Ebay Seller Quotes

Google controls two-thirds of the US search market. Almost three-quarters of all Internet users have Facebook accounts. Amazon controls about 30% of the US book market, and 70% of the e-book market. Comcast owns about 25% of the US broadband market. These companies have enormous power and control over us simply because of their economic position. They all collect and use our data to increase their market dominance and profitability. When eBay first started, it was easy for buyers and sellers to communicate outside of the eBay system because people’s e-mail addresses were largely public. In 2001, eBay started hiding e-mail addresses; in 2011, it banned e-mail addresses and links in listings; and in 2012, it banned them from user-to-user communications. All of these moves served to position eBay as a powerful intermediary by making it harder for buyers and sellers to take a relationship established inside of eBay and move it outside of eBay.

Many people assume that working from home is like a vacation, where you get to do what you want when you want. This was not the case for me. The demands of eBay put me on the strictest schedule I’d ever endured. Because my auctions were timed, there were very real consequences for missing deadlines. The prime time for auctions to go live was Sunday evening. If mine went up late, that meant my customers, who were likely waiting to pounce on my latest batch of vintage gems, might end up disappointed, instead giving another seller their business. If I took too long to respond to a customer inquiry, she might get impatient, choosing to bid on something else. Shipping orders out late might result in negative feedback, and if I didn’t steam and prep all the clothes the night before a shoot, there wouldn’t be time to get through everything in one day.

Launching “Buy It Now” was a large change that touched every transaction, but the eBay team also innovated across the experience for both sellers and buyers as well. With an initial success, we doubled down on innovation to drive growth. We introduced stores on eBay, which dramatically increased the amount of product offered for sale on the platform. We expanded the menu of optional features that sellers could purchase to better highlight their listings on the site. We improved the post-transaction experience on ebay.com by significantly improving the “checkout” flow, including the eventual seamless integration of PayPal on the eBay site. Each of these innovations supported the growth of the business and helped to keep that gravity at bay. Years later, Jeff became a general partner at Andreessen Horowitz, where he would kick off the firm’s success in startups with network effects, investing in Airbnb, Instacart, Pinterest, and others. I’m lucky to work with him! He recounted in an essay on the a16z blog that his strategy was to grow eBay by adding layers and layers of new revenue—like “adding layers to the cake.” You can see it visually here: Figure 12: eBay’s growth layer cake As the core US business began to look more like a line than a hockey stick, international and payments were layered on top. Together, the aggregate business started to look like a hockey stick, but underneath it was actually many new lines of business.

Growth was running at 40 percent per month, but what was more impressive was the motor that was driving it. Unlike Yahoo, which was pouring money into marketing, eBay’s marketing budget was zero. Its hectic expansion was instead propelled by Metcalfe’s law: as the size of its auction network grew, its value rose exponentially. The more sellers listed stuff on eBay, the more bargain hunters were drawn to the site; the more buyers there were, the more sellers turned to it.

One way to make yourself less vulnerable to copycats is to build a moat around your business. How Can I Build a Moat? As you scale your company, you need to think about how to proactively defend against competition. The more success you have, the more your competitors will grab their battering ram and start storming the castle. In medieval times, you’d dig a moat to keep enemy armies from getting anywhere near your castle. In business, you think about your economic moat. The idea of an economic moat was popularized by the business magnate and investor Warren Buffett. It refers to a company’s distinct advantage over its competitors, which allows it to protect its market share and profitability. This is hugely important in a competitive space because it’s easy to become commoditized if you don’t have some type of differentiation. In SaaS, I’ve seen four types of moats. Integrations (Network Effect) Network effect is when the value of a product or service increases because of the number of users in the network. A network of one telephone isn’t useful. Add a second telephone, and you can call each other. But add a hundred telephones, and the network is suddenly quite valuable. Network effects are fantastic moats. Think about eBay or Craigs-list, which have huge amounts of sellers and buyers already on their platforms. It’s difficult to compete with them because everyone’s already there. In SaaS—particularly in bootstrapped SaaS companies—the network effect moat comes not from users, but integrations. Zapier is the prototypical example of this. It’s a juggernaut, and not only because it’s integrated with over 3,000 apps. It has widened its moat with nonpublic API integrations, meaning that if you want to compete with it, you have to go to that other company and get their internal development team to build an API for you. That’s a huge hill to climb if you want to launch a Zapier competitor. Every integration a customer activates in your product, especially if it puts more of their data into your database, is another reason for them not to switch to a competitor. A Strong Brand When we talk about your brand, we’re not talking about your color scheme or logo. Your brand is your reputation—it’s what people say about your company when you’re not around.

