Last week eBay sold a 65 per cent stake in Skype to a group of private investors for $2 billion (£1.2 billion), bringing an end to plans for an initial public offering of the internet calling service and the curtain down on a strategic mistake that has overshadowed eBay for years. Judging from the subsequent commentary, you would have thought the move had miraculously cured the e-commerce company. But it hasn’t. EBay still has a number of big problems, not least eBay itself.
Have you tried using the auction site recently? I moved house the other month and, having realised that I (a) own no furniture and (b) am skint, returned to eBay for the first time in years. I have been stunned at what a mess it is, not least technologically. The eBay and PayPal websites are semi-autonomous, making selling and receiving payment, or buying and sending payment, a process so convoluted that you worry for your sanity. Posting an advert entails navigating more options than those on a Starbucks menu, and it also requires inputting text in HTML code, which is about as intuitive as rubbing your head and your tummy at the same time.
And then, if you make too many errors, or trigger some mysterious logarithm inside the website, you could suddenly find your account frozen, which in turn might require you to verify your identity by spending an evening answering questions via an instant message system about purchases you made in the dim and distant past. All in all, it offers the most frustrating technological experience this side of trying to load a computer game on to your toaster.
That said, the problems only really begin once you’ve conquered the gadgetry and started dealing with other eBayers. In the past I’ve found the buyers and sellers on the auction site a charming bunch, if a bit obsessive and eccentric — not least the retired Welsh couple who travelled from Cardiff to London on public transport to pick up six chairs they’d bought for £20. But nowadays a significant proportion of eBay users seem to be scammers and villains. It’s the internet equivalent of shopping in East L.A. I ended up advertising a single old mobile phone three times before it finally sold, because on the first two occasions it attracted fraudulent bids from abroad. (I got charged for all three listings, of course, and, I tell you, it is true torment waiting for a response, let alone a refund, from eBay.) Bidding for items didn’t prove any less agonising than selling things. Either I have developed taste and sophistication in recent years without realising it, or it has become much harder to find second-hand gems on the site, with searches returning pages of blatant counterfeit merchandise or fixed-price tat. And when something nice finally did appear — a contemporary, large oak dining table — I am pretty sure that the seller was bidding against me with a fake eBay account to drive up the price. In the end, I gave up.
Frankly, anything, up to and including sleeping on an ironing board and eating ready-meals off the floor, is preferable to shopping on eBay in its current state.
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And if I were to guess at how and why the auction site has become such a mess, I would say there are three main reasons. First, on a corporate level, the company has spent so much time fretting about Skype and PayPal that it has taken its eye off the core website, which was the start of everything.
Second, eBay has responded to the significant threat posed by all the scammers and phishers out there with half-baked security measures that serve only to infuriate users while doing little to deter the villains.
Third, and most worrying, the management has not come to terms with eBay’s new status in the world.
Surprise was expressed this year when the company reported sluggish revenue growth (you would think that the second-hand market would thrive in a recession), but the real shock is that an auction site such as eBay ever became so big in the first place.
In the real, non-internet world, people have for decades preferred dealing with brand names that offer consistency and reliability, and corporations that offer customer service and guarantees, rather than shopping at what they might regard as flea markets.
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The second-hand market has only ever represented a tiny portion of total commerce, and a declining fascination with online auctions is surely just a sign that the internet world is back on a path to convergence with the real world.
However, instead of accepting this and concentrating on keeping the business it already has — or launching the kind of niche auction websites run by competitors, many of which now do a better job than eBay — the company has noticed the likes of Amazon.com doing well with fixed-price sales and has decided to compete against them.
According to recent press reports, eBay is making all sorts of changes to help large vendors to sell new goods at fixed prices in greater volumes. It has “tweaked its search algorithm to favour new products”, it will “limit communications between buyers and sellers — a step designed to ease the burden for volume sellers”, and it hopes “eBay will become a clearing house for large volumes of out-of-season and surplus goods rather than a flea market for the curious”.
As a strategy, this seems bizarre. All that will happen is that it will find itself being squeezed, losing out to big rivals such as Amazon on one hand and niche auction sites on the other.
EBay is famous for being an auction site, and using it to sell fixed-price goods is like a vegetarian restaurant serving meat or Skype going into the carrier pigeon market.