Can eBay Copycats Thrive?

In the online auction sector, eBay is not just king of the hill; it owns the mountain.Some challengers to the throne have stepped forward in the past few years, but all havebeen trounced.

Is it possible that in coming years, a more savvy and well-funded contender couldchallenge eBay and steal away part of its auction business? Although Giga InformationGroup analyst Steve Telleen told the E-Commerce Times that smaller players could attemptto nibble away at eBay’s market share by serving niche markets, many analysts said theanswer is: absolutely not.

“EBay will be [the] only real player for online auctions for a long, long time to come,”Jared Blank, an analyst at Jupiter Media Metrix, toldthe E-Commerce Times.

Fee, Fi, Fo, Fum

Industry giants usually serve as attractive targets for small companies looking to copytheir success. Witness the swirl of online booksellers that try to take on Amazon, or themultitude of ticket sites that want to catch Ticketmaster unawares.

EBay, however, has proven to be such a powerhouse in its field that attempting to copy itis widely seen as business suicide.

A recent Jupiter Media Metrix report on retail Web site traffic in April listed theauction mammoth atop the e-commerce heap, with 24.3 million unique visitors. Thecompany’s closest rival, UBid, squeaked into therankings with just 3.6 million visitors during the same period.

“Basically,” Blank said, “eBay is so successful because of its size. It became large veryearly and established such a cycle of growth that it became the online auction site ofrecord. Which means that it’s difficult, if not impossible, for anyone else to catch up.”

Lightweights of the Ring

But although eBay is a heavyweight champion, it does not lack competition.

Sites like UBid and Abidon market themselves asalternatives to eBay’s frenzied marketplace, where a bidder may be overwhelmed bycompeting offers. While some users may take comfort in a smaller pool of buyers andsellers, the majority of auction-goers gravitate toward eBay.

Few big players have tried to take on the Web auctioneer. Most recently, Yahoo! attemptedto enter the online auction fray — with dismal results.

Jonathan Gaw, research manager at IDC, told the E-Commerce Times: “Yahoo just got out ofit in Europe because they got their hat handed to them by eBay. In the U.S., the game’sover. EBay won.”

Rather than stumbling far behind eBay or shuttering its European venture, Yahoo! choseto forge an alliance with eBay’s European operation and promote the auction site on itsYahoo Europe portal.

Plain and Simple

“There’s nothing really magical about eBay,” Gaw said. “If you and I were to sit down andreally think hard about what we want in an auction site, we’d come up with something thatlooks a lot like eBay. It’s pretty simple.”

The formula for success, according to Blank, was that eBay built momentum quickly. Itattracted a large number of buyers and sellers at a rapid clip, and provided them with afinancially secure arena for their transactions.

The site also did not attempt to be anything other than an auction site. Yahoo, on theother hand, tried to be both auction site and Web portal, spreading its resources toothin and confusing consumers. In contrast, eBay resisted selling products or providingadditional services.

This single-minded focus made a big difference as the economy went south, according toanalysts. Everyone knows what eBay does. That consumer recognition secures the company’sposition in the marketplace.

Nibbles at the Pie

Although it is doubtful that a serious eBay competitor will advance, some companies maybe able to capture at least part of the market.

Steve Telleen, vice president of Giga Information Group’s Website Scorecard Service,told the E-Commerce Times: “There is some opportunity for smaller players to get in, butit wouldn’t be in taking on eBay directly. Rather, they would have to look at nibblingpieces out of their marketplace.”

Telleen said the only feasible way to do this is to open a segmented auction that relieson either geography or a limited selection of products. For example, if people in Texaspreferred to buy from other Texans, or if antique clock collectors wanted to interactonly with others of their ilk, someone might be able to serve such a niche.

Even if niche sites could be created, Gaw said he wonders whether consumers wouldn’tgravitate toward eBay anyway.

“If you’re a buyer or a seller, you go to where there are the most sellers and buyers,”he said. “So, why would you go anywhere but eBay?”

