Internet Giants Pool Their Bids For Auction Site To Rival EBay
SEP 17,1999
By Jon G. Auerbach, Staff Reporter of The Wall Street Journal
The bidding is about to heat up in the Internet auction world.
Seeking to take on leading auctioneer eBay Inc., a handful of top technology
companies including Microsoft Corp., Dell Computer Corp., Lycos Inc. and Excite
At Home Corp. have agreed to join forces.
Under a plan set to be unveiled Monday, the companies are forming a new
auction network in which goods will be shared across all the member sites. This
means that someone listing a used Palm Pilot for sale on Lycos, for instance,
will automatically have the gadget posted on the auction sites of Microsoft and
Excite, as well.
The pooling of resources is an admission of how difficult it is to challenge
giant eBay, which has built up formidable critical mass. With nearly 3.5
million auction listings, eBay is far and away the market leader, dwarfing even
well-known rivals like Yahoo! Inc. and Amazon.com Inc. Numerous companies have
unsuccessfully tried to challenge eBay over the past several years.
The company behind the new alliance is FairMarket Inc., a closely held
start-up based in Woburn, Mass. FairMarket sets up and runs auction sites for
companies including Lycos, Dell and CompUSA, in addition to handling billing
and customer services. FairMarket already operates a network with them, but
Monday's announcement will mark the addition of Microsoft, Excite and
Ticketmaster Online-CitySearch Inc., those companies confirm.
FairMarket says it realized two years ago that there was only room for a
small number of stand-alone auction sites, especially given eBay's dominance.
"The only way to survive in the auction business is to be networked and to
start something much bigger," says Scott Randall, FairMarket's founder and
chief executive.
FairMarket gets paid in two ways. It receives a flat fee each month for
auction hosting -- the fee starts at about $10,000 per month -- and it receives
about a 1% cut from every sale on its network.
FairMarket says the new network will launch Monday with about 70,000 auction
listings initially, a tiny number compared to eBay, Yahoo and Amazon.
But the FairMarket number doesn't include any listings from Microsoft, which
is in the process of launching its own auction site. Microsoft's MSN.com site
ranks No. 3 among all Web destinations -- behind Yahoo.com and AOL.com -- a
huge pool from which to draw buyers and sellers for its auction page.
Ticketmaster Online-CitySearch will join the network within 30 days. The
company, based in Pasadena, Calif., plans to connect the network to its own
local auctions, which are geared to specific cities or communities. Through its
site, cityauction.com, local people typically buy and sell fragile or heavy
goods -- from porcelain vases to cars -- that are easier to pick up cross-town
than to ship cross-country.
Charles Conn, Ticketmaster Online's chief executive, says joining the
FairMarket network will allow it to list more goods than "we can ever catalog
on our own."
Still, the new consortium faces an uphill battle. Many Web users already
associate the eBay name with Internet auctions, says Rakesh Sood, an analyst at
Goldman Sachs.
"Branding is huge," he adds. "It's very, very difficult for somebody new to
come along."
EBay says the new competition only validates eBay's business strategy. "We
do anticipate other players will enter into the space, but so far our track
record speaks for itself," says Kevin Pursglove, eBay spokesman. In the second
quarter, he adds, eBay handled about $6.8 million in merchandise sales daily --
far more than any other auction.
The FairMarket network will work like this: Someone wishing to sell an item
like a striped tie on Lycos, say, will list it through Lycos. The posting will
then be sent out to appear on the auction pages of most of the other sites.
A shopper clicking onto Microsoft's MSN auction site would see the tie
listed among the other MSN items. And the viewer would have no way of knowing
the tie actually came from the Lycos site.
On many sites, users pay about a 2.5% fee to the auctioneer. FairMarket will
act as the intermediary between all the network partners. It will collect the
fee, which will approximate 3% of the value of the goods sold, Mr. Randall
says. FairMarket will then pay about a third of the fee to the site that
actually listed the item, and another third to the site where it was sold.
FairMarket will pocket the remainder.
FairMarket employs round-the-clock customer-service workers who can provide
information to buyers and sellers. The company also handles the electronic
billing for items, and manages the fraud-protection programs that are critical
to most auction sites.
Not all the sites in the FairMarket network will share listings back and
forth. Dell, for instance, uses its auction site to hawk refurbished Dell
computers and other electronics. And the Dell auction page itself won't include
listings of merchandise from other sites in the network. However, Dell will
allow its merchandise to be posted on other sites.
Mr. Randall says the big names joining FairMarket will help give it critical
mass to compete against the likes of eBay. FairMarket was founded in 1997 by
Mr. Randall, who had previously worked for Yahoo and Procter & Gamble Co.
Mr. Randall, 37 years old, says the company plans an initial public
offering. FairMarket has already managed to attract some big names in
technology, including Robert Supnik, a former top engineer with Digital
Equipment Corp. who helped design that company's flagship microprocessor.
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