eBay: Because eBay tracks feedback and allows both buyers and sellers to rate one another, it is a good idea to buy a few things on-line before you try to sell something so that you can validate your good name. Buy cheap things; pay promptly. Request feedback if none is provided automatically. Give the seller feedback. Then, sell your least valuable things first and work up to something like a car where feedback would be key.

The way PayPal started was that it was a security and risk company that stumbled onto payments, which were really in need of development as the Internet was starting to grow. It was to find safe ways of facilitating payments between people who were buyers and sellers who couldn’t interact in person or were interacting online. What you had at the time, as the Internet boom started, was all these businesses that were forming and selling online, and they didn’t have any physical assets—they only had digital assets. If you had a small business that had just started a website, looking to sell something on eBay, for example, and you went to the bank and said, “Could you underwrite me, and allow me to accept electronic payments?,” there was simply no way that these financial institutions

Economists are beginning to use attention to explain economic decisions.2 As a nice example, if shoppers were to pay full attention to the price they paid for goods and services, we would predict that $4.00 CDs could be advertised on eBay as $0.01 plus $3.99 shipping or $4.00 plus no shipping and generate the same sales. But in reality, shoppers pay much more attention to the sale price and much less to the shipping cost, and so sellers make more sales in the former condition.3 The inherent scarcity of attention has also caught on in the business world; it’s described as the “attention economy,” where obtaining the attention of customers and employees who are constantly bombarded by information and technology is an essential element of commercial success.

As an example, early on at eBay we found we needed a product principle that spoke to the relationship between buyers and sellers. Most of the revenue came from sellers, so we had a strong incentive to find ways to please sellers, but we soon realized that the real reason sellers loved us was because we provided them with buyers. This realization led to a critical principle that stated, “In cases where the needs of the buyers and the sellers conflict, we will prioritize the needs of the buyer, because that's actually the most important thing we can do for sellers.

Max Levchin’s Plan A was not to be. Demand for security on handheld devices never materialized. He remained a vagabond. But he was cooking another idea. Max pursued a Plan B that centered on cryptography software. “It’s really cool, it’s mathematically complex, it’s very secure,” said Levchin.7 But once again, no one really needed it. Plans C, D, and E didn’t work out any better. Levchin’s Plan F, still based on his cryptography expertise, was a system for securely transferring cash from one PalmPilot to another. As part of that effort, Levchin’s team built a Web-based demo version that did everything on a Web site that the PalmPilot version could do. By early 2000, people were using the Web version for actual transactions, and the growth of the Web demo was more impressive than for the handheld version. “Inexplicable,” recalled Levchin. “The handheld one was cool and the Web site was … unsexy … a demo. Then all these people from a site called eBay were contacting us and saying, ‘can I put your logo in my auction?’ We told them ‘No. Don’t do it.’ Eventually, we realized that these guys were begging to be our users. We had the moment of epiphany. For the next twelve months, we just iterated like crazy on the Web site version.”8 Levchin finally had a tool that filled a void, allowing ravenous eBay traders to safely transfer cash from buyer to seller. Plan G—a little outfit called PayPal—was born. And did it strike gold. PayPal is the now dominant system of paying securely for online purchases. Eventually, eBay, whose internally run payment system was floundering, bought PayPal for $1.5 billion.

