EcommerceBytes-Update, Number 134 - January 09, 2005 - ISSN 1528-6703     2 of 6

A Look Back at the Online Auction Industry in 2004

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eBay drop-off stores, classifieds sites, the rise of the Powerseller, and sophisticated online scams continuing unabated were some of trends affecting online auction users in 2004. The use of online auctions for fundraising saw an increase, and educational tools for eBay sellers mushroomed.

While eBay is still the "800-pound gorilla" in this industry, the landscape changed when Overstock.com threw its hat in the ring and launched an auction site of its own. Overstock Auctions launched in September (http://www.auctionbytes.com/cab/abn/y04/m09/i27/s01) and has been attracting serious interest from eBay sellers and third-party services.

Another online auction site, Bidville, revamped in January 2004 with a $2.2 million round of equity funding (http://auctionbytes.com/cab/abn/y04/m01/i10/s01). It launched new services and an aggressive marketing campaign, reporting an increase to 1 million registered users and a 30% increase in the average number of listings by the end of the year.

All over the country, eBay drop-off stores popped up, promising to take the hassle out of selling unwanted items for consumers (http://auctionbytes.com/cab/pages/consign). AuctionDrop teamed up with UPS to allow consumers to drop off items at all UPS Store locations, and franchise operators like iSold It and QuikDrop signed up lots of interested entrepreneurs.

eBay created a formal program for the stores called Trading Posts, adding to its existing program for consignment sellers called Trading Assistants, which it created in 2002. The drop-off fad became international with stores in Canada, England, Germany, Australia (http://www.auctionbytes.com/cab/abn/y04/m10/i13/s03).

Not everyone could figure out how to make a go of the drop-off store, however. Circuit City ended its brief experiment with drop-off consignment selling. Some independent drop-off stores closed, others put themselves up for sale on eBay. Most Trading Assistants continued to operate their consignment businesses out of their homes or warehouses, or offered pick-up service instead of opening a drop-off location.

Classifieds sites got a lot of attention in 2004, touted as a way to sell hard-to-ship items, reach a local audience, and reduce the risk of fraud. LiveDeal.com officially launched last year after a soft launch in 2003 (http://auctionbytes.com/cab/abu/y204/m09/abu0126/s02). CityXpress expanded its online auction-event services for newspapers (http://auctionbytes.com/cab/abn/y04/m09/i29/s02) and teamed up with Adstar to help newspapers extend their classifieds online (http://auctionbytes.com/cab/abn/y04/m09/i01/s02).

A report published in December claimed online classifieds sites were hurting newspapers. The report from Classified Intelligence said Craigslist cost newspapers in the San Francisco Bay area $50 million to $65 million in employment advertising revenue (http://auctionbytes.com/cab/abn/y04/m12/i28/s02).

eBay got directly involved with classifieds sites in 2004, making a splash by acquiring a 25% stake in Craigslist in August (http://auctionbytes.com/cab/abn/y04/m08/i13/s01). eBay also acquired Mobile.de, a car classifieds site in Germany; Marktplaats.nl, the leading classifieds website in the Netherlands; and Rent.com, a privately held online classifieds site in the apartment and rental housing industry (http://auctionbytes.com/cab/abn/y04/m12/i17/s00).

eBay also modified its search engine on eBay.com to expand its local search capability (http://auctionbytes.com/cab/abn/y04/m12/i10/s02) and launched a "wanted" feature on eBay.com (http://auctionbytes.com/cab/abn/y04/m12/i03/s00).

In addition to wanting to capture sales at the local level, eBay continued its march toward global domination in 2004 with the acquisition of India's Baazee site and the opening of PayPal's European headquarters in Ireland. But the risks of operating on a global level came to the forefront in December with the arrest of eBay's top officer in India (http://auctionbytes.com/cab/abn/y04/m12/i21/s02).

Last year saw some significant improvements to eBay Stores, which lacked even basic storefront features when first introduced. eBay also continued its efforts to attract third-party developers to work with its API program, and created a Solutions Directory so users could find vendors "technically compliant" with eBay (http://cgi6.ebay.com/ws/eBayISAPI.dll?SolutionsDirectory). It revamped its preferred service provider program, renaming it the Certified Provider Program (http://auctionbytes.com/cab/abn/y04/m10/i15/s02). It also continued to develop the data-licensing program it had introduced in 2003, which enables third-parties to license and resell historic eBay data (http://auctionbytes.com/cab/abn/y03/m12/i19/s01).

