Industry Profile: Jerry Lynch, Chairman and Chief Architect of AuctionHelper
By Ina Steiner
Jerry Lynch co-founded AuctionHelper and is Chief Architect and Chairman of the Board of Directors. AuctionHelper is a software company that creates auction-management tools to automate the time-consuming components of the online auction process and allow sellers to increase their efficiency and productivity. Lynch developed AuctionHelper software for use with his own business on eBay in 1997.
AuctionBytes: Tell us a little bit about yourself. What did you do before co-founding AuctionHelper?
Jerry Lynch: This is how the management industry got started, because as you know, we were the first ones to do this. Historically I've sold sports cards. I started selling sports cards in the mail back in the late 80s, and then we started to get into Beanie Babies. And we started to do some really high-volume on eBay in 97-98, and in both Beanie Babies and sports cards. At the time, there were no management tools to facilitate high-volume. The only thing that was really around was SA Pro, but it was not conducive to handling high volume.
AuctionBytes: How did you get into selling sports cards?
Jerry Lynch: When I was about 18, 19, back in the late 80s,... Sports cards got really popular in mid- to late-80s, and back then, there was a lot of money to be made, and there were a lot of kids my age in the business. It was real easy to make money, a monkey could have made money back in the 80s. That was the time when, interestingly enough, you didn't need any capital, you could pre-sell products with expected delivery dates 6 or 7 months down the road. So you could pre-sell all your products and then go out and lock in the product you had already sold.
AuctionBytes: Where did you get the idea for AuctionHelper?
Jerry Lynch: We got involved in 2 major products at the same time, we purchased the leftover NASCAR products from a sports card manufacturer that went bankrupt. We had a truckload of cards, while at the same time we were dealing in Beanie Babies in high volume.
We could list items easily because eBay had Mr. Lister, which at the time you could list up to a thousand items a day. The problem was how are you going to close a thousand items a day? There was no automation. So we developed an invoicing system where customers could come to the Web site and fill out their invoices. So we were pre-selling Beanie Babies, sort of like you would short stock. That's how this whole thing got started, we were pre-selling Beanie Babies on eBay. We were doing a thousand items a day, every single day.
AuctionBytes: Do you think you were the only ones doing that volume on eBay?
Jerry Lynch: No, there was another company doing high volume. I think they were out of Thailand, they literally had, from what I understood, hundreds of employees doing nothing but answering emails. What we did was automate the steps involved in the whole facilitation to where I was literally selling, not just closing, but selling 500-600 items a day and I had no employees. When we were doing 1,000 items a day, I had no employees answering emails, the only thing I had were employees packing orders. And then we got into a card deal, and we wanted to do 5,000 a day. But the problem was, there were no tools that could do it, because Mr. Lister limited you to a thousand a day, so then we developed a listing tool that could list super-high volume. Eventually we got to the point where on one day, we listed 28,000 items, and I'm going back to 1999/2000 here.
We listed 28,000-29,000 items in one day, and actually paid the fees, these weren't free. This was not free listing day. Now, it's not all that uncommon for somebody to do that with all the tools that are out there, especially on free listing day. I've seen people list over 100,000. But we were doing it before there were tools, and we developed these tools.
AuctionBytes: Did someone from eBay call you and say, what's going on?
Jerry Lynch: Back then, eBay's Powersellers Group would actually have Powersellers contact us to use our tools because there was nothing that could facilitate volume. Now I'm dating myself back to early, mid-1999.
AuctionBytes: So eBay was sending people your way?
Jerry Lynch: Yes, that was very common back then.
AuctionBytes: And you were charging people?
Jerry Lynch: We didn't actually start charging people until April of 2000. We were free for almost a full year.
AuctionBytes: So the idea for AuctionHelper came because you needed it and developed it yourself?
Jerry Lynch: It was a necessity.
AuctionBytes: And when you started charging for it, how many people were using it?
Jerry Lynch: I would say a couple of hundred. This didn't start out as a business, we were doing it for ourselves, and then we set up a site where people could sign up and join, and then all of a sudden we got all these people using it that we don't even know. And then it dawned on me that this could actually be a business, so we stopped selling products and made this into a business. Several months later we had several competitors with large Venture Capital behind them.
AuctionBytes: A lot of them seemed to spring up in late 1999.
Jerry Lynch: Right, that's when they all sprouted up. We didn't invent the wheel, we were just the first ones, then a bunch of other people came in and started doing it.
AuctionBytes: I remember I wrote about AuctionLynxx in the July 2001 issue of the AuctionBytes newsletter. This was the only tool around at the time that allowed sellers to cross-promote their items and was incredibly innovative for that time. I notice some other services have finally implemented some cross-selling features of their own, including eBay. What do you think of that, and were you able to get any patents?
Jerry Lynch: We still have patents pending, the patent office is extremely backed up, and we're still waiting. We have a number of patents pending on AuctionLynxx, PictureLynxx, and other tools that we've shelved, because everything we come out with somebody copies. There's a few things we put on the shelf for a while that we do have patents filed on.