4 Comments

  • eBay does battle with many pretenders, including those that attempt to copy or emulate its name and/or web design. Look at the recent lawsuit against bidBay, which was settled with a payment of money and a name change to Auction Diner. This company and its officers have been hit with a major lawsuit involving a stock swindle and scam of many private investors. The vice president, Wes Cooley, a former Congressman, was forced to resign his seat because of the following:
    ——————————————————————————–
    In March 1997 Oregon’s Former Congressman Wes Cooley was convicted in Marion County Circuit Court of lying in the statement he made about his military experience for the official Oregon Voter’s pamphlet. He paid $7000 in fines plus court costs and was sentenced to two years’ probation and 100 hours of community service. Cooley falsely claimed in the 1994 Voters’ Pamphlet that he served in the Korean War. Actually, military records and former officers’ statements confirm that he hadn’t left the United States.
    Prior to his conviction, the controversy caused him to drop his bid for reelection.
    A year after his conviction Cooley filed to run for the United States Congress again. He apologized for making a claim in the pamphlet that could not be proved. But he said: "I don’t admit I made a false statement. … A lot of people get convicted who don’t do anything wrong." Cooley was defeated in the primary election.
    Would you buy and sell from a company with people of this character? Stick with eBay and know what you are getting.

  • This article is dead-on, yet misses the point.
    To be sure, eBay is at the top of the auction and person-to-person trading heap right now. Will they last? That’s questionable. They have been the beneficiary of incredible momentum due to the network effects of their model. They haven’t even been doing all that much to attract more business – it just comes. That said, they’re making alot of poor decisions that emphasize short-term profitability over long-term customer satisfaction. This includes raising fees, more sterile environment and lack of differentiation with the larger sellers, and a less focused positioning with its users.
    More importantly, eBay will continue to win until someone exploits their weaknesses. They have won because they created the best buyer experience. All these other auction sites cannot offer anything to the buyer that eBay isn’t already offering – plus eBay has incredible liquidity (breadth of products) in its marketplace. Yes, eBay will stay the largest auction site for as long as anyone can see. This is virtually unquestionable. Amazon Auctions, Yahoo! Auctions, etc. do not give me, as a buyer, any incentive to be there. So I stay on eBay.
    However, will they maintain their position as the top person-to-person trading site? That is the true market, not auctions. eBay itself is attempting to quickly diversify, recognizing that auctions are not the ideal method of buying and selling. They have been smarter and quicker than the rest to recognize the fixed-price person-to-person market with their acquisition of Half.com. Amazon and Yahoo were both late to that game as well. The leader cannot be beaten by copying them. They can only be beaten by doing something drastically different. Those who sail will understand what I mean. So I would look for companies, particularly start-ups, that take a different approach. One that gives the buyers a greater value proposition. Get the buyers and the sellers will come. Half showed that if you give the buyers a better experience, they will come, and then the business will leave eBay (and even expand the overall market).
    One potential giant killer that recently launched is iOffer.com. Buyers can buy at the seller’s asking price or make an offer to the seller. This appears to be a much more intuitive model than auctions, and here is a place where I see the buyer gaining a significant advantage over buying at an auction. They don’t have to compete with other buyers; wait a week and you can deal directly with the seller. I think they will be another winner like Half. They’re hitting eBay the only place where they can be hurt, by providing the buyer with a superior experience. Of course, the king of the heap will probably gobble them up as well, and then we’ll be back to looking for another potential giant killer.

  • What analysts persist in overlooking: the future of any company, even a monopoly, is in doubt if its own clients feel abused. Ask Lotus.
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    IMHO, Ebay has enough unhappy users so that ANY move in another direction could topple them, with the help of insiders. Not another copycat site, what will kill Ebay will be a Napster-type sales utility that shuts out the middleman almost completely.
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    Amazon.com was the only outfit that could have taken Ebay out using a similar business model. They wrecked it totally by letting their exploitative, clumsy Charter Sellers kill their momentum out of the gate.
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    Four years ago, almost any offer to do business outside Ebay was met by most sellers with a staunch and loyal diatribe against cheating Ebay. Expressions of loyalty were enough to give even a casual observer diabetes. Things are different now, AM azingly so. Their recent focus group "guests" (all expenses paid) came back to the message boards sounding disheartened. Many obviously think the future for small sellers at Ebay is doubtful.
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    These days, nearly every bid revs up offers to go outside — and the variety is going spotty, the really small sellers have given up. Ebay has made casual sales so hard, only the bigtime professional peddlers sell there. It’s all beginning to look like a parking lot sale at "Crazy Earl’s — All You Can Eat for $9.95."
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    The low-functioning sellers who gave up a percentage of their gross for the privilege of renting ad space on Ebay have realized the error of their ways, IMHO. They will not repeat it in the next round.
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    Look for Pinpost.com or similar distributed operations to make Ebay obsolete. They won’t be missed.
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