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With Growth Slowing, eBay Gets Innovative
How does a billion-dollar company with sagging growth get its mojo back? If it's eBay, it throws dozens of new features at the wall to see what sticks.
When Meg Whitman took the stage at the Web 2.0 Summit in mid-October, she announced that eBay had made more changes in the previous months than in the last three years combined. She wasn't kidding. The 11-year-old auction site's interface had long been a confusing morass of links and menus. No longer. Now the focus is on making the site more appealing to buyers through easier navigation, new ways to browse and more reasons to hang around. The strategy seems to be working: There's a feeling of freshness and fun the site hasn't had in years.
The changes were propelled by a kick in the pants: The growth of eBay's core auction business is slowing. For the first nine months of 2007, the number of listings on eBay was down 3 percent from the same period in 2006. Amazon is making a play for eBay sellers -- with some success, observers say. Despite eBay's diversification through purchasing Skype (for which the company recently took a $1.4 billion write-down), PayPal, StubHub and smaller ventures like StumbleUpon and Kijiji, it's important to note that 70 percent to 80 percent of eBay's revenue still comes from its online auctions.
Cantor Fitzgerald analyst Derek Brown says the biggest concern for eBay sellers is that buyer demand seems to be on the decline. "If, as eBay says, conversion rates and average selling prices have increased, why are sellers not responding through more listings?" he asks.
Corporate spokesman Usher Lieberman says eBay's management acknowledges that growth has decelerated. "About a year ago, the leadership of the marketplace business got together and took a hard look at what had been a successful business for 11 years," says Lieberman. "The (buying) experience hadn't kept up with what people expect when they go online."
To that end, the number of new buyer tools introduced in the last several months is staggering:
* A downloadable eBay Desktop application allows users to bid and get streaming price updates without opening a web browser.
* Three new widgets can be used on blogs and social networks outside eBay's walls: eBay To Go, GiftBay and eBay Marketplace for Facebook.
* Bid Assistant automatically places bids for a buyer.
* eBay Countdown is an easier (read: more in-your-face) way to keep track of auctions that are just about to close.
* eBay Deal Finder helps you seek out items that will close soon but have no bids entered yet.
This fall, eBay also unveiled a site redesign with sleeker, simplified graphical interfaces and new pathways to search for items. On eBay Playground (a version of the site where eBay tests new features), for example, the "snapshot view" of items displays search returns as a tiled wall of photos. Mouse over them, and pricing info pops up.
Other discovery features hop on the social-network bandwagon. Neighborhoods, a forum for like-minded collectors to network, got buzz when it launched in early October, and the still-unpublicized EKG allows users to curate their favorite items and share them with others, a concept similar to craft-commerce site Etsy's Treasury.
Rolf Skyberg, whose title at eBay is "disruptive innovator," frames the new social features using the "hierarchy of needs" theory proposed by psychologist Abraham Maslow in 1945. Retail stores, he points out, frequently sell hot dogs. Why? Because they meet shoppers' basic need for food, thereby enabling them to shop longer. If eBay can meet a shopper's social needs, perhaps she will spend more time on the site. (Skyberg recently gave an amusing presentation on the subject.)
The company is also stoking the marketplace fires for sellers. Between Oct. 18 and Nov. 5, eBay is discounting insertion fees by one-third, presumably to encourage more listings. In an Oct. 26 webcast, eBay hinted for the first time that it was considering volume discounts on fees for top sellers.
"That is so contrary to eBay's philosophy since it started," says Ina Steiner, editor of AuctionBytes, a trade publication for online merchants. "High-volume sellers have been demanding volume discounts for years. It wasn't until Amazon increasingly moved in on eBay's territory that eBay reacted to the demand."
Hani Durzy, eBay's director of corporate communications, responds that the company has always run experiments with its pricing structure and this move is "absolutely not" a reaction to Amazon's competition. "We expect that our sellers, even our biggest sellers, are multi-channel," says Durzy. He does add that eBay will be considering more pricing options in 2008 than it has in the past.
In putting forth all of these changes, eBay's whole corporate persona seems softer, less arrogant. It's clear the last year has brought a self-examination process, the fruits of which are now being humbly offered to the public. It's not a bad lesson to remember: Even the market leader needs to keep its customers happy.