Big Internet Sites Joining Auction Network
<p class=default>
March 15, 1999
</p><p>
</p><p>
<br/>
By BOB TEDESCHI
</p><p>
Entrepreneurs Set Up Shop on Auction Sites
</p><p>
hen it comes to doing business online, Chas Emerick, a computer retailer,
has a one-word business plan that encompasses nearly all
<br/>
of his marketing, distribution and technology needs. The word is eBay.
</p><p>
Like a growing number of businesses, Emerick's Mass.-based operation, Firewall
Computer and Graphics Services, can thank the online
<br/>
auction giant for a vast majority of its sales -- whether or not those sales
ultimately happen on eBay. By selling modems and other refurbished
<br/>
and over-stocked computer goods at auction, Emerick has found that eBay's
transactional fee is a small price to pay for a steady stream of
<br/>
customers, high-profit sales and a means to market his services and his Web
site.
</p><p>
Or, to put it more succinctly, "eBay has been a complete epiphany," Emerick
said.
</p><p>
Lest it be seen as an aggregator of merchants -- as opposed to average folks
trading the contents of their attics -- eBay contends that a "very,
<br/>
very small number of businesses" use its site essentially as a retail
storefront. And that may be true, given the roughly 1.4 million items for sale
<br/>
on the service each day.
</p><p>
But it may not be true for long. Last month, EarthLink Network Inc., an Internet
service provider, held an auction on eBay to entice users to
<br/>
switch ISPs. And the phenomenon appears to be growing quickly among small
businesses who cannot afford to pay for advertisements that
<br/>
will attract the kind of qualified buyers who make eBay one of the most visited
-- and valuable -- sites on the Web.
</p><p>
The trend has not escaped Emerick, for one. "It's definitely grown in the past
six months," he said. "Most of them are similar to me --
<br/>
companies with just one or two people. And it's extremely common to see a lot of
people selling used and refurbished computer supplies this
<br/>
way."
</p><p>
Indeed, a random search through eBay's computer section turned up numerous
examples of companies selling goods at auction. Typically, the
<br/>
companies establish what is known as a "Dutch auction," whereby they offer 10 or
so of the same item for sale. Often they place a one-line
<br/>
promotion for their Web site at the bottom of the product description, along
with a link; and they generally offer both credit card payment and
<br/>
product warrantees. Furthermore, they generally set a minimum price, also known
as a reserve, to insure they make a profit on the sale.
</p><p>
In other words, they get buyers, a guaranteed profit and quick sales. "With
this, I didn't have to try to play the local game, which was difficult
<br/>
because a few large resellers pretty much take care of that demand," Emerick
said. "The week before I hit on eBay [last August], I paid $89
<br/>
for a quarter-page ad in a local newspaper. I got one call, and one person who
filled out information on my Web site. It was pretty pitiful."
</p><p>
The next week, he said, he sold a refurbished PowerBook on eBay. "My goal was to
make $100 profit, and I ended up in the $175 range,"
<br/>
Emerick said. "It was the smoothest money I'd made in the history of my
company."
</p><p>
Shortly thereafter, he bought 150 over-stocked Global Village modems for $2
each, which he auctioned for an average of $15. "And it was
<br/>
good for buyers because the market was about $25 at the time," Emerick said.
</p><p>
The site comes in handy for other reasons. Because buyer and seller ratings are
posted on eBay, companies can use the feedback profiles as
<br/>
a seal of approval when doing business outside of eBay, while avoiding the
site's sales commissions.
</p><p>
Meanwhile, computers are not the only area of eBay where merchants are finding
new customers. In the rare books
<br/>
section of the site, for instance, Andrew Cotlar sells first-edition volumes of
American Jewish literature. Cotlar, a
<br/>
former law professor based in Columbia, Missouri, turned to eBay in January. The
result: "With very few
<br/>
exceptions, everything I've put up has sold -- and fast," Cotlar said. "It's
been fantastic."
</p><p>
Cotlar said his one-man business, which he launched 18 months ago, now relies on
eBay for 80 percent of its revenues. What has he done to
<br/>
market his own Web site? "I don't have one," he said. "I don't really need one."
</p><p>
Indeed, the chief benefit of doing business on auction sites is that it
eliminates the need to set up a Web site or market it -- to date, the main
<br/>
barriers to small businesses embracing e-commerce.
