A material world

Online auction giant bids to continue growth in changing marketplace

Roger Fillion, Rocky Mountain News

Published November 6, 2006 at midnight

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BAILEY - Thomas Burns is among the tens of millions of people who make the vast eBay economy hum.

Surrounded by shelves crammed with around 100,000 record albums, Burns auctions vintage vinyl on eBay to make a living. He knows the payoffs . . . and pitfalls.

Burns works from a 2,000- square-foot space overflowing with jazz LPs, CDs, comics and the like. He sells to customers as far away as Australia and Brazil.

The payoffs: Burns reaps about $100,000 a year in eBay sales, through auctions and fixed-price deals. And he can reel in that money from a remote mountain town nestled near snow-capped peaks.

The pitfalls: Ironically, eBay's huge success since its start in 1995 - in Pierre Omidyar's California home - has made it tougher for those such as Burns to make a living from the site.

So Burns is among those who've turned to other sites such as GEMM.com and musicstacks.com to sell some of his records. But he's hardly abandoned eBay.

"It is still one of the biggest sites for collectibles," says Burns, just back from a trip where he bought two private collections of vintage jazz vinyl. "Most of the stuff I bought is going on eBay."

Growth pains hit eBay

EBay is one of the Internet's greatest success stories, an online phenomenon that began as a way to make some cash after cleaning out your attic or garage.

It's evolved into the world's largest online marketplace, a global bazaar where virtual storefronts dominate the landscape and hundreds of thousands of sellers, big and small, use it to make cash. Among the items sold this year: Barry Bonds' 715th home run ball and oceanfront property in Mexico.

But even as it has become an economic driver, eBay - which had $5.6 billion in revenue over the past 12 months - is enduring growth pains. Wall Street has hit the stock, which has dropped about one-third in the past two years. Sales are slowing, and rivals abound. Sellers gripe about fee increases and lower selling prices. And analysts question eBay's recent purchase of Internet phone company Skype for as much as $4.1 billion, wondering if the price was too steep, and why eBay would want to buy a phone company.

That said, Thomas Burns is among the many sticking around. He turned to eBay in 1997, about a year before the company went public and became a Wall Street darling.

At the time, Burns was selling records from a store in an Evergreen strip mall. But after checking out eBay's Web site, Burns decided to give it a whirl.

It not only "looked fun," recalls Burns, but records on eBay were going for as much as four times the price he was fetching at his bricks-and-mortar shop.

Burns' business hit pay dirt. "Right out of the gate we were doing $2,000 a week."

Fast-forward to today. Tens of millions more people have flocked to eBay, many to sell records, Zippo lighters, cars, you name it.

The result: lower prices for items sold. Numerous eBay-engineered fee increases also have cut into sellers' bottom lines. And frequent changes in eBay's sales policies have forced people such as Burns to bob and weave to stay in sync with eBay corporate in Silicon Valley.

"EBay has been much more difficult as they have grown," says Burns. "From 1997 through 2000, we would put up 30 to 50 items a week and bring in a minimum of $2,000 a week. Now, I put up hundreds of items a week to make the same amount of money."

Pointing to the beginning

Burns is among some 1.3 million people globally who make a full or partial living hawking goods on eBay, according to a June -ACNielsen International Research survey done for eBay.

The goods have included Ferrari sports cars and a partly eaten, 10-year-old grilled cheese sandwich said to bear the Virgin Mary's image. (The sandwich fetched $28,000 two years ago.)

EBay draws small businesses and one-time execs who ditched corporate America. Even computer giant Dell and appliance maker KitchenAid look to the Internet auction site to sell computers and blenders.

It's a far cry from Labor Day weekend 1995, when Omidyar wrote the software code for what would mushroom into eBay. Omidyar's first listing: a broken laser pointer. It sold for about $14.

Today, eBay has sites in 33 nations across the globe.

Worldwide, eBay counted 211.9 million registered users as of Sept. 30. As a national population, eBay's online community would rank No. 5 worldwide, behind China, India, the United States and Indonesia.

Spinoffs crop up everywhere

At any one time, about 105 million items are listed for sale. The value of goods sold totaled $44.3 billion in 2005.

