WIRED ON FRIDAY: One success of the internet has been auction sites. Undoubtedly the most successful and biggest of these is San Jose, California-based eBay. In a February report by Morgan Stanley, the analysts wrote that "we believe eBay is still in the very early innings of a big secular growth cycle that is leading. . . one could call it E2E (everyone to everyone) trading."
EBay's mission is to build the world's largest online trading platform to help practically anyone trade practically anything on earth. The range of products it sells is truly diverse and fall under 18,000 categories. On any given day, Media Metrix estimates that 5.5 million users visit the site and most shopping occurs late in the afternoon or early evening.
EBay traded $9 billion (€10.23 billion) worth of goods last year, about 20 per cent of all consumer electronic commerce. More than $1 billion came from cars, a category that did not even exist on eBay two years ago. A book is sold every four seconds, a laptop computer every 30 seconds, a pair of shoes every 35 seconds and a motorcyle every 18 minutes.
Today, eBay is the largest online seller not just of cars and collectibles but also of computers, photo equipment and sporting goods. It now has operations in 18 countries, including the Republic and it has local sites in 60 markets in the US. According to Kevin Pursglove, senior director of communications at eBay in San Jose, about 11 million items are listed on its domestic and international sites and it conducts about $30 million in sales each day.
EBay's 42 million registered buyers and sellers do the company's work . They hold on to inventory so there is no need for eBay to have warehouses, they bring in countless new products, they ship the products to people who have bid the highest and they handle customer service. Sellers are the source of all eBay revenue and last year revenues were $750 million. By 2005, the company expects to be raking in $3 billion in revenues, merchandise sales of $35 billion and $1 billion in operating profits.
Customer acquisition is largely driven by word of mouth. EBay takes a commission - typically 1 to 5 per cent - on every trade on its electronic exchange. The rest of the revenues come from listing fees that can range from $0.30 to $3.30 per item and other charges. The seller can list an item at a fixed price to buy it now or auction it, in which case he must list it for either three, five, seven or 10 days. Fixed prices are now assigned to about 40 per cent of eBay's listings.
For people to buy something from faceless strangers there needs to be a certain degree of trust. EBay has a feedback system whereby buyers and sellers can rate each other positively or negatively. Those who sell more than $2,000 a month on eBay are a vocal group known as power sellers and most of them earn their living off the site.
But, for a site that had humble beginnings in September 1995, it has tried to improve its technology at a rapid pace. Three years ago, eBay chief executive and president Meg Whitman hired Maynard Webb, the former chief information officer and a senior vice-president at Gateway. Today, eBay's site runs on more than 12 servers compared to just one Sun server in 1999.
Mr Webb is involved in an 18- month project to overhaul the site, which is referred to internally as V3. This process has already begun and is happening in three phases: called Mercury, Gemini and Apollo. EBay has decided to base its new architecture on IBM's WebSphere software, Sun servers and Tibco back-end messaging software.
Mr Pursglove said, "V3 is designed to increase developer productivity, enhanced integration of API [application programming interface\], improve eBay's ability to design and implement new features, allow for greater flexibility and to add new business architecture. In the long-term, we want to continue to improve site dependability and the user experience." Mr Pursglove would not disclose how much eBay is spending on the new technology.
Two women who live in New Jersey and describe themselves as "avid eBayers" think the site has definitely improved in the past year. "There used to be a lot of outages," said Michelle Korosy who discovered eBay three years ago after she heard Rosie O'Donnell talk about it on her TV show.
Since then, she has sold and bought children's clothes, toys and house furniture and said bidding on the site can be "incredibly addictive". But "there's nothing more annoying than trying to make a final bid on an auction and the site goes down".
Over the years, however, she said, eBay has introduced many new features. "All of its search engines are great. It has different ways to help you manage buying and selling that are wonderful and can help you keep track of your favourite buyers and sellers. It has definitely gotten better in the past year. It hasn't just stagnated." Hand in hand with the technology improvements, she added, commissions and fees have gone up. "If you're willing to pay shipping - even from overseas - you can get all kinds of great stuff."
Kim Lennox, a textile designer who works in Manhattan and lives in New Jersey, said eBay is always introducing new ways to do searches and upgrading information about individual auctions and sellers.
Ms Lennox started to collect pottery on eBay three years ago. Initially, she said, she bought "little wacky things from the 1930s and 1940s just for fun. Now, it's totally got out of control."
She and her husband have bought about 20 cookie jars on eBay and about 100 or so planters for holding small plants. Most of what she buys are small ticket items that cost about $5, so sometimes her shipping can cost more than the item. "I definitely need the feedback system," she said. "I don't buy anything without seeing a picture of it first.
"Normally a good seller will tell you how much the postage will be."
In one instance, she bought a cookie jar for $150 only to find that it had been repainted even though the seller listed it as being in its original condition. When Ms Lennox stated her dismay, the seller took back the jar and refunded her money. She never discloses her credit card details online but prefers instead to use a third-party online payment system called PayPal, which provides her with an account number, or she sends a cheque.
For someone who loves browsing around antique shops, Ms Lennox said of eBay: "You can search and see stuff you have never seen before. You are really able to collect things that are rare and nobody knows their worth. The search is half the fun, maybe more than half the fun."