AuctionBytes: Should any companies be worried, do you think, that you've taken out these patents?
Jerry Lynch: If we get the patents, then they'll need to worry.
AuctionBytes: I want to shift gears and ask you, what are some of your most memorable experiences in this industry?
Jerry Lynch: I would say the number one most memorable experience was when (eBay CEO) Meg Whitman flew us out to her condo in Telluride, Colorado. She flew Brandon Marz and myself out there. She had bought a condo and wanted to re-design the interior. She literally had us sell everything in the condo, including the hinges on the door.
AuctionBytes: So did she fly you out to help?
Jerry Lynch: Yes, we literally flew out there, took pictures of everything, we listed it all on eBay for her, we collected all the money and shipped all the product.
AuctionBytes: This is like consignment selling on a big scale. And what percentage did you get?
Jerry Lynch: We did it all for free, and in exchange, she gave us a meeting with every top executive at eBay. The only one we didn't get to meet was Pierre. I really wished I could have met him too. And she gave us a meeting with them to show them AuctionLynxx, PictureLynxx, and talk about some possibilities of using the tool, which they never did, but it was interesting. I could say without a doubt, that Meg Whitman is probably one of the nicest, kindest people I have ever met in my life.
It was a very interesting experience, because as powerful a corporate entity as she is in the world today, she is one heck of a nice person. And she's down to earth, and I thought that was really cool.
AuctionBytes: She won't be mad by you telling this story?
Jerry Lynch: I don't see why she would.
AuctionBytes: So did everything sell on eBay?
Jerry Lynch: Yes, she sold everything, there was no minimum bid.
AuctionBytes: I think you had told me you were using a tool called Front Runner that did something amazing?
Jerry Lynch: We had a tool called Front Runner early on that got the eBay item numbers ahead of time, which allowed Meg to run a full-page newspaper ad in a local paper with the item numbers, because the ad had to be in a week before the items were running on eBay. So she was able to put the item numbers in the ad. That was a nice little tool, but when eBay changed their Sell Your Item form and eventually switched over to the API, you can't do that.
AuctionBytes: That is an interesting experience.
Jerry Lynch: I would say the second most memorable experience was back in 1999 or 2000. I was developing the first automatic Non-Paying Bidder alert feature for sellers, and I found a hole in eBay's site where you could issue an NPB alert for any item listed in the last 90 days regardless of whether or not you were the seller. Which means if the wrong person had that information, they could have filed 10, 20, 30 million Non-Paying Bidder alerts, which could probably have shut down eBay. I found that and notified eBay and they fixed it right away.
State of the Industry
AuctionBytes: How has the online-auction industry changed since you first became involved?
Jerry Lynch: I would say it's changed in several different ways. My biggest complaint with how it has changed is that eBay competes with all of the management tools. They compete with them at a price level that is very difficult to compete against. Some of the pricing that eBay charges for its management fees, a company like us - we would literally pay more in API fees than the user would pay eBay for their total fees. That's unfortunate, because the way I see it, eBay being in management tools has taken away probably 80 - 90 percent of the market. They have a lot of users that use their tools. eBay in my opinion has no business being in the management industry.
AuctionBytes: Do you think it's anti-competitive?
Jerry Lynch: I think there are two problems. I think it does a disservice to a lot of people, especially the sellers. eBay didn't invent the online auction, they were just a lot of smart people at the right place at the right time. A lot of the tools that eBay develops are counterproductive, in other words, they don't know what it is like to sell products on their own site. Therefore, the developers that work for them, and the people developing the software are software developers. The worst people in the world you want to have developing tools for your average seller is a software developer. Cause they don't understand.
It's sort of like a non-writer trying to write something when they don't know what they are talking about. To me, that's a disservice to the seller, because if they take away 80 - 90 percent of the available market, it means they are taking away 80 - 90 percent of the available money that management tools could make to further develop better tools to help people sell more products or sell their products for more money. They are taking a small amount of money for services that are not conducive to increasing sales.
The problem is, the average person doesn't understand the difference between what something costs, and what they actually pay for something. In other words, you could pay $5 for a service, and there might be another service out there for $20, but you go for the lowest price, but that $20 service might actually get you another $100 in revenue.
And the average person can't comprehend that.
To me that's the biggest disservice eBay has done to the industry, is by being involved and competing in it (the auction-management market).
Another problem is that the API is not free. I think that's absurd. eBay is charging us money to help people sell more products so that they can pay eBay more money in fees.
AuctionBytes: I understand that when the eBay API first came out it was very expensive,..
Jerry Lynch: Extremely expensive.
AuctionBytes: How long was it extremely expensive?
Jerry Lynch: Probably for the first year or two.
AuctionBytes: And then the prices came down. But it's still too much?
Jerry Lynch: Yes. In my opinion, why should it cost anything?
The only reason the API exists, is because of people like me and Scott Samuel of Honesty. Inventors who developed tools to help them sell more products, which in turn increases eBay's revenue. They sort of forget who brought them to the party. Because they are the 800 pound gorilla, they can do whatever they want, or it's the Golden Rule - he who has the gold makes the rules. Unfortunately we have no choice.
