Why Ebay will die

DESPITE RECORD BREAKING profits in the first quarter of this year(pdf), Ebay is again pushing up costs for its sellers - specifically aiming rises at power-users who are committed to selling on the internet's leading auction site.

Ebay recently hiked up charges for the half a million online stores that operate on the site, which provoked the merchants most affected to call for the head of Ebay's CEO, Meg Whitman. It isn't the first time costs have drastically risen, a similar reaction to rate rises forced a significant back tracking from the president of Ebay. Marginal rises are often acceptable, but Ebay's price changes are often in double percentage terms, if not triple - 100% rises are not uncommon.

There are further costs to consider when using Ebay. Firstly, Paypal's 'protection' seems long-winded and slow, sometimes resolutions with third parties take weeks, if ever being concluded at all - this is my personal experience, and though I've heard of people receiving their money in a timely fashion, I've also heard of similar horror stories. This wouldn't be so much of a problem if the service was cheap, yet its abhorrently expensive.

Ebay takes every measure to ensure Paypal is your preferred payment of choice, banner ads, automatic insertion of Paypal-related advertising, protection only via Paypal-purchased goods etc. Then, not only do Ebay charge you for listing your goods, they will also profit from the associated payment for your goods via any Paypal purchase - and then Paypal further charge any withdrawal of your money to your bank.

Luckily, competitors have realised that the cost of using Paypal may appear abhorrent to some users and have launched their own competing merchant tools. Unfortunately, Ebay has the good sense to ban these providers quickly, for the ‘safety' of its customers. Apparently Google's recent foray into a Paypal-esque service does not have a proven track record to allow for the support of Ebay transactions. Any seller caught offering Google Checkout to prospective buyers faces having their listings cancelled, forfeiting their fees or even having their entire account suspended. Oddly, running against this line of reasoning, bank transfers, and non-protected money order transfers from the likes of Western Union, are allowed. This is disgraceful behaviour, and points towards monopolistic abuse.

You'd think Ebay would stick to its guns and declare all Google product unusable, negating any hint of hypocrisy, but a deal this week confirming a considerable relationship between Google and Ebay consisting of Google advertising being integrated into Ebay, along with 'click-to-talk' functionality for Google Talk and Skype, means that further questions should be asked of the company's refusal to allow the Google payment scheme.

Despite the increasing costs and restrictive payment methods, a good site user experience may keep people coming back for more. But the Ebay platform itself instantly appears slow and antiquated to any net savvy user. Modern web sites utilising the latest in 'Web 2.0' technologies have been flourishing, whilst Ebay has remained in the clunky, full page-refresh, pre-ajax mentality, despite huge profits that could easily transform an underdeveloped user experience via some decent level of R&D investment. Instead, Ebay development seems to have ground to a halt, with the company seemingly resting on its laurels with regards to its main user interface, which is utilised by hundreds of millions of users daily.

The site images Ebay uses, and the embedded banner ads wouldn't look out of place in a web site from the late 90s. While other sites are throwing cheap storage space for achieving user data, Ebay still only allow you to view records for the previous 60 days - utterly restrictive, and unnecessary. (Also, a pet hate, why do you have to consistently re-login at utterly arbitrary random intervals despite checking the ‘keep me signed in' option?)

The recent addition of a text-based messaging facility seemed incredibly belated, and like many recent additions to the site, appears to a bolted-on function which takes you to a separate system away from the main Ebay screen - a little integration would of made the service a little less unwieldy. This seemed to be a precursor to Ebay's acquisition of Skype, which occurred in September of 2005. Its taken nearly a year for Ebay's development team to add a 'Skype Me' button to seller pages, a simple task that should've been implemented within weeks of the deal's completion (it must be noted that this is still only accessible in a very limited amount of Ebay categories, for no apparent good reason). The guess is, long-winded management decision processes and internal bureaucracy must be stifling any changes to the already antiquated user experience.

All of this is irrelevant to the argument concerning the synergy between Ebay and the newly purchased Skype. A number of industry commentators and analysts argued that Ebay didn't need to buy into its own VoIP service, and that an over abundance of cash had merely been burning Ebay's pocket waiting for a weakly technically linked company to become available for purchase. It's of no doubt that increased client communication can provide a pivotal role in the provision of an auction site, what's of doubt is whether it should cost $2.6billion to provide this service, or whether a partnership with a third-party company providing the communications infrastructure would allow for each company to properly focus on their own core-competencies.

The previously mentioned recent deal with Google regarding 'click-to-talk' functionality raises questions over how ubiquitous Ebay expects Skype to become, considering it's supporting a rival technology within its own domain. So far, details are sketchy concerning what the VoIP-related relationship actually encompasses, but this seems a very odd business decision by Ebay, and Google seems to be the clear winner in the deal.

Regardless of Skype, it could be argued that the "if it ain't broke, don't fix it" mentality could be applied to Ebay in its current guise - and this has certainly worked so far. But that philosophy makes little sense in the fast-paced world of the internet, where a small competitive advantage can quickly wipe-out competitors market share - Google quickly replaced Yahoo as the main search engine of choice, while Myspace is now the social-networking market leader even though many, many similar sites came before it.

Ultimately it will take a huge sway of users and a very attractive alternative offering for people to switch to another auction service. But despite its current size, the fickle nature of internet use created by word of mouth and current trends, the minimal cost of switching, the tiring user experience, the increasing costs (which are proportional to Ebay shareholder greed), and the restrictive nature of Paypal and related services, will all couple to ensure a better-equipped competitor who embraces change, open standards, and provides a much better degree of customer service, will eventually topple Ebay - and not before its due time. µ

L'Inq
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