</p><p>
The increasing number of businesses setting up shop on auction sites isn't
necessarily cause for celebration, says Eric Killorin, chief executive
<br/>
of Mobilia.com, an automobile memorabilia site which offers both auctions
intended for individual collectors and a store for merchants. "When
<br/>
people come into an auction format, they don't want to deal with big vendors,"
Killorin said. "The perception is that they won't get a better
<br/>
deal, so the thrill of the chase is gone."
</p><p>
"Businesses should be in the store, so customers will know that's where they'll
tend to be. Now, if a vendor says I have only 10 left of a
<br/>
certain item for auction, that can be an incredibly valuable experience, but you
have to present it for what it is," he said. "I saw a computer
<br/>
auction site where some company was doing a Dutch auction for hard drives, with
a high reserve, something like $300. To me, that's not an
<br/>
auction, that's a scam."
</p><p>
However, according to Larry Schwartz, the president of Auction Universe, "If
customers can find something, and find it at a good price, they
<br/>
don't care who sells it to them." (Auction Universe is a division of Classified
Ventures, which is partially owned by The New York Times.)
</p><p>
"We're just an extension of the newspaper, where you have both private parties
and companies selling goods," Schwartz said.
</p><p>
In fact, Schwartz said this trend is so pervasive that he foresees his site
evolving into a place where small merchants create a virtual flea
<br/>
market for goods they could not otherwise sell to large audiences. "The misnomer
about auction sites is that people just want bargains," he
<br/>
said. "This is more about offering people one-of-a-kind things you can't find in
your neck of the woods."
</p><p>
And if that means consumers get those goods from businesses rather than private
parties, he said, "that's fine."
</p><p>
eBay, meanwhile, has taken a laissez faire approach to the issue, said Kevin
Pursglove, a company spokesman. "Eventually," he said, "It'll be
<br/>
up to the users to decide if they want to buy from a particular seller, or move
on."
</p><p>
The E-COMMERCE REPORT appears on alternate Mondays in the Business Day section
of the newspaper, and every
<br/>
Monday in the Technology section of The New York Times on the Web. Click here
for a list of links to other columns in the
<br/>
series.
</p><p>
<br/>
Related Sites
<br/>
These sites are not part of The New York Times on the Web, and The Times has no
control over their content or availability.
</p><p>
eBay
</p><p>
Firewall Computer and Graphics Services
</p><p>
EarthLink Network Inc.
</p><p>
Mobilia.com
</p><p>
Auction Universe
</p><p>
Classified Ventures
<br/>
September 17, 1999
</p><p>
<br/>
Big Internet Sites Joining Auction Network
</p><p>
By SAUL HANSELL
</p><p>
early 100 Internet sites, including three of the biggest -- Microsoft's
<br/>
MSN, Excite@Home and Lycos -- have agreed to share their
<br/>
auction listings so that an item put up for sale on one site will be
<br/>
available for bidding on all other sites.
</p><p>
The move, which will be announced Friday, is an
<br/>
attempt to catch up with the huge popularity of
<br/>
Ebay, the dominant online auction site, which has
<br/>
more than three million items for sale at any one
<br/>
time, ranging from stuffed bears to minivans.
</p><p>
The new auction network was established by
<br/>
Fairmarket, a small company in Woburn, Mass.
<br/>
Fairmarket initially created a service that let
<br/>
companies set up their own auctions, mainly as a
<br/>
way to sell discontinued items and products that
<br/>
have been returned. Its customers include
<br/>
CompUSA, Newline Cinema and CBS
<br/>
Sportsline's sporting goods shop.
</p><p>
These companies had used the site to sell their own merchandise, but they
<br/>
have now agreed to have all of their products listed on general-purpose
<br/>
auction sites as well.
</p><p>
America Online, the largest Internet service, does not run its own auctions.
<br/>
Ebay agreed to pay $75 million over four years to promote its auctions to
<br/>
America Online users.
</p><p>
Yahoo, the second-biggest Internet service, has competed aggressively
<br/>
with Ebay by offering free auctions. Ebay charges a fee to list an item and
<br/>
then collecets a percentage of the purchase price. Since Ebay experienced
<br/>
a series of computer blackouts in recent months, Yahoo's popularity has
<br/>
surged. It now lists 700,000 items for sale.
</p><p>
But the other popular Internet services have found it very difficult to make
<br/>
headway into Ebay's turf. Excite@Home, for example, has fewer than
<br/>
20,000 items for sale on its free auction site -- a major incentive in its
<br/>
decision to merge those listings into the new broader network.
