eBay Management Suggestions

eBay suspects that its revenue might fall for the first time in its history. Although it doesn't have much control over world market conditions, it does have control over its own platform. Here are my suggestions for making eBay more money:

Make Search King

As Google has taught us, there is a lot of convenience in a powerful search engine. eBay should improve their search engine to make it easier for buyers to locate auctions they care about. By doing so, they can make the platform more useful for both buyers and sellers.

This suggestion is actually behind the times. eBay has already started revamping their search results so that better auctions are shown toward the top of the list. This is a far more useful sorting than "ending soonest." They've also done a good job incorporating things that buyers care about: high seller ratings, low shipping prices, accurate listings, etc.

Chase the Long Tail

One of the great things about the Internet is that it facilitates the long tail. There are about 1.5 billion people connected to the Internet. Among those 1.5 billion people, there's probably a market for a $10 baby spoon emblazoned with characters from The Rocky Horror Picture Show. Who knows what kind of crazy stuff might sell. One of the keys to making the long tail work is to have tons of stuff available. eBay should eliminate insertion fees or at least significantly lower them so that the volume of listed items increases. There are hundreds of thousands of shops that would love to list their inventory for auction on eBay. But paying $0.15 per listing is ridiculous. If you're selling a low-volume item, you might have to list 10 times before you get a sale. That means you're paying eBay 15% in listing fees to sell that Rocky Horror Picture Show spoon.

Sure, insertion fees might improve the quality of listings slightly, but a decent search engine can sort out the crap and show the buyer just the good stuff. If eBay still wants to charge insertion fees to prevent junk listings, they could charge sellers a flat monthly fee for unlimited listings. Harnessing the shops with lots of inventory is a quick way to access that long tail.

Focus on Final Value Fees

By eliminating insertion fees, it would force eBay to focus on final value fees. If eBay wants more revenue, it has to encourage auctions to end successfully. If you have a successful auction, you have a happy buyer and a happy seller. That's your goal. Here are two suggestions for increasing revenue from final value fees without changing the rate structure:

Encourage Emotional Bidding

Many buyers get emotionally attached to auctions they're bidding on. The owner of JJGames tells me that he gets emails from eBay users who have lost auctions to him. They complain that they lost the auction despite not bidding high enough. The reason is that they're not bidding rationally but emotionally. They get so attached, they would bid higher if they were allowed to. eBay should harness these emotional buyers by extending auctions that receive bids in the final minutes. Other auction platforms (such as BidMass, for example) already do this. The same thing happens naturally in traditional auctions. If someone is outbid, the auctioneer gives the previous high bidder a chance to increase his bid.

In these emotionally charged auctions, eBay could easily increase their revenue from final value fees. At the same time, they would eliminate dissatisfaction from customers who dislike sniping.

Relatively few auctions will activate this new bidding rule, so in most cases there will effectively be no change to the auction format. For buyers who spend a great deal of time assessing the market value of a particular auction before bidding, they're still free to snipe the auction and avoid releasing that valuation until the last minute. I can think of no valid reason for continuing the current "hard close" policy.

Discourage Emotional Bidding

As an eBay buyer, I personally dislike emotional bidding. I am entirely unattached to any auction I bid on. It annoys me that I have to manually try seven times to win an auction for a one ounce gold coin, because emotional bidders routinely bid them far higher than the current spot price of gold. I would love to buy various items on eBay but the requirement for manual intervention means that I usually choose Amazon. As a buyer, my goal is to purchase a particular product, not to win a particular auction.

I should be able to indicate the product I want and let eBay do the rest. For instance, let's say that I want to buy a new chainsaw. I find five different auctions with which I would be satisfied. I should be able to tell eBay: I'm willing to pay $200 to have any of these auctions delivered to my house. eBay would then subtract the auction's shipping price from my $200 and place a proxy bid on each auction in turn until I win. Once I win, I'd get an email telling me that I've won and I can proceed with payment.

It's easy and simple. I might have to wait a couple days to get the deal that I want, but at least I don't have to waste hours of my life managing the whole purchase. I'll gladly wait passively for two days to save $20 bucks, but I'm only willing to actively spend 15 minutes of my life to save that same amount. If buying on eBay takes more participation than that, I'll go to Amazon.

Postscript

In this entire discussion, I've not accounted for eBay's actual cost of doing business. That's because it should be practically $0 per auction. The core business of selling items at auction hasn't changed at all. They should have ridiculously low costs. If they don't, there's no excuse. Software and hardware is pretty much free these days. Instead of throwing your money at giant Oracle databases, move it in house and innovate for goodness sake. Google and Amazon have done that and tremendously benefited themselves and everyone else on the 'net.