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Technology Stocks : eBay - Superb Internet Business Model -- Ignore unavailable to you. Want to Upgrade?

To: astyanax who wrote (2452)	4/1/1999 3:01:00 PM
From: Doug Fowler	Read Replies (1) \| Respond to of 7772

I just bought a video set from Amazon, and am impressed by the overall experience. It got to Florida from Seattle in three days. In my package were two items promoting the Amazon auctions - one was the letter from Jeff Bezos, and another was a small color flyer, also promoting the auctions, and offering a $10 Amazon gift certificate for my first purchase on Amazon auctions. This is an indirect way to pay people to bid, which I have believed for many months now is one of the few ways to compete against eBay. Of course, the cost could be very high, but since investors don't seem to care about Amazon profitability, and only about revenue growth, Amazon will probably be OK. I am wondering about how much this $250 guarantee against bad sellers will cost Amazon, or how much it would cost eBay to implement. Let's say that 1 in 1000 auctions fit into this category. Let's also assume that $40 is the size of the average online auction (since this has been reported as the average by eBay). Then, for every 1 million auctions, which brings in about $1.4M for eBay, they would have to part with $40,000. If eBay does $200M this year, they would end up spending about $6M for this kind of insurance, or about 3 percent of gross revenues. Now, the real kicker is how much fraud would exist, and what kind of overhead would be necessary to administer between 2000 and 3000 claims per week. eBay could offer a similar program and dramatically reduce the number of claims by making this offer only for sellers who have an eBay feedback rating of 10 or higher. From another angle, eBay could offer the seller this kind of insurance at a cost of 1 percent of the final successful bid. Again, offer it only to sellers with a certain level of positive feedback. The seller would check a box when listing an item for sale. Under this scenario, the program could easily end up costing eBay nothing. And it would provide the seller with a way to highlight his/her reputation as a quality seller, with a statement such as "This transaction is insured by eBay!", and increase the likelihood that someone will bid.