It's Time to Replace eBay

http://fourstarters.com/2007/07/24/its-time-to-replace-ebay/

by danw • 19 years ago

19 32 19 years ago

palish• 19 years ago

Heh.. Good luck. Network effect that strong seems almost impossible to break. Come to think of it, does anyone know of any examples where strong network effect was broken, and how? Not just in the online world, either (although it seems network effect in the offline world is only broken through war).

dpapathanasiou• 19 years ago

Network effect that strong seems almost impossible to break.

You're right about that. Having a better model doesn't work unless you can convince a critical mass of people to use your system.

It reminds me of the story of the Arizona Stock Exchange (http://www.businessweek.com/1997/09/b3516129.htm), which was (theoretically, anyway) better for trading than the NYSE, but failed because they couldn't convince enough brokerages to leave the NYSE and use AZX instead.

Goladus• 19 years ago

Break is really the wrong word for it. Strong networks by definition simply can't be broken. But, a network can be dwarfed or subsumed no matter how strong it is, and a network may weaken over time if the facilities that bind it together are made obsolete. A weakened network may disintegrate suddenly.

One example: Everquest. Its network-effect was dwarfed by World of Warcraft, and the gameplay didn't keep pace which led to a gradual weakening.

dood• 19 years ago

I would suggest the word 'sidestepped'.

nostrademons• 19 years ago

A few examples:

Blockbuster. For a long time, BlockBuster was thought to be invincible in the video rental space, because they bought up all the prime real estate close to video renters. Because you could always find a BlockBuster near you, people became regular BlockBuster renters, which gave them a steady revenue stream and reliable borrowers so they could afford to buy up even more prime real estate, which enhanced their brand, which got them even more people hooked. They are in the process of being killed by NetFlix, because NetFlix realized that with the Internet, you didn't need a physical store presence at all, rendering BlockBuster's real estate advantage moot.

IBM. IBM came to own the computer market by offering CIOs a single model (the System/360) that would serve all their needs - it could run all the software people needed, and it was expandable with compatible, more powerful models for when you outgrew its computing capabilities. As a result, "nobody ever got fired for buying IBM". As more Fortune-500 CIOs bought IBM, it became more unthinkable to buy anything else, because the whole industry was used to IBM machines. They were killed by Microsoft and the PC revolution because this dropped the prices of computers & business software to the point where CIOs were no longer making the purchasing decisions. The department heads and small business owners who now made the buying decisions were used to PCs at home, so they bought PCs.

The Rothschilds. The Rothschilds provided liquidity in European financial markets for most of the 19th and early 20th century, frequently serving as the "buyer of last resort" during financial panics. In doing so, they developed very strong connections to the ruling governments in Europe. These personal relations let them charge a premium when loaning money, which helped them build up capital, which increased their power to ask as a source of liquidity, which improved their power connections. However, they've been hurt badly by the rise of America as a major financial center (they have few or no connections to the American government) and by the massive growth of capital markets. They no longer have the funds available to compete with Wall Street giants like Goldman Sachs, Bear Sterns, etc.

If you look at these, there are basically two ways to break a network-effect monopoly:

Identify the factor of production that lets them operate so efficiently. Search for a technological breakthrough that makes that advantage irrelevant. Use every advantage the technological breakthrough gives you to deliver the service better and cheaper than the incumbent. (Eg: Netflix).

Identify a group of people who form a potentially large market, yet are marginalized by the customers of the monopoly you want to break into. Offer a product that makes this marginalized group more powerful than the customers of the monopoly. Profit as they become the dominant customer group. (Eg. IBM, Rothschild)

acgourley2• 19 years ago

That was a well thought and written out post.

However, I don't think those examples have the same power of network effects that ebay leverages. By powers, I mean that in the mathematical sense. For a network of N nodes, the examples above have some network effect of N^1.3 or N+log(N), but I think ebay is closer to N^2 or greater...

The only way around ebay will be to somehow go around the edges (aggregation?) or fight a long hard battle against them with a superior product. I do think someone can take them out, but it will not be easy.

pg• 19 years ago

One way to beat network effects is to make the next network.

Instead of trying to break into the news business, for example, reddit build a new kind of thing, and people started using that instead.

