Is eBay's Real Threat Amazon or Classifieds, or Both?

I did this interview with Business Week about classifieds today and it got me thinking....

On this blog I've spent a good bit of time comparing eBay (EBAY) vs. Amazon's (AMZN) seller business. I definitely think when it comes to 'practicals' Amazon is taking significant share from eBay and others in ecommerce.

But if you think back to the recessionary period of 2000/2001, eBay was counter cyclical. People used eBay to clean out their garages, attics and turning their old stuff into cash.

Newspapers were losing classified revenue to eBay hand over fist as eBay gave people a much easier way to turn their items into cash. You can call a newspaper, create an ad for some wacky $/word formula, put in your phone number and deal with all that, or upload some picture(s) to eBay, set your terms, run an auction and hope for bid-up (which frequently came in those days). eBay even had a local feature where you could look for items around you. I remember getting my first flat-screen LCD monitor and selling my 21" tube-based monitor for $50 on eBay to a local person that stopped by and got it. I don't think you could do that on eBay today - the local aspects have been dumped over the years.

In the current 08/09 recession, eBay hasn't been countercyclical - Why? I've been somewhat 'blaming' Amazon, but some new data out Friday sheds a big spot-light on classifieds that have been under the radar for a while, but shouldn't be any longer.

Classified Usage Doubled in last 4 Years

The Pew Internet Project has a report out Friday that you can find here, that shows that classified sites (mainly craigslist), have doubled in usage between 2005-2009. According to the Pew research, half of the online audience has visited a classified site. On any given day about 10% of the online audience visits a classified site.

This graph shows the dramatic growth in classified usage in the last four years:

Over that timeframe, checkout what happened to the newspaper classified business.

Newspaper classifieds peaked in the late 90's and then they got hit with eBay. Ultimately they recovered - mostly by focusing on the non 'for-sale' classifieds that eBay was chewing away at such as jobs, vehicles, real estate and personals. You can see in the chart that they started to recover by around 2005. Then **WHAM** look at that drop by half from $19b to $9.9b.

What's the impact on eBay?

eBay doesn't break out transactions by seller-type - individual, small business, large-business, etc. so there's no way to know how many of the what I call FSBO (For Sale By Owner) types of sellers and their corresponding GMV have left eBay.

Thinking through some back of the napkin math, if there are 40m unique visitors to craigslist, let's assume half of them are there to buy products and the other half are there for non-product oriented categories.

20m buyers/month at a 10% conversion rate and a $100 ASP yields $2.4b/yr. The ASP on craigslist could be considerably higher if there is a larger % of car sales.

I'd say that a big chunk of that - 80% or so is straight out of eBay's GMV pie or approx $2b/yr. At their $60b/yr GMV run-rate that would be about a 3.5-7% headwind depending on the ASP. If amazon is in the $4b range, you can attribute eBay's 10% y/y decline path in a pretty clear way.

eBay is in a tough spot - Amazon is eating away at selection from the top-end - large and SMB retailers. Craigslist is pulling selection from individuals and the Local element. Buyers follow selection. It will be interesting to see how eBay navigates this strategic dilemma over the next year or so and if they can carve out a spot in the middle or do they need to more aggressively take on Amazon, craigslist, or both?

Disclosure: Author is long Amazon and Google. eBay is a strategic investor in ChannelAdvisor.

Comments

[PastTense:]

"I'd say that a big chunk of that - 80% or so is straight out of eBay's GMV pie or approx $2b/yr."

I disagree. I think think the vast majority of eBay use is for shippable products (small products with a relatively low shipping charge), while the vast majority of Craigslist use is for non-shippable products (where the shipping charge is too high for its value and thus local pickup is the preferred option).

So lets consider furniture. There were never all that many eBay furniture ads (except for expensive stuff). But Craigslist is excellent for both the buyer and seller here--with the expectation the buyer is going to come pick it up. So the newspaper ad has been transferred to the Craigslist ad.

Consider small antiques. You find a much larger set of people interested in eBay than your local metro area, and thus a higher price if you are seller. But if you are a buyer do you really want to spend an hour going and picking up a $10 item--when it could be shipped to you from anywhere in the country for $5?

