|Tue Jan 4 2011 19:24:35|
Did eBay Blunder with Its Digital Content Strategy?
By: Ina Steiner
In 2008, eBay banned digital downloads from its marketplace. It wasn't that eBay didn't see a demand for digital content - sellers were successfully listing ebooks three years ago when it abruptly put in place the new policy banning digital downloads.
eBay's Brian Burke explained why eBay created the policy in this March 2008 interview: "Most items that require digital delivery, once created, can be very easily replicated. This ease of replication creates the opportunity for sellers to list thousands of the same item in an attempt to manipulate the Feedback system."
It appeared to be another case of eBay's rogue "Trust & Safety" department influencing marketing policy. But a recent Twitter post from Matt Ackley, eBay's Vice President of Advertising and Internet Marketing at the time, indicates the decision may have been caused by a business-school calculation that failed to take into account real-life technology and marketing innovation: "just think, ebay watched a huge media category die over 5 years because we could not prove the npv....."
NPV stands for Net Present Value, a method MBAs use for determining the time-value of money to appraise long-term projects. eBay CEO John Donahoe was running Marketplaces at the time and used his management-consulting background to impose a numbers-focused management style on eBay.
Now that ebooks are mainstream - Barnes & Noble now sells more digital books than physical books on the world's second largest online bookstore, BN.com - it looks like eBay may have made a strategic mistake that could be costing it millions of dollars in lost revenue.
Now, eBay's only saving grace in the digital-content space is its PayPal online payments unit, which has a micropayment service for digital goods and has partnered with the likes of Facebook and the Financial Times. With A Pew Research Center report showing that 65% of Internet users have paid for online content, at least PayPal will be a part of the growing digital content space.