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As EBay Marks 10 Years Online, It Tries to Pacify Unhappy Users

Accused of acting like a monopoly, the auction company is working to improve ties with sellers.

June 27, 2005|From Associated Press

SAN JOSE — Jewelry dealer Michael Jansma used to be one of EBay Inc.'s biggest cheerleaders.

Every month the entrepreneur from Largo, Fla., sells baubles worth about $250,000 on the auction site. But the revenue Jansma gets from EBay has declined over the last year, and in January the company raised fees, denting his profit.

To compensate, he added inventory on his own site,, which sells about $60,000 of pearls and other luxuries each month. In November, he opened an account with, where he sells $35,000 in merchandise a month. And in February, he began selling on, where sales have more than doubled each month.

"I hope EBay gets the message: People have choices, and if we're not happy we'll look elsewhere," Jansma said. "I hope EBay will rise to the occasion."

With about 150 million registered users, EBay ranks among the world's most powerful companies, online or otherwise. It had more than 1.4 billion items listed last year. For every $100 spent online worldwide, an estimated $14 is spent on EBay.

But some say EBay's blockbuster growth has engendered arrogance.

Entrepreneurs grumble that executives pander to big-ticket electronics vendors and industrial manufacturers -- not the teddy bear enthusiasts and numismatists who were faithful a decade ago, when EBay was founded and enjoyed a kitschy if somewhat obscure success. The critics complain about shoddy customer service, including site crashes and anti-fraud software that too often mistakes a legitimate business for a huckster.

Meanwhile, EBay executives are looking for new revenue as growth slows in North America and competition heats up from Amazon, Yahoo Inc., Google Inc. and start-ups. EBay faces daunting obstacles, such as cracking the Chinese e-commerce market and broadening the audience for its PayPal online payment division, whose business is mostly EBay transactions.

"They've made good strides but haven't fully monetized other opportunities," said David Edwards, an analyst at American Technology Research in San Francisco. "The nature of a marketplace is that once you have a critical mass, it tends to stick, and there's not a lot that can unseat it. But that's not to say that EBay doesn't have significant challenges ahead."

EBay foes concede that it would be nearly impossible to eclipse the world's largest online auction company. But that hasn't stopped them from carving out niches where they perceive EBay to be weak.

Take fraud, for example. Though EBay maintains that less than one-hundredth of 1% of all listings on its site are fraudulent, scammers target high-priced items such as plasma TVs, and some victims have lost thousands of dollars. EBay's fraud-detection software alerts internal investigators of suspicious listings, but executives say it's impossible to police a site receiving as many as 2,000 new listings per second.

By contrast, Chicago-based UBid Inc. verifies addresses and checks bank references for all 3,700 of its sellers. Service representatives place random orders to ensure prompt delivery, said Chief Executive Bob Tomlinson.

"EBay's taking a hands-off approach to fraud that makes some users uncomfortable," Tomlinson said.

EBay also has gained a reputation as a company that acts like an unregulated monopoly and only recently has extended an olive branch.

In mid-January, EBay warned sellers in a terse e-mail that the monthly fee to operate a basic EBay store would increase from $9.95 to $15.95 and that a standard listing fee would double to 40 cents. Sellers peppered EBay executives with angry mail, forcing it to reduce some fees.

EBay CEO Meg Whitman acknowledges that some of EBay's user relationships have been difficult. But the company, which routinely flies in buyers and sellers for focus groups, has "redoubled" efforts to be responsive, Whitman said.

"Sometimes it's a little bit like being a politician," she said. "We have work to do in understanding our users' sentiments."

But EBay's contrition may be too late. Salt Lake City-based launched an auction site eight months ago that addresses complaints from EBay sellers partly by charging roughly one-third of EBay's listing and transaction fees. It has 225,000 listings, from tractors to sneakers.

Holly MacDonald-Korth, senior vice president of Overstock auctions, takes calls directly from sellers. By contrast, it wasn't until February that EBay stopped sending automated e-mail responses to sellers.

Despite the complaints, EBay maintains a passionate user base. More than 10,000 sellers converged in San Jose last week for EBay's 10th anniversary, which ended Saturday with a concert by the B-52s.

Glenna Woolard of Santa Cruz, who sported a temporary EBay tattoo and a woven ponytail in EBay's logo colors, has been a seller since 1999. A stay-at-home mother of four, she hawks items purchased from local estate liquidations, garage sales and industrial auctions, with monthly revenue of $3,000.

"EBay takes the 9-to-5 world away, so even someone like me can fit into the economy," Woolard said. She hopes to spend next summer collecting items to sell on EBay while driving cross-country in her Fleetwood Bounder, a mobile home she purchased on EBay for $29,000.

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