March 31, 2003, 12:00 AM

eBay subtracts Half from the equation

After acquiring Half.com in 2000 and learning what it needed to learn from Half`s operations, eBay has decided that Half no longer has a role in eBay`s future. It will shut down Half`s operations over the next year.

Three years ago, as eBay Inc.’s eBay.com was still defining its place as an e-commerce site, it turned to retailer Half.com for help in developing some key strategies. “When we saw what Half was doing, we were intrigued with a number of things-online payments, their electronic product catalog system, and their fixed-price concept,” an eBay spokesman says. “We thought Half was moving in the right direction.”

After eBay acquired Half.com for $241 million in stock in July 2000, it started to leverage Half’s expertise, most notably in the way eBay improved its fixed-price option for books, CDs and videos categories. Now, after absorbing what it learned from Half and growing what it calls its media category to more than $1 billion in sales, eBay has decided Half.com no longer has a role.

“EBay’s own success torpedoed Half.com, because it became easier for buyers and sellers to just deal with eBay,” says David Kathman, a stock analyst with investment research firm Morningstar Inc.

Half`s founder and president, Josh Kopelman, who also served as eBay’s vice president of media products, will leave the company April 15. He’ll be replaced by Mike Aufricht, currently head of marketing at AvantGo Inc., a provider of mobile enterprise software.

Founded in 1999, Half built its niche with a slogan that promised prices always about half the original list price. It quickly rose as an e-commerce star expected to challenge Amazon.

Its business model relies on technology it introduced to figure prices of goods at about half the original price. Sellers enter a UPC code or other identifying number into an electronic web-based form, along with other information on the product’s condition, to set a price at about half the original list price. But the value of that service is now in question, eBay says.

The eBay spokesman says eBay will review whether it wants to keep the Half.com pricing system. “It has a lot of pluses,” he says, “but sellers are now looking for more options when it comes to selling merchandise, such as using photos and posting reviews to describe an item.”

Following its acquisition by eBay, Half began to deal with a broader range of products, including sporting goods, jewelry and consumer electronics, but its strength remained with books, CDs and videos. The eBay spokesman says Half accounts for the fastest growing segment of eBay’s overall media products category, which grew 75% in 2002 over 2001 to hit $1.2 billion.

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