Nathan Withers
New Media
February 15, 2007

Site Analysis 2: Ebay

The private business sector played an important role in integrating the computer and the internet into the homes and lives of modern culture. The internet especially seemed an endless venue for lucrative ventures to the business world and many were eager to invest in this cyber cash cow. Unfortunately, the internet, as a whole, failed to fiscally perform to the level of business investors’ expectation, giving way to the significant drop internet stocks in 2000, also known as the dotcom crash. Even though many stocks were not making money one internet site among a few has not only been profitable but has also created a new market, and that site is eBay.

EBay is an internet auction site that has connected millions of buyers and sellers in America and internationally. Early on eBay ran across many logistical issues concerning buyer/seller security, methods for charging fees, and methods of payment. Ebay’s user community quickly became too large to manage itself. As James Beniger predicted, new technology especially with information usually becomes a tool for control, and eBay became an example of Beniger’s control revolution (Bucy, p. 17-18). Unlike the individual and informal sites such as myspace, eBay requires trust and security from its users, and like many area of the business world trust is gained through control over the market by the company. In order to gain user trust eBay, implemented a disciplinary policy in which violating users would be sanctioned or barred from eBay. EBay integrated peer enforcement through the creation of a triadic feedback system. After every transaction each party can evaluate the other party by leaving positive, negative, or neutral feedback. On top of this each user is allowed a short sentence or two, explaining the reasons for their feedback choice. User feedback is archived and compiled to give users quick information on the trustworthiness of a buyer of seller. Even now that buyer/seller trust was held to account, eBay still had to overcome to figure out a way to streamline the lag time in each transaction during which the seller waited for payment before shipping the won item.

EBay’s answer was Paypal; an internet account company that allowed for transfers of money over the internet. Not only were sellers now able to receive almost instant payments, but Paypal also gave buyers added security through the refund of transactions that were fraudulent. Paypal also made it easier for eBay to charge user fees for sellers. With security and ease of use established, eBay was able to create a whole new market of thousands of small scale e-auction businesses. EBay also used tools such as discussion boards, groups, chat rooms, review guides, eBay blogs, and even an eBay community wiki, to help educate and connect a large loyal group of users. For small e-auction businesses eBay also offers seller pages that allow for personalization and organization of the presentation of auctions.

Steve Lohr in his piece “Computer Age Gains Respect of Economist,” quoted several skeptics who rightly saw an over inflation of the internet as a business market (Bucy, p. 180); a few year later they saw their prediction come true with the dotcom crash. But eBay not only survived the crash and defied skeptics but also created a huge industry of online auctioneering. EBay has connected both the large scale sellers such as Best Buy’s used and damaged seller, but also millions of small scale individuals looking for a lucrative alternative to a garage sale. Internet auctions such as eBay have created their own effective business model characterized by lack of geographical constraints, the lack of time constraints on business hours, the large number of users that need nothing more than a computer and an item to sell, the ability for users to be both a buyer and a seller, and lastly the ability to create immediate price discrimination based on open market model.