Should ebay become freebay?

I've been thinking a lot lately how so many of our big internet services like ebay and match are being driven towards extinction. They should be reducing their prices every year. Like walmart they should be passing on their massive efficiencies to their customers in a constant drive to reduce friction.

Instead we see ebay raise fees. How is that benefitting their buyers or sellers? Is it to fund esxciting new services? No. Its to show wall street higher eps, and have a high stock price to go buy other growth properties like skype and rent.com.

Now I wouldn't want to have meg whitman's job. She faces a vicious downward spiral where she has to spend more money to bring people into her marketplace and then charge them more to cover that making her product ever less competitive with the increasing free world. It must suck to have to compete with the free world.

These same economics are being played out for many web 1.0 leaders from match.com to monster. Even craig recently decided to stop competitors like oodle from crawling his marketplace.

It becomes more clear every day however that nobody will succeed fighting against the free world. As we saw in news, if you're not on google you're not on the web. if you're brillaint story on bush isn't crawled, nobodys gonna know about it. How long until we search for a used car imn the open market and see all for sale, except of course those listed on ebay?

And how can ebay play in this world? My rule of the net is that anything that can be free will be and free will always win.

So what if ebay became freebay? Well, it would no doubt destroy the stock to wipe out 75 % of revs:) but I wonder what would happen if they started cutting prices every year and allowing/inviting the world to take and use and present all their lsitings?

Since all services would have to link back to ebay which is hosting the sales they would get a ton of free traffic letting them spend less on marketing and reduce fees.

Or what if ebay launched its own killer? What if they launched their own marketplace aggregator that crawled every car for sale and allowed free listings?

Ebay obviously gets the power of the free listings model as it has invested about 1 billion buying these companies from rent.com to marketplatz and a stak in craig.

In a world where data moves freely, ebay's business becomes all the value added services, many of which still have network effects. Their ratings could be a separate service like paypal offered to be used with any marketplace.

This also brings up other questions. Maybe 100 billion dollar companies aren't aligned with net consumers in the long run. The msft model of capitalism that ebay and goog follow is to maximize profit and stock price and then redistribute this massive wealth privatley as chairty from bill, pierre, larry and sergei.

Would they all do better by the world giving back more direclty through their companies? What if msft lowered the price for windows and office every year rather than brutally fighting? This would have given back to our economy but would it have helped them? Why should a monopolist reduce prices? Sure don't teach that at harvard b school.

Yet it seems like ebay would be better off with a more cooperative relationship with its sellers. Compare to the branding craig gets with free.

By cutting prices as low as possible these companies would own their monopolies more completely because there would be way less room for new competitors. They might also have driven greater penetration or new uses for their services. Clearly the newspapers missed the boat not cutting the prices for their classifieds.

I guess my gut tells me that if ebay doesn't open up and cut prices now, they're the next aol, but I probably can't make a coherent case yet.

One last point and sorry for rambling,these are community created marketplaces. They are co owned by their users. You are wronging them by raising prices when you don't need to. People love craig because he tries to chrge as little as possible. If he ever went commercial and charged for lots of listings, I suspect he'd be done.
Sent wirelessly via BlackBerry from T-Mobile.

Comments

[Bill Burnham]

Hi Mark,

This is a great post. In keeping with your thesis, EBay would be wise to study the evolution of stock markets in the United States, particularly the last 20 years. Stock exchanges generate comparatively little money from trading fees/commissions and almost all of their money from ancilliary revenues streams, particularly pricing data. Exchanges that failed to lower transaction costs have seen volume rapidly shift to cheaper alternatives. In the grand scheme of things, most of the money made by firms servicing the stock market is made by services such as margin lending, stock loans, and clearing. Ebay should focus on ancillary services such as payment, escrow, insurance, financing, etc. and try to lower transaction costs to as close to zero as possible. Until they do so, they are in real danger of being usurped in the fashion you describe.