Yahoo, Bidding for eBay Market Share, Cuts Auction Fees

Aiming to grab a bigger piece of the online auction business, Yahoo (Nasdaq: YHOO) has said it will eliminate fees charged for using its auction site, a move that seems directly aimed at sellers who would normally turn to eBay (Nasdaq: EBAY) to sell their goods.

Yahoo is eliminating both the listing fees -- the up-front charges to put an auction item up for sale -- and the percentage-based fees charged if an item sold. The savings could be considerable, especially for the so-called Power Sellers who drive much of eBay's business.

Going forward, the Yahoo auction site will be ad-supported, with paid search and other types of advertising. The change only applies to the U.S. Fees will continue to be charged in Canada and in Japan, a market where Yahoo's auctions are actually the dominant market player and where eBay has been thwarted in its attempts to dethrone the portal.

Huge eBay Audience

EBay's listing fees range from 25 cents for items that start for sale at less than a dollar to US$4.80 for items on which the bidding begins at $500 or more. The so-called final value fee starts at 5.25 percent of the total sale price.

Depending upon the category and other factors, the savings on an item that sold at auction for $100 could be more than $5, depending upon the number of extras a seller chooses to draw attention to its listing. For sellers who peddle dozens of items each week, that could represent a significant bottom-line difference.

The change comes less than a week after eBay announced plans to buy comparison shopping search engine Shopping.com in a deal worth $620 million. That move gives eBay the ability to offer sellers broader exposure for their listings.

In the past, eBay's sellers have been wont to stray from the auction giant because despite a slew of would-be competitors, from Amazon (Nasdaq: AMZN) and Yahoo to sites such as Ubid.com, no single alternative could offer anywhere near the audience of would-be buyers and, just as importantly, bidders, that eBay boasts.

Yahoo might be one of the few competitors for eBay that has the means to change that, however, since it attracts tens of millions of visitors to its portal each month.

Yahoo said the move had nothing to do with eBay's Shopping.com buy and that the change has been in the works for some six months. That time frame coincides with the latest eBay fees hike, which drew outcry from sellers.

At the time, Overstock.com moved to woo disgruntled eBay users by slashing its own auction listing fees. Overstock said it saw immediate results, with auction listings rising 50 percent in the course of a week. However, while eBay has shown signs of slowing growth in recent quarters, most analysts believe that competitive move had little long-term impact.

Growth Predicted

EBay later reversed itself on some of the fees, though a hike on the percentage charged for final sales was kept in place, as were the fees charged to sellers who maintained eBay Stores. Those fees increased as much as 60 percent. The auction giant also promised to expand phone support for sellers in a bid to smooth ruffled seller feathers.

Forrester Research analyst Carrie Johnson told the E-Commerce Times that eBay has long been a force in the Internet commerce world, a brand that is all but synonymous with online auctions.

Auction-style selling is something that is poised to grow as well, as more shoppers become Web-savvy. Because the bidding process is somewhat more complicated than traditional e-commerce sales from a site such as Amazon -- and because most eBay merchants do not take credit card payments directly -- such sales attract slightly more sophisticated users.

But there might be signs that consumers would welcome an alternative to eBay. Johnson said while a recent survey found eBay users still fond of the sense of community the site develops -- which builds loyalty -- Amazon.com has scored higher on overall customer experience. Other surveys have found that less than half of all eBay users say they are committed to buying only from that site.