That would put eBay - as an economy - at No. 60 worldwide, behind Slovakia and just ahead of Libya, based on gross domestic product data from the World Bank.

"EBay is one of the great examples of globalization," says Ken Hillis, professor of media studies at the University of North Carolina and an editor of the book Everyday eBay.

Vice President Dick Cheney invoked eBay during the 2004 presidential campaign, saying U.S. economic numbers failed to account for the "400,000 people (who) make some money trading on eBay."

The eBay economy has given birth to scores of spin-off businesses, too.

There's the "professional closet cleaner and organizer" - in the words of author and businessman Daniel Nissanoff - who will sort through your belongings and sell the stuff you don't want via eBay.

Other outfits peddle technology to boost the odds you'll win an auction in the final moments of bidding.

And "drop-off" stores will auction your goods for you on eBay. Employees snap a digital photo, write a description and post a listing. And that's just the tip of the iceberg.

"The eBay ecosystem companies are growing by leaps and bounds," says Nissanoff, author of Futureshop, a book on the auction economy.

Forrester Research projects the U.S. online auction market will grow to $65 billion in 2010 from $28 billion in 2005.

"By bringing collectibles and antiques out of the hands of the few with access, and used goods out of yard sales, eBay and others have created a consumer marketplace that doesn't exist offline," wrote Forrester analyst Carrie Johnson in a 2005 report.

Those "others" include rivals that have jumped into the business, such as Amazon.com, Overstock.com and Bidville. Competitors also have emerged abroad. Less directly, search engines Google and Yahoo! generate leads for sellers that yield non-eBay sales.

It's still not for everyone

EBay's format doesn't work for everything and everyone. Take Jeff Veres, a longtime eBay seller.

"EBay is a great shopping tool for small items you can ship through the mail," says Veres, who uses eBay to sell the chips that casino gamblers use like currency.

Veres, of Littleton, recently sold a gun safe weighing about 500 pounds - but not on eBay. "It's not something you ship," he says, noting the steep fees.

Instead, Veres used a Denver listing on Craigslist, the largely free, localized online classified service. Craigslist says it operates more than 300 sites in all 50 states and more than 50 countries.

A Lakewood man bought the gun safe. Veres has since on Craigslist sold a TV and a canopy that can be used as a portable garage.

EBay has taken notice. "Local is something we're going to be looking into," says spokesman Hani Durzy, adding that more news on localized sales is likely to come next year.

Other sellers, too, say they're looking elsewhere. A September online survey of 1,225 people conducted by the Web site AuctionBytes.com found many who sell on eBay want to leave for other sites. Those other venues include a seller's own electronic commerce site as well as sales venues offered by such Internet players as Amazon, Overstock, Google and Craigslist.

According to the unscientific survey, 92 percent of respondents were current sellers on eBay. But only 38 percent planned to be selling on eBay in six months.

Strategic bets to boost sales

"EBay sellers vote with their pocketbooks," says Ina Steiner, AuctionByte's editor. "Right now they're being squeezed on both ends - higher fees and lower prices."

What's it all mean for eBay's future? Depends on whom is asked.

"It's hard to know where they're going. But I think they're grasping to some degree," says Steiner.

Grasping, perhaps, but hardly sitting still. Last year, eBay bought a 25 percent stake in Craigslist. That gave eBay a firsthand look at classified-style trading.

That's just one of many strategic bets. To expand its reach, eBay has bought online exchanges here and abroad, the comparison shopping service Shopping.com, and online apartment listing service Rent.com.

A key deal came in 2002, when eBay spent $1.5 billion to buy online payments company PayPal. The electronic service lets consumers pay for goods without using a credit card. PayPal's own popularity had ballooned with the online auction craze.

EBay's purchase of Skype last year was geared to boost auction volume. How? By making it easier for eBay buyers and sellers to talk with one another about listings.

In August, eBay partnered with rival Google in a new bid to cash in on Skype by permitting users to speak with advertisers via the service; advertisers would pay Google and eBay for the calls.

"We have just begun to scratch the surface to get these three brands working together," says eBay's Durzy, referring to eBay, PayPal and Skype. "The next 10 years hold incredible promise."

fillionr@rockymountainnews.com or 303-954-2467

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