May 24 04:30 PM

[redbaron:]

I agree with both Scot and PastTense. PT makes good points on the large non-shippable items like furniture, but for smaller items I think that Scott has it right. What I noticed just today, as I looked through my latest antiques and collectibles purchases to decide where I should be marketing them (eBay or my local antique malls), so many of the items that used to be found on eBay regularly, are no longer there. I used to look and find virtually everything that I would buy at local estate auctions here in the midwest, and it was really astounding how often I would think I had found a truly unique item, and I would still find it on eBay in completed auctions. Just the opposite is true today, and item after item I researched, is no longer being sold on eBay. This leaves me in a quandry as to where to market my goods, and I'm not sure what I will do in the immediate future. Longer term, however, the trend is unmistakeable; good merchandise is not moving on eBay because sellers are not listing it there. I was selling on eBay during the previous recession, and as Scott mentioned, there was no slow-down for eBay sellers then, and we built sales right straight through that recession. Quite the opposite is true today, and while eBay's policies introduced in the last year or so have indeed cost it some good sellers, the sellers who are leaving now in the most recent months, are leaving mostly because they aren't selling anything, or at least, not selling enough. My antique mall sales are now outpacing eBay sales, and while the recession has hurt both, it has hurt ebay sales more. At least, that is how I see it currently.

May 24 06:47 PM

[harper:]

doesn't e-bay own 20+% of Craigslist?

May 24 07:26 PM

[bricki:]

I think this misses the point. With Ebay the assessment should be "I have met the enemy and he is us".

Ebay's issue is how do they improve on their customer's experience. Every year people move off Ebay because fees have gotten too high or the terms of the transaction have gotten unacceptable to big sellers.

So long as their model continues to require increasing fees to increase revenue they have a real problem.

May 24 08:15 PM

[redbaron:]

'Ebay's issue is how do they improve on their customer's experience.' Agreed, if you consider both buyer and seller as customers, which in reality is true.


On May 24 08:15 PM bricki wrote:

> I think this misses the point. With Ebay the assessment should be
> "I have met the enemy and he is us".
>
> Ebay's issue is how do they improve on their customer's experience.
> Every year people move off Ebay because fees have gotten too high
> or the terms of the transaction have gotten unacceptable to big sellers.
>
>
> So long as their model continues to require increasing fees to increase
> revenue they have a real problem.

May 24 11:38 PM

[raytayzmd:]

...absolutely agree...Ebay shot itself in the foot with the most atrocious customer service I've ever experienced.


On May 24 08:15 PM bricki wrote:

> I think this misses the point. With Ebay the assessment should be
> "I have met the enemy and he is us".
>
> Ebay's issue is how do they improve on their customer's experience.
> Every year people move off Ebay because fees have gotten too high
> or the terms of the transaction have gotten unacceptable to big sellers.
>
>
> So long as their model continues to require increasing fees to increase
> revenue they have a real problem.

May 25 07:35 AM

[Philip Cohen:]

>"I have met the enemy and he is us".
I could not agree more.

“Shill Bidding on eBay: a Case Study”
See www.auctionbytes.com/f... for a detailed case study that lays bare eBay's lack of concern about shill bidding.

May 25 12:39 PM

[Jon Hawthorne:]

amateur sellers are often really cheap. most of the online classified ads are free, while eBay charges a small listing fee, so this trend makes sense.

I wrote a response about eBay's dwindling popularity here:
blog.typohound.com/eba.../

May 25 05:04 PM

[a. palmer jr.:]

You stated that in troubled times people use ebay to clean out their garages and make a little money. I don't think that's possible now with all the fees and higher postage plus the paypal fees, etc. I believe that when you clean your garage out you might as well haul the stuff to the dump.

May 25 05:38 PM

[jayminho:]

the printing press, is doomed. honestly, i cant see any way out for them.
its not like the music industry (that was supposed to be doomed, if not for apple, riaa and the endless torrents sues)
printing press, is over, there is nothing to do,
look at the bright side, ecologically speaking, we are saving more trees now.. yeeeeeeeeee :) every hippie dream is coming true.
even the oil/energy cars.

i wish andy wharol were alive. he would be happy.