So if you want to beat something huge and established, the way to do it is to try to answer the question: twenty years from now, when they write this history of this period, what will people say replaced it? Such questions are very hard to answer, but they do have answers, and with some effort you can often see the beginning of one.

brlewis2• 19 years ago

One big issue in going head-to-head with ebay is that you can't ignore software patents the way you would in most web projects.

immad• 19 years ago

why not? What strong patents does ebay have?

brlewis2• 19 years ago

It's not necessarily ebay's own patents. MercExchange might be your biggest worry. But to answer your question, see http://www.pagebox.net/bm4.html

cbetta6• 19 years ago

What patents would be a problem then? I think there is real legroom for a product that ignores the eBay sweetharts (super-resellers) and focusses more on the individual occasional sellers that use common sense and trust to make a transaction.

kieranoneill2• 19 years ago

The "long tail of auctions" :) What would individuals want that power sells wouldn't?

ph0rque• 19 years ago

Idea: make a network of ebays, with each one specializing in a certain category: cars, collectibles, etc. That way, a community forms around each ebay, and each community can develop its own quirks that make sense/are convenient for that particular ebay, have its own experts (perhaps with karma to differentiate those experts), etc.

cbetta6• 19 years ago

Well, I can imagine some differences. A powerseller wants the highest amount of profit, but someone who likes to sell his product asap to someone who is like able to pick it up TODAY has different needs.

I recently had some issues with eBay where I had to relist an item 3 times because of scammers. Why does your item disappear before the deal is DONE? Why not have ME decide when it is sold, and not the buyer?

patrickg-zill• 19 years ago

It's time for the mice to put the bell on the cat.

jamiequint• 19 years ago

auctomatic.com anyone?

Harj• 19 years ago

we see the opportunity in building on top of existing trading platforms such as ebay rather than creating them from scratch.

rebonuk2• 19 years ago

They're building on top of eBay, rather than instead of it.

rebonuk2• 19 years ago

Ah, you beat me to it harj! Shouldn't have left the window open before replying :-)

cbetta6• 19 years ago

That doesn't do anything social. Just a tool for sellers. I am talking about the once in a few months seller here that is being neglected. Powersellers get all they want from eBay.

kieranoneill2• 19 years ago

So it's time to replace eBay because you can't add the seller as a friend? Right...

cbetta6• 19 years ago

Never said that, just said that there is no social control or value in eBay.

ivankirigin• 19 years ago

A bigger division between stores that sell thousands of items, and more regular users, would make sense.

While the information architecture is fine, the site is really ugly. There has to be something functional and beautiful, and not just functional and bare like craigslist.

The rating system is idiotic -- an early form of karma whoring where the marginal cost of high ratings is too low. Perhaps it would make more sense to gain a point a per day or hour, and a 10 point rating system, where you need to allot scarce points when giving reviews.

The payment problem is solved with PayPal and others, so that is a non-issue. People actually trust it.

Better templates that allow for easy and beautiful sales pitches would be nice. Some of the 1996 era junk makes me want to run for the nearest far-more-pretty myspace page.

Community would make a lot of sense for particular items, like bobble-head dolls and replica light-sabers. Buyers of one rarely have the other, which beckons for sub-culture. Though I did know a guy who had mock light-sabers and a collection of StreetFighter 2 bobble-heads.

cbetta6• 19 years ago

Amen, you totally get what I meant with the article, Thank you.

Tichy• 19 years ago

They have disabled comments for a reason, I guess to avoid pointless flamewars. Just a thought - not everything might be as stupid as it seems at first sight. I agree that ebay is not as good as it could be, though.

cbetta6• 19 years ago

Well, closing an option down completely for the sake of spam-control is never a good option I believe. One should work towards a solution, not abolishment.

rsheridan6• 19 years ago

Would it be feasible for a competitor to use Ebay's network effects? If users gave an Ebay-killer their Ebay passwords, their feedback could be imported, helping to get the initial activation energy.

A superior auction/marketplace meta-search application could also help kill Ebay. If people preferred to use it, buyers would see auctions at competitors' sites, not just Ebay. Creating a meta-search site might be a good first step for an Ebay-killer.

It's Time to Replace eBay

Related Stories