In 2003, top eBay Powersellers had banded together under the name "the eBay Elite." Last year, the group changed its name to the Professional eBay Sellers Alliance (http://auctionbytes.com/cab/abn/y04/m04/i07/s01) and held two summits. PESA and continues to gain clout with companies and services eager to reach the 600+ members that generate over $1 billion in annual eBay gross merchandise, according to PESA's website.

Last year also saw the demise of a long-time organization in the auction industry when the Online Auction Users Association (OAUA) folded in July (http://auctionbytes.com/cab/abn/y04/m07/i19/s01).

Incidents of fraud and phishing continued, and an old scam saw new life online with a disturbing trend. The counterfeit check scheme is nothing new, but it has taken off with a vengeance using a new twist. BIN bandits and malicious bidders purchase thousands of dollars worth of items in a short period of time and try to perpetrate a payment scam for the purchases (http://auctionbytes.com/cab/abn/y04/m11/i23/s01).

The strange, goofy and disturbing all found homes on eBay last year. The media fell in love with the Wedding Dress guy (http://www.auctionbytes.com/cab/abn/y04/m04/i29/s02) and were mesmerized by the Virgin Mary grilled cheese sandwich (http://www.auctionbytes.com/cab/abn/y04/m12/i08/s03). A shortage of the flu vaccine in the fall led to auctions of - what else? - flu vaccines.

Insomniacs learned through late-night infomercials they could make a fortune selling on eBay. Books and seminars on how to sell on eBay proliferated. eKnowledge Institute started an "eBay University" type of seminar program (http://auctionbytes.com/cab/abn/y04/m05/i19/s02), and a company called AuctionAdvisor offered "free" 90-minute seminars around the country in order to upsell their workshops, including "eBay University Business Builder" for $1,995.

eBay officially announced its "eBay Education Specialist" program to train users who want to learn how to teach eBay's Selling Basics course (http://www.auctionbytes.com/cab/abn/y04/m09/i20/s02).

In 2004, companies seemed more in tune with the value of online auctions for fundraising. eBay consignment businesses went after this as a way to drum up business and met with some success. Firms like Gotham City Online (http://www.gothamcityonline.com/info/charity); Kompolt (http://www.kompolt.com); Benefit Events (http://benefitevents.com); and cMarket (http://www.cmarket.com ) all took different approaches to the same need to raise money for non-profit organizations.

Lawsuits are a fact of life for a company the size of eBay, and its lawyers were kept busy in 2004.

In July, users sued eBay over billing problems (http://auctionbytes.com/cab/abn/y04/m07/i06/s03), and the same month, PayPal settled a lawsuit brought by its users (http://auctionbytes.com/cab/abn/y04/m07/i30/s01).

MercExchange is still waiting for an appeals decision after it won its patent lawsuit against eBay in 2003. (http://auctionbytes.com/cab/abn/y04/m10/i06/s01). Tiffany sued eBay over fakes being sold on the site (http://auctionbytes.com/cab/abn/y04/m06/i22/s01).

Progress was made in the feedback liability lawsuit filed by Robert Grace, which may ultimately be heard by the California Supreme Court (http://auctionbytes.com/cab/abn/y04/m07/i26/s01)

Online auction users faced many challenges last year, including higher fees, glitches, no true Free Listing Day from eBay, Item Specifics & Category Rollups, billing problems, the near demise of Half.com, new policies and procedures, new features that weren't necessarily wanted, and did I mention glitches?

Meanwhile, eBay and its top executives got richer and more powerful. Five eBay executives appeared on a list of the 100 best-paid executives in the Bay Area. eBay CEO Meg Whitman was number three on the list (http://digbig.com/4cjsy). Whitman was also named the most powerful woman by Fortune and received a CNBC/Wall Street Journal Executive Leadership award for "Business Leader of the Future."

There are likely to be more changes and challenges in the coming year, as eBay prepares to mark a corporate and industry milestone: its 10-year anniversary.


About the author:

Ina Steiner is co-founder and Editor of EcommerceBytes and has been reporting on ecommerce since 1999. She's a widely cited authority on marketplace selling and is author of "Turn eBay Data Into Dollars" (McGraw-Hill 2006). Her blog was featured in the book, "Blogging Heroes" (Wiley 2008). Follow her on Twitter at @ecommercebytes and send news tips to ina@ecommercebytes.com.


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