</p><p>
"In auctions, scale is really valuable," said David Tse, a senior vice
<br/>
president at Excite. "If you put an item up for sale, you want the most
<br/>
potential bidders. If you are a buyer, you want to see the most products in
<br/>
the category you are interested in."
</p><p>
The move represents the first entry into auctions by Microsoft, which has
<br/>
been rushing to make sure that its MSN Internet service matches all the
<br/>
features offered by competitors.
</p><p>
In recent weeks, Microsoft has introduced an instant message software to
<br/>
match one of the most popular features of America Online, and a
<br/>
name-your-own-price travel service, modeled after the well-known
<br/>
offering of Priceline.com.
</p><p>
While it is unclear how successful Microsoft will be in any of these areas,
<br/>
its entry into any market inevitably causes investors to raise concerns
<br/>
about the leaders of that market. In the first two days after Microsoft's
<br/>
travel service was announced, for example. Priceline's stock dropped
<br/>
nearly 20 percent. Ebay, which has a stock market value of $19 billion, did
<br/>
not respond to requests for comment on the new auction network.
</p><p>
The third-biggest auction site is Amazon.com, the biggest online retailer.
</p><p>
Although the company declines to say how many items it has for sale,
<br/>
Auctionwatch, a site that tracks auctions, estimates that Amazon lists
<br/>
between 100,000 and 200,000 items.
</p><p>
In July, Lycos was the first big site to use the Fairmarket auction system,
<br/>
letting its users post items for sale and bid on items from all participating
<br/>
auctions. While Lycos had considered starting its own auctions or selling
<br/>
links to Ebay, as America Online has done, it decided that it "would take a
<br/>
long time to build, and going with a joint venture would give us more
<br/>
traction," said Jeffrey S. Bennett, the director of business development at
<br/>
Lycos.
</p><p>
Fairmarket has also signed up
<br/>
Ticketmaster-Citysearch, which runs
<br/>
local auctions; Boston.com, a unit of
<br/>
The New York Times Company, and
<br/>
Earthlink, the big Internet service
<br/>
provider. In all, these sites will
<br/>
contribute about 70,000 listings from
<br/>
the start to the Fairmarket network.
</p><p>
Each of the member sites will present the auctions in its own format and
<br/>
graphic design, so that shoppers will not know that the listings come from
<br/>
multiple sites. And each site will integrate the auctions with its other
<br/>
services. For example, Lycos users can have the auctions they are bidding
<br/>
on presented on their My Lycos start page alongside their chosen stock
<br/>
quotes and sports scores.
</p><p>
At first, Lycos and Excite plan to offer auctions without any fees.
<br/>
Microsoft will not charge a listing fee but will impose a transaction fee of
<br/>
between 1.5 and to 5 percent, depending on the purchase price.
</p><p>
Deanna Sanford, the lead product manager for MSN, said that Microsoft
<br/>
would be charging a transaction fee, even though others were not, because
<br/>
it expected such fees would become standard.
</p><p>
Indeed, for Fairmarket to profit from the system, sellers must eventually
<br/>
charge such fees. Fairmarket is charging the sites about 1 percent of
<br/>
completed auctions. In addition, the site whose user buys an item also
<br/>
receives 1 percent of the purchase price from the site that posted the
<br/>
auction. But Fairmarket said it was waiving these fees for sites that offer
<br/>
free auctions.
</p><p>
Bennett of Lycos said that even if competition prevented the company
<br/>
from imposing transaction fees, it could still profit by selling advertising on
<br/>
the auction pages.
</p><p>
"We are in the business of aggregating an audience," he said.
</p><p>
Analysts said it was not clear how much the Fairmarket venture could dent
<br/>
Ebay's market dominance.
</p><p>
"For MSN and the others, it's a better starting point than if they did this on
<br/>
their own," said Fiona Swerdlow, an analyst with Jupiter Communications.
<br/>
"But Ebay is clearly out in front."
</p><p>
But Bennett said that Lycos could still build a big business as newcomers
<br/>
come onto the Web with no loyalty to Ebay.
</p><p>
"Hats off to Ebay, which has really benefited from its first-mover
<br/>
advantage," he said. "But the game is early, and there are a lot more folks
<br/>
to come in and be attracted to the auction space."
</p>