Date: Fri 03-Sep-1999

Publication: Ant

Author: JUDIR

Quick Words:

Santucci-eBay

Full Text:

eBay Admits Fault But Continues With Reserve Fee Increases

By Louis Santucci

There will probably be a lot of disagreement as to whether or not eBay

(www.ebay.com) shot itself a wounding blow in the proverbial foot, but

certainly buyers and sellers alike will remember the controversy that erupted

during the weekend and days following August 20.

Beginning the morning of August 20, many eBay sellers received an e-mail

stating that effective August 30, eBay would add an additional charge of $1

for all auctions using a reserve fee option. In addition, the seller would be

obligated to set a minimum starting bid of at least 25 percent of the reserve

price.

The rationale for this change, according to eBay, was that buyers had

complained that they did not know what the reserve was for the items they were

bidding on and that it cost eBay a lot of money to manage the reserve auction

complaints which forced them to respond to the complainant's e-mails. There

was the implication, in addition, that sellers used the reserve system, by

placing a very high reserve, to get an estimate of the value of an item

without having to sell it. This assertion further fueled the flames and set

off the firestorm of protest.

The firestorm erupted on the auction's chat boards and especially on the eBay

cafe and the "new features" chat boards.

In reaction, several hours later, eBay posted a new announcement on the

announcement board removing the offending language but leaving the fee and 25

percent structure in place. However, eBay added insult to injury with the

comment that the fee was after all "only a dollar." This note unlike the

others was signed by eBay founder Pierre Omidyar.

This caused more furor among eBay sellers. Several people commented that they

sold thousands of items and the additional charge would add up to quite a bit

and take from their profits. Others pointed out that for their $10 and less

items this would bring the total cost for selling a $10 item from 75 cents to

$1.75 -- or more than a 100 percent increase.

By the end of the weekend, eBay had relented a bit and had reduced the reserve

fee to 50 cents for items under $25 but kept the fee at a dollar for items

over that price. They also backed off from their insistence that the starting

price must be no less than 25 percent of the reserve requirement.

A boycott of the eBay site was initiated starting on Monday, August 23. Many

sellers openly admitted on eBay's chat boards that they had switched and

encouraged others to do the same. Some of the graphics during the protest were

quite clever and amusing. One showed a sinking ship actually sinking into the

water. The language was often quite strong over the issue. Many felt that

eBay, which prides itself on its so-called "community" of users, had split the

community.

Michael Pursglove, a spokesman for eBay, admitted that they had not checked

this new policy out thoroughly enough with the sellers who use eBay and pay

the fees.

We "blew it," said Matt Vanec, of investor relations at eBay, and he suggested

that the partial backtracking was a result of the huge protest that ensued. He

said that they had learned a lesson and would be trying to develop ways for

checking new policy ideas out with users before adopting them. He would not

comment on whether or not the fee structure would be modified if the protest

continued. No one at eBay would comment on whether or not they had lost

business due to the controversy.

Another issue raised by the surprise announcement by eBay was whether or not

eBay could institute policy and fee changes without the 30 day notice called

for in their contract with users. One chat board user was seeking other people

to join a class action lawsuit he was threatening to bring over the matter.

Neither Amazon nor Yahoo spokeswomen would comment on whether the eBay protest

had a direct impact on their sites by increasing new users and traffic to

them. Sharon Greenspan, a spokeswoman for Amazon, did note, however, that

their users had increased by several hundred thousand in a one month period. A

check with both their sites did indicate that there were sellers who normally

used eBay who were now using these sites and their history details showed they

had not been there before.

Another new site, Golds Auction, noted on its announcement board that more

than 2,000 users had switched from other sites in just the five day period

since the protest at eBay began. How many were eBay users was hard to tell but

most likely a good number were because many of those had indicated so. Golds

Auction was not scheduled to go to full use until September 1. However, the

overwhelming response swamped its capacity and forced it to upgrade its site

before the scheduled official debut.

Many people stated on the chat boards that this recent action further

exacerbates eBay's goodwill problems because of its inability or unwillingness

to offer the promised free listing day which was promised as a thank you to

the users for sticking with eBay after their severe outage problems earlier

this summer. That day has been put off twice so far and the last word was that

these free listings will only be permitted during off hours.

It is hard to gauge the long-term impact the protest will have on any of the

sites. EBay, up until now, has had the distinction of having the largest

critical mass of users that keeps attracting people to the site. But one

wonders with the new search engines available, such as www.auctionwatch.com

and others which can search every auction site for an object, whether that

critical mass will mean much to computer-savvy people once those search

engines are in place.