AuctionBytes: When I raised the issue about the fact that services like yours have to compete with eBay tools, someone at eBay said their tools are like hot-dogs. In other words, services like yours are steak, and eBay tools are hot dogs, therefore eBay's not really competing with third-party tools.
Jerry Lynch: But here's the problem, The overwhelming majority of eBay sellers don't understand the concept, the difference between, what does it cost, and what am I paying.
My biggest problem is that they are competing with the very people who came up with the industry. In other words they said, "Oh, this is a good idea, thanks. Thanks for the idea." And that's my biggest problem. I don't think they should be in the management industry. Only because it takes money away from people who are going to develop better products.
AuctionBytes: Have there been other changes?
Jerry Lynch: Another problem is that they let anybody in now. I may be wrong, but I think I heard there are 5,000 API members.
AuctionBytes: I wouldn't be surprised. They are coming out with a directory of licensed services in late June.
Jerry Lynch: There's another problem I have with the original PSP (Preferred Service Provider) page. You had to meet some criteria to be on that thing. And it was a who's who of the bigger corporate API members, and you look at the Preferred Solution Providers for eBay, and everyone is on there except for the company that started the industry. How absurd is that?
I think that the API is the absolute best thing that ever happened on eBay as far as management tools go. When we were scraping, and every time they changed something on the site, our tools would break. So with the API, the tools don't break. But why should we have to pay for this. We could be using that money to further develop new products, new tools that help people sell more products. Especially when you look at how much their stock has gone up.
Take a look at the eBay Live and the Developer conference. How absurd is that they even charge money for this thing. If you take the stock value taking into account the stock split, it's quadrupled in the last year. How many billions of dollars is that, but they want to charge the developers to show up for a meeting so they can learn how to help people sell more products so they can pay eBay more money? It's ludicrous, it's an insult.
AuctionBytes: Are you guys going?
Jerry Lynch: We are not going.
AuctionBytes: Do you feel that online merchants are in a better position now than 4 or 5 years ago?
Jerry Lynch: Overall I'd have to say yes, because some of our clients are some of eBay's largest sellers. But you'd have to define the term online merchant.
Unfortunately, you do run into people who complain a lot, because it's harder to do more business, but where isn't it harder to do more business?
AuctionBytes: What are the challenges users are facing?
Jerry Lynch: Just the same, typical things, competition,...
I'm not going to say eBay fees, because in my opinion, I think that's probably one of the smarter things eBay's good at, is balancing the market and making sure that the prices are in line. Everybody would like to pay less money, but the reality of it is if eBay lowers their fees, there would be more products and people would make less money, or their margins would be lower.
You need to diversify, you need to see what's there ? what sells, what doesn't sell. The less-experienced sellers, they're always going to do less business, but overall, it depends on the industry. And that changes, everything is cyclical.
Future of the Industry
AuctionBytes: Where do you see the industry headed?
Jerry Lynch: If I had to guess, I would say that the online auction industry is going to grow into individual auctions. I think you'll get some people who overall are smart enough to realize that they don't need to be spending all this money with eBay.
AuctionBytes: Are you talking mostly the larger companies, like Sony or Dell?
Jerry Lynch: No. Even some of eBay's larger people, I can really see them switching over to direct-sales ecommerce sites. I've got clients that pay eBay $60,000 - $70,000 a month in fees, well, that's great if they are making money. And there are a lot of people paying eBay that kind of money. I don't think a lot of people understand that. And, there's other ways you can spend that money, rather than on eBay. But at the same time,..
AuctionBytes: But you don't see another auction site coming out with something that would make these sellers happier? You see it more like, well, it's either eBay or I'll do my own site?
Jerry Lynch: eBay has what, 90+ percent market share? That's a monster that's going to be hard to capture.
AuctionBytes: And you think these guys selling on eBay could bring their customers with them?
Jerry Lynch: Sure, I don't see why they couldn't.
AuctionBytes: What are some of the biggest challenges facing online-auction sellers in the next 5 years?
Jerry Lynch: That's a tough question, because it's going to be relative to the products they deal in and their own business experience. I don't think that corporations are going to come in and cause any problems. I think a lot of people were afraid of that, that the corporations would screw the little guy, but I actually see it the other way around. I think the little guy has the best shot going up against a corporation. Corporations are not going to sell products at the kind of price that the average person will. I think we could use less sellers on eBay.
AuctionBytes: Are you working on any projects for the future?
Jerry Lynch: I have a new product that I can't tell you anything about. We are working on a new tool that will significantly reduce the fees for a lot of high-volume sellers.
AuctionBytes: Where do you see AuctionHelper in 5 years?
Jerry Lynch: Still in the game.
Jerry Lynch is the Co-founder and Chief Architect of AuctionHelper http://www.auctionhelper.com. He handles all of the day-to-day technical architecture for the company's entire product suite. After developing AuctionHelper for use with his own business on eBay, in 1997, many credit Mr. Lynch with inventing online auction management.
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 firstname.lastname@example.org.
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