Overstock.com CEO Patrick Byrne made the following comments about his online auction business in his letter to shareholders. This is required reading for eBay investors:
Under the brilliant management leadership of Holly MacDonald-Korth, and the technical abilities of Sam Peterson, our new Auctions business got off to a solid start. We tried a few free listing days and saw our listings swell as high as 170,000, or 1.5% of eBay's: however, most of these incremental listings were junk (e.g., 100 of the same keychain), and when they were live, our auction conversion dropped precipitously (we plan to do few of these in the future, or will offer free listings only to good sellers whom we trust to post attractive products). Yet when the free listings washed out, we found our auctions converting at a fine percentage for a nascent business.
eBay's recent decision to raise some fees > 50% may be a boon for us. The eBay seller community seems to understand that it is in its interest to help us get auctions off the ground. We have already become one of the most trafficked auction sites on the Internet, and our listings seem to grow better organically than they did with free listings: as I write, we have 38,000 listings of attractive, solid products. Incidentally, much information is revealed in message board comments: if you are not doing so, I urge you to check out our and others' auction message boards.