Does eBay have a future?

A former colleague of mine phoned me to ask me about eBay: “what do you think? The greatest thing since sliced bread? Or what?”

That got me reflecting on innovation, and the crucial difference between ‘obvious opportunities’ and ‘obvious difficulties’.

In any era of rapid technological advances, people naturally focus on the obvious opportunities. When the internal combustion engine appeared on the scene, for example, lots of people got very excited by the idea of replacing horses by engines – and hundreds of companies were set up to do just this.

What most of them avoided, however, was an obvious difficulty – of making horseless carriages that were affordable to the ordinary working man. (At the time, the cheapest motor car sold for around £300,000 by modern standards).

This obvious difficulty of affordability was – well – damned difficult to solve. So not many people wanted to tackle it. And not many investors wanted to fund their attempts to tackle it.

Yet the people who made the real breakthroughs – people like Henry Ford and Alfred Sloan – were the ones who tackled, and overcame, the obvious difficulties. And those who focused on the obvious opportunities faded into obscurity.

As far as I can see, eBay is a business built on exploiting an obvious opportunity: the opportunity offered by the Internet to lower transaction and interactions costs and thereby open up opportunities for smaller sellers to reach larger audiences. That’s great, so far as it goes. Like replacing the horse with an engine.

But the obvious difficulty of the Internet age is not how to reduce transaction costs. Anybody can do that (and a lot of other sites are now doing it much better than eBay). The obvious difficulty is how to help people find and use the information that’s really relevant and useful to them. That’s a really tough one. The closer you look at it, the harder it seems to get.

The answer to this obvious difficulty lies at the heart of the next big commercial breakthrough: person-centric commerce. And eBay has studiously avoided it.

To this degree, eBay as a business model is already passed its sell-by date. Sure, it’s got plenty of momentum because it’s very famous and top of mind for many users. But having addressed the obvious opportunity of reduced transaction costs, it hasn’t got anywhere to go. That’s why its flailing around, adding all sorts of activities on to its ‘core’ business: PayPal, Skype, internet search/advertising services, price comparison services and the like. eBay CEO Meg Whitman talks up the need for businesses to ‘focus’. But in reality she is doing the exact opposite.

Meanwhile, a few brave souls beaver away at the modern age’s obvious difficulty: how to turn a tidal wave of information that threatens to overwhelm us into the rich, finely-grained, empowering resource it should be?

I’m confident that we’re beginning to crack this one. If we succeed, eBay will become an evolutionary irrelevance.

Alan Mitchell

Comments

[Robert]

Hi Allan,

I agree with Roger. I don't think lowering transaction costs was ever a driving motivation for Ebay or its users. The key to ebay is product selection - and this supports the consumer demand seen in the Long Tail. I do think that you're right about Ebay's mistaken seller-centricity. They want to cater to their customers (and make more money) but don't realize that both the buyers and the sellers are their customers. Catering too much to the sellers could offend the buyers.

About the aquisitions, I think you are right. They seem to be losing focus. Also, maybe they should start to look at actually lowering transaction costs for their customers. Striking a deal with (or owning) a courier company could be a wise move. Everyone who buys something on Ebay needs it shipped. How many people need to talk with their seller on Skype? Not me.

So far as whether they have a future - they definitely do. They would have to do something catastrophically stupid not to. They are the de facto online auction and the place where millions find those hard to find things - things that, as Roger says, would otherwise be thrown away.

Robert

[AlanMitchell]

Hi Roger,

You may be right. But I think the key issue is information. eBay has a 'caveat emptor' approach; it doesn't help buyers navigate their way to 'best value', except by the age-old retail approach of putting a load of stuff on the shelf and letting potential buyers sift through it. It has created a market-place, not a consumer service. And from what I can see of it's leaders' priorities, they are much more interested in the selling 'community' (power sellers etc) than the buying community.
Yes, it has bought a lot of different companies which do a lot of different things. The question is, what is it going to do with them?

[Roger]

@ Alan,
Interesting thoughts, but I don't think that eBay (and other websites that put the consumer in control) were set up with the idea of lowering transaction and interaction costs.

In The Netherlands they bought marktplaats.nl (Dutch for marketplace). This is a website that has a lot of profesional (but small) entrepeneurs, but most of the users (buyers AND sellers) are just normal people with some second-hand stuff to sell. Things that a few years ago would have been thrown away, but now finds a new life somewhere else!

So as you put it: person-centric commerce!

And eBay isn't much different in my opinion, it puts the consumer in the driver seat and gives him/her a ignitionkey as well.

To answer your question: yes, I do think they have a future.

[timkitchin]

Alan...

It's fair to say that eBay is moving to a utility strategy, and that its 'marketplaces' approach to matching services is rather seller-centric...

Already, though, hybrid models and derivatives of this are emerging, which are much closer to the BCCF ideal...check our www.etsy.com for example.

Employs producer-centric (mutualist) logic and effective search-brokering...

This is where the long-tail logic goes...self-segmenting producer-consumer communities...

[timkitchin]

Alan...

It's fair to say that eBay is moving to a utility strategy, and that its 'marketplaces' approach to matching services is rather seller-centric...

Already, though, hybrid models and derivatives of this are emerging, which are much closer to the BCCF ideal...check our www.etsy.com for example.

Employs producer-centric (mutualist) logic and effective search-brokering...

This is where the long-tail logic goes...self-segmenting producer-consumer communities...