Ebay is still the number one site for individuals and small businesses to sell their items to people worldwide. While it is much larger than it was initially, at its core, Ebay still functions like the world’s largest flea market with items of every type and at every price point available. Ebay continues to expand and improve, giving sellers like me confidence that they will be around for years to come. With nearly two hundred million registered Ebay users, there are still plenty of opportunities to make money on Ebay. But why sell your items on Ebay instead of a garage sale or consignment shop? Hands down, you will get the most money for your items on Ebay versus selling them locally. As I mentioned earlier, there are nearly 200 million registered Ebay users, meaning there are 200 million more chances to sell your items. Let’s say you have a rare collectible to sell. While only a handful of people will come to your garage sale or enter your local consignment shop, on Ebay, your item is available for purchase to the millions of Ebay account holders worldwide. You only need to wait for that one

When eBay entered the Chinese market in 2002, they did so by buying the leading Chinese online auction site—not Alibaba but an eBay impersonator called EachNet. The marriage created the ultimate power couple: the top global e-commerce site and China’s number one knockoff. eBay proceeded to strip away the Chinese company’s user interface, rebuilding the site in eBay’s global product image. Company leadership brought in international managers for the new China operations, who directed all traffic through eBay’s servers back in the United States. But the new user interface didn’t match Chinese web-surfing habits, the new leadership didn’t understand Chinese domestic markets, and the trans-Pacific routing of traffic slowed page-loading times. At one point an earthquake under the Pacific Ocean severed key cables and knocked the site offline for a few days. Meanwhile, Alibaba founder Jack Ma was busy copying eBay’s core functions and adapting the business model to Chinese realities. He began by creating an auction-style platform, Taobao, to directly compete with eBay’s core business. From there, Ma’s team continually tweaked Taobao’s functions and tacked on features to meet unique Chinese needs. His strongest localization plays were in payment and revenue models. To overcome a deficit of user trust in online purchases, Ma created Alipay, a payment tool that would hold money from purchases in escrow until the buyer confirmed the receipt of goods. Taobao also added instant messaging functions to allow buyers and sellers to communicate on the platform in real time. These business innovations helped Taobao claw away market share from eBay, whose global product mentality and deep centralization of decision-making power in Silicon Valley made it slow to react and add features. But Ma’s greatest weapon was his deployment of a “freemium” revenue model, the practice of keeping basic functions free while charging for premium services. At the time, eBay charged sellers a fee just to list their products, another fee when the products were sold, and a final fee if eBay-owned PayPal was used for payment. Conventional wisdom held that auction sites or e-commerce marketplace sites needed to do this in order to guarantee steady revenue streams.

Let’s look at a product marketplace, such as eBay. A seller is trying to sell one item. Once that auction ends, the item can’t then be bought by another buyer.

Sometimes there are hidden obstacles to scaling—a lesson that eBay has learned in recent years. Like all marketplaces, the auction marketplace lent itself to natural monopoly because buyers go where the sellers are and vice versa. But eBay found that the auction model works best for individually distinctive products like coins and stamps. It works less well for commodity products: people don’t want to bid on pencils or Kleenex, so it’s more convenient just to buy them from Amazon. eBay is still a valuable monopoly; it’s just smaller than people in 2004 expected it to be.

Among other techniques, they simulated consumer demand on eBay by creating a bot (an automated software tool) that bought goods on the site and then insisted on paying for these transactions using PayPal. Noting this apparent growth in demand, many eBay sellers signed up for the PayPal service—which in turn made PayPal even more visible and attractive to consumers.

Michael Malone: So why did eBay win? Mary Lou Song: The economic genius of what Pierre came up with was that we never interfered with the velocity of the transactions. We facilitated, we helped people find each other and connect, and our job really was to make sure that buyers could find sellers and sellers could find buyers and make that transaction as seamless as possible. If we had taken possession of their items, we would have interfered with that velocity.