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Technology Stocks : OnSale Inc.

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To: Keith Hankin who wrote (3450)	1/17/1999 9:11:00 AM
From: Maxwell	Read Replies (3) of 4903

Keith Hankin: <<Can anyone tell me why the investment community has higher hopes for EBAY over ONSL? How are their business models the same and how are they different, in a way that can explain the wild variance in their valuations? Please try to be objective.>> _____________________________________________________________________ EBAY: Ebay is like a national Greensheet. Anyone can post anything for sell on Ebay. Ebay gets about 2.5% in commission of the total sales when the auction is ended successfully, that is with a bidder. If no one bids then the seller cannot sell and Ebay makes nothing. The majority of the products are selling for $20. Thus Ebay is making about $0.5/product sold. However there are some BIG TICKET ITEMS. I saw the other day a Mark McGwire 70th homerun baseball auctioned for $2.7M! Ebay makes $67.5K for that transaction. That is very sweet. I also saw a used Lamborghini was going for $150K. These big ticket items are lucrative and bring huge revenue to Ebay and analysts love it. Advantages: Ebay is not responsible for the product sold. Ebay doesn't hold any inventory. The more products sold the more money Ebay makes. Successful transactions may bring more sellers to Ebay. Sellers prefer Ebay to local newspapers since they don't pay if their products are not sold. There are over 250M people live in US and Ebay may be THE WEBSITE for these people to sell anything they have. Disadvantages: Ebay cannot guarantee that the seller delivers the goods to the buyers. Scamming may and have occured on Ebay. This may cause many buyers to look elsewhere for bargains. Ebay biggest problem is that buyers HAVE TO DIG THROUGH A FOREST OF PAGES to find an item they want. This takes a long time and loss time= loss money. Furthermore buyers have no way of knowing what the condition the products are in. They have to trust the buyers. Finally Ebay model can be easily copied. Thus competitions will be a threat to Ebay. ____________________________________________________________________ ONSALE: Onsale is an auction house where they buy refurbished and surplus products directly from the manufacturers and sell directly to the consumers. They also act as a middleman to auction exercise equipment and travel cruises for exercise equipment manufacturers and travel agencies respectively. They make their money the following ways 1) Buy the surplus directly from the manufacturers at a bargain price and sell back to the consumers at a profit. 2) Sell the surplus for the manufacturers or distributors and get a commision fees or a % of the sales or profits. 3) Advertising banners from other webpage. Advantages: They have access to large quantity of surplus compared to many other auction house such as Ubid and BidCom. Website is very attractive and easy to move around to look at the product. Model is scalable. Excellent service and deliver products upon promise. Customers are so satisfied that over 70% of the buyers are frequent customers. Disadvantages: Onsale must carry inventory. If inventory is not sold quickly then it will be depreciated rapidly since many of these items are computer electronics. Inventory ties up cash. Also there is no way to ensure more surplus will be available for auction. Manufacturers can terminate the agreement with Onsale in selling their surpluses. As manufacturers improve their forecast they will reduce surpluses which mean reduce items sold to Onsale. Onsale model is not so easily copied as Ebay. Competitor must get access to surplus from manufacturers to be successful. _____________________________________________________________________ Wall Street likes Ebay over Onsale because Ebay has a higher profit margin (no inventory). Ebay is currently makes money and the name is more popular than Onsale. Ebay is more than just a Greensheet. It is a community. Ebay has chat line while Onsale doesn't. Wall Street also believes that Onsale has more competitions. This is the reason why Ebay is 8X Onsale market cap. To differentiate from the rest of the pack I believe Onsale must enter the B-2-B website like everyone here has talked about. This new website will make Onsale unique and brings lucrative profits. Then you will see Onsale market cap exceeds Ebay. Maxwell

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