Article 8 of 200
Techno File/Infotech; Alsop on Infotech
Contemplating eBay's Funeral
Stewart Alsop
06/07/1999
Fortune Magazine
Time Inc.
Page 201+
(Copyright 1999)
Is eBay dead meat? I keep wondering. My very first column in FORTUNE
asked the same question about Netscape. As I'm fond of saying, Netscape
turned out to be very expensive dead meat, but dead nonetheless (now that
it's part of America Online).
In 1996, Netscape was a hot company that faced a significant challenge from
the market leader, Microsoft. In 1999, eBay is a hot company that faces a
significant challenge from the market leader, Amazon .com. Microsoft won
the previous race and is now worth $330 billion, while Netscape was worth
just $10 billion when it was absorbed into America Online. Right now, eBay
and Amazon are valued almost exactly the same, at $22 billion each. The
question is: Will the same split happen between these two companies? Will
Amazon use its greater market presence and reach to overwhelm an
e-commerce pioneer?
I started down this road when I decided to sell something on eBay. I had a
Sony 200-disk CD changer, which I bought a couple of years ago. Big
mistake. These CD changers don't have a user interface. When you load your
CD into one, it disappears because you have no way to retrieve it except by
playing each CD one after the other. All my CDs disappeared into this thing.
In the two years I owned it, I listened to less than a third of my CDs. So I
recently bought a five-disk CD changer. (Still from Sony; my attraction to
that brand is probably worth a whole other column.)
Net result: I had a two-year-old, 200-disk CD changer that cost about $250. I
could give it to Salvation Army or Goodwill. I could throw it away. I could
hold a garage sale. Instead, I decided to try out this eBay phenomenon and
sell it online.
I sold it in seven days for $188.49 plus shipping. I had 20 bids.
Here's how I described the item in my auction: "Sony CDP-CX200 juke box
holds 200 CDs. Used for two years but shipped in original box with cables
and remote control. Works just fine. This model is discontinued but go to
Sony's Website to see the latest models, the equivalent being the
CDP-CX210."
Once I got a winning bid, I shipped the changer to the buyer in Kentucky. I
haven't heard from him since, so I assume he got what he expected. I got a
lot more than I expected: $188 more.
I also found out what people were chattering about when they talk about
eBay. I discovered what my brother Ian has been telling me for more than
two years: eBay is a phenomenon!
There is one little problem. My experience with eBay was really, really bad.
The first time I went to the company's Website, it was very sluggish. The
registration form took several minutes to come up, and filling it out was like
moving through molasses. Setting up the auction for my CD changer was a
snap, but I was presented with a bunch of confusing options (a reserve price?
special conditions or pricing? what did I know?). The auction, on the other
hand, was like the first time I paid my bills on CheckFree: nail-biting,
thrilling fun. The first bid showed up within 24 hours. (How the heck did
they find my little CD changer so fast amid the hundreds of thousands of
items being sold?) I found myself checking several times a day to see how
many bids were submitted. And then the top bid was about twice what I
expected.
The worst part of the experience was actually paying eBay. The day after the
auction was over, I got an invoice dated ten days earlier, charging me for an
insertion fee of $2. This seemed reasonable, but I couldn't pay online! I had
to print the invoice, write a check (or use my credit card number), and mail
it to an address in Dallas (eBay is located in San Jose). I was amazed that a
company that specialized in getting buyers and sellers together online
wouldn't accept payment that way.
It got worse. It turns out eBay uses a monthly billing system. Since I ran my
auction at the end of the month, I got a second invoice a month later: this
time for $5.84, the actual fee for the value I got for my CD changer. Again,
the price seemed reasonable, but why did it have to show up five weeks after
my auction closed? I paid, of course, by writing another check and mailing it
in.
At this point I began to suspect that eBay did not have the infrastructure of a
modern e-commerce business. In fact, I could only imagine that this
company had been completely surprised by its success and was unprepared to
build out a commercial business capable of serving two million-plus
customers.
Just two weeks after I wrote eBay the second check and dropped it in snail
mail, Amazon introduced a new auction system on its site. So in early April
I visited Amazon 's auction page. The first thing I noticed was the note in
the upper right-hand corner: "Hello, Stewart Alsop. You're preregistered to
bid, buy, and sell. Have fun!" Then I noticed that Amazon is offering a
$250 guarantee on items bought or sold on its auction site, in case you buy
something that isn't what it was promised to be or in case you sell something
that the buyer doesn't pay for. Then I noticed that you can get a $10
Amazon gift certificate if you read the letter from Amazon 's CEO telling
you about the new auctions. And then I noticed that somehow, Amazon had
already populated its site with tons of stuff for sale.
So I started asking myself the Question: Is eBay dead meat? I haven't actually
bought or sold anything on Amazon 's site. Or on Yahoo's auction site,
either. And I haven't bought anything on eBay's site. So I'm not an expert on
these matters. But Amazon has eight million customers, and it added the last
two million--the total eBay has registered--in the past three months.
Amazon definitely has the infrastructure of a modern e-commerce business.
In fact, the company got sued by Wal-Mart for hiring its best
information-technology managers to run Amazon 's IT infrastructure. The
suit has been resolved, but it makes you think Amazon might have a pretty
good IT department. Plus, Amazon 's site design is just outstanding.
By contrast, eBay's site went down for four hours early in May. While
getting ready to write this column, I looked for the results page of my
auction. An e-mail told me the page would expire after 30 days; so I didn't
expect much. But what I got when I clicked on the link was the following
message: "The item you requested (62055371) is invalid. Please check the
number and try again. If this message persists, the item has expired and is no
longer available."
The site isn't personalized and doesn't remember anything about you. It is
plain ugly--all text, with a color scheme only an enginee could love. I haven't
tried to buy or sell anything else since I sold my CD changer in February. I
have checked back at eBay a few times since then, and the site seems much
faster. I'm sure the company has been working diligently to improve its
infrastructure. And then there's that little fact that there are more than two
million items for sale. And the two million customers registered on eBay are
all interested in buying and selling stuff, not in buying new books and CDs at
retail prices.
So there you have it. Wall Street thinks these companies are of equal worth.
I've begun to wonder if Amazon doesn't have an unbeatable edge. What do
you think?
STEWART ALSOP is a partner with New Enterprise Associates, a venture
capital firm. Except as noted, neither he nor his partnership has a financial
interest in the companies mentioned. Alsop may be reached at
stewart_alsop@fortunemail.com; the column may be bookmarked at
www.fortune.com/technology/alsop/. Quote: EBAY'S SITE ISN'T
PERSONALIZED AND DOESN'T REMEMBER ANYTHING ABOUT
YOU. IT IS ALSO UGLY. |