May 25 05:41 PM

[Bob C:]

eBay's real threat is its CEO, John Donahoe.

May 26 09:41 AM

[Yankee Trader:]

eBay is their own threat! Unless the draconian policy changes of the last few years are reversed or modified to be fair to the small sellers such as us the exodus will continue and they will continue to leave for alternative sites that are seller friendly.

May 26 11:24 AM

[Philip Cohen:]

The fact is eBay still is the “golden goose” of the on-line auction world (albeit with a little tarnish now), still with an effective monopoly of this type of business. In the normal course of events it should then have been very difficult for any competitor to make an impression. And, then, along came the new captain, known better in a previous life as a “dismantler” (ie, wrecker) of companies, and he is proceeding apace with his task. Of course, to justify their sometimes seemingly obscene performance bonuses, such executives of public companies apparently are required to grow a business’s revenue by at least 50% every year. Realistically, that is going to be problematic when you are already the household name in your chosen field of activity. Nevertheless Captain John “Noise” Donahoe has attempted to improve eBay’s bottom line by various means. What a shame it is that the sum of most of those means has had just the opposite effect on eBay’s bottom line. The real threat to eBay is eBay itself. Time to go John …

The only question then is, can this turkey survive yet another Xmas?

May 26 06:25 PM

[exodusfromebay:]

eBay's problem is that they insist on self-destructing by allowing Donahoe to act they only way he knows how to - as a business consultant specializing in corporate destruction.

All of the changes they have made since March 2008 have been shear idiocy. The man has no business leading a company he doesn't understand.

eBay is losing market share as a direct result of what they doing to their client base, the Sellers.

It really is that simple, and if you can't see it, you really should think about a career change.

May 28 02:01 PM

[Tony P.:]

I'm late to this party, but I feel compelled..


Scot, you have it right. eBay's real threat is both Amazon and online Classifieds. And the recession. And high postage fees. And the fading novelty of auctions. And all the other factors that have been mentioned, for years now.

But add them all up and ebay should still be doing what IT did back in 2000 - making sales on an increasing scale. Except for one thing. Whatever factors IT had a hand in Creating.

IT drove many sellers to CL, and still does even today. IT drove many sellers to Amazon, and continues to do so. Those sites would have seen a natural influx over the years, that is true, but ebay created an unnatural stampede.

Not surprising to some, I'm sure, but I can find partial blame on them for the dramatic rise in Postal rates. Indirectly. Back in 2005 when the USPS started to see mega$$$, they let their opportunistic thinking get the better of them.

Ebay should have formed a partnership with their sellers and the USPS to keep rates down. Their (ebay's) influence could have made a difference, but they were off on M&A buying sprees and didn't give a dam about the Critical Mass.

That $2.6B frivolous expenditure will always remain as a moment when ebay could have done so much better than IT has become. IYKWIM. A pivotal point, pissed away.

Now it's the Noise's turn and they don't give a dam about ebay.

May 28 04:34 PM

[Patricia013:]

I know dozens of small sellers who now list on craigslist. They simply had to get away from the stranglehold Ebay is putting on its sellers - especially its small sellers and the horrendous fees....higher fees for less traffic I might add! Yes, I believe Scott is right on in this article. As I've said before, Ebay is killing Ebay and if they don't soon change their management team then they will fade to the point of no return!

May 29 12:35 PM

[Henrietta:]

PastTense: $5 shipping? It had better be real light, shipping just went up again.

Of course Scot is right. Commodities sellers particularly the larger ones, Channel Advisor type sellers are doing OK, not as well perhaps as before but surviving and if I know Scot Wingo he will have them on diversified channels anyway. Every listing that goes to Amazon from those sellers is one that 6 years ago would have been solely on eBay.

The question of selection on eBay particularly in collectibles and antiques is an excellent one. I find in my research that things I used to find are gone. If you want to see where they are do a Google product search. A surprising number are on Bonanzle, Ruby Lane is booming, Etsy has lots of vintage kitsch and there are a gazillion websites, ning sites etc.

I have found two disadvantages to Craigslist, as a seller you are limited in reach. As a buyer it can be a bit scary, there are a lot of wierdos out there.

Jun 03 02:49 AM