In its second-largest acquisition, Amazon buys the company for $970 million.
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That includes a no-haggle, no-deductible, no-third-party money-back guarantee for purchases up to $250. “The amazon.com auction guarantee was absolutely ground-breaking,” says Spiegel, a 2 1/2-year veteran of Amazon and former vice president of engineering and store development.
Many differences between the sites are subtle: Whereas eBay offers auctions that run three, five, seven and 10 days, Amazon’s run from one day to two weeks. But in a marked departure from eBay, where “snipers” are known to come in and pick off a high bid during an auction’s closing minutes, Amazon has a feature, named Going, Going, Gone, which extends an auction for 10 minutes from the last bid any time a bid is made 10 minutes or less before closing.
Amazon is determined not to suffer the same fate as Yahoo, which draws more than 30 million visitors to its portal each month but whose auction sites and chat rooms bear a close resemblance to ghost towns. “If Yahoo couldn’t do it, I have doubts that Amazon can do it better,” says Emaze’s Rubenstein. “It’s a completely separate business model. It’s not Amazon’s business.”
Don’t tell that to Amazon, which launched its auction site March 30-barely six months after CEO Jeff Bezos gave the project the green light. While the company is mum on specifics, Spiegel claims that the auctions drew more participants than anticipated in its first month-even more than in the first month following Amazon’s fast-starting music launch. “The truth is, being an underdog can be motivating and challenging,” he admits. “The issue gets back to focusing on customers and not inordinately on the competition. If we serve them well, they will reward us.”
“Our customer service group is absolutely second to none,” boasts Spiegel, who has been known to send his customer service people anonymous e-mails at 1 a.m. “Go try to get a problem resolved via eBay’s customer service,” he adds cattily.
EBay, by contrast, takes the high road with regards to the competition. “A lot of people are going to try to emulate us,” says Pursglove. “We have to keep our ear to the ground and listening and twisting it around.” In response to user requests, the company launched a feature earlier this year called the Gallery-in other words, eBay with pictures-while its Personal Shopper device notifies a customer when an item they’re searching for comes up for bid.
Even so, the site’s recent glitches have chased a few sellers away-for the first time in ages, the number of items listed for sale briefly dipped below 2 million in mid-June. And for now, many of the eBay faithful are on Community Watch. “This thing has been running like a three-legged giraffe for a long time, and each little goodie will only make it worse,” one longtime seller posted to the site’s message board (which made for pretty lively reading in the days following the outage).
Ken Orton at Cognitiative thinks that eBay’s management team would be well-advised to study the approach that America Online took some years ago when the portal experienced outages as its popularity took off. “They greatly underestimated demand and they did a miraculous job of getting out in front of the public and doing a mea culpa,” he recalls.
“I think that eBay is a bit of a victim of its own success,” Orton adds, noting that consumers still don’t have the same expectations they have of online retailers as they do of their bricks-and-mortar counterparts. If eBay’s executives would be upfront about what they’re doing to fix the problem-and they maintained an unusually low profile in the days following the outage-he sees the opportunity to “spin this lemon into lemonade.”
In any event, Orton believes that eBay’s shortcomings have created opportunities for the competition-and not just Amazon. Other potential threats include Yahoo, which currently provides auction listings as a free service to its users, and AOL, which has a short-term commercial agreement with eBay but may have its eyes on the auction market as well. “Right now both of them have to be looking for chinks in the armor,” he says.
For the attendant pleasures and pitfalls of its overnight success, eBay isn’t standing still as the bidding for bidders heats up. “As we continue to grow we have to find a way to constantly reinvent ourselves,” Pursglove says. “Every three months this is an entirely different company. It’s a very big challenge to handle growth historically. That’s why we’re hiring more customer support people to keep pace and make sure that the ratio of users to support staff as low as it can possibly be.”
The acquisition last April of Butterfield & Butterfield-one of the top three U.S. auction houses, with headquarters in San Francisco-gives eBay entree into new and uncharted territories. It provides access to the higher-end ticketed items in Butterfield’s inventory as well as tentacles into international markets including Europe, Asia and Australia, to say nothing of access to the 134-year-old auction house’s expert appraisers and authenticators.
Not to be outdone, Amazon raised the stakes in June by investing $45 million for a 1.7% stake in Sotheby’s Holdings Inc., with plans to launch an online offspring, sothebys.amazon.com, later this year. “I wouldn’t count Amazon out of anything they decide to do,” says Orton. “They are laying in the infra-structure to be really big.”
But never underestimate the power of community. “I occasionally get links e-mailed to me regarding other auction networks, but they never seem to have the selection that eBay does,” says doll and toy dealer and collector Laurie Dowell of San Diego, Calif.