However, yesterday, John Lilly wrote a great piece on Steve Jobs yesterday, and I realized I might have a story worth telling after all.  I find myself fortunate, in retrospect, to have joined Apple in 1996 as an intern, and then full time in 1997 just weeks before Steve Jobs took the helm as interim CEO.

A Tale of Two Meetings

As an outgoing intern of the Advanced Technology Group, I actually did attend the meeting that John describes in his blog post.  However, as a full time engineer on WebObjects, I also had the opportunity to attend a different all hands that Steve Jobs called for the entire Rhapsody team (the codename of the project that became Mac OS X).

If you haven’t read John’s post, it’s definitely worth reading in tandem with this one.  He does a great job capturing the insights from the ATG meeting.  Instead, let me add to the story with my recollection of the Rhapsody meeting that happened the same week.

(Note: It has been over fourteen years since the meeting, so don’t take this as a literal play-by-play.  I have no notes, so all quotes are from memory.  But this is how I remember it.)

The “Michael Dell” Meeting

The mood of the Rhapsody team meeting was energetic, but mixed.  More than any other group at Apple, the Rhapsody team required a combination of talent from both long time Apple engineers and newly merged NeXT engineers.  There was a palpable sense of excitement in the room, as particularly the NeXT team had a huge amount of respect for the “incoming administration”.  At the same time, there was an element of discontent around suddenly finding themselves part of a large company, and even some skepticism that Apple was salvageable.

Steve got on stage at the front of the room in Infinite Loop 4, and put a huge, larger than life picture of Michael Dell on the wall.  He repeated the news fodder that Michael Dell had been asked recently what he would do if he was running Apple Computer.  (At the time, Dell was the ultimate success story in the PC industry.)  Dell said that he would liquidate the company and return the cash to shareholders.

A few gasps, a few jeers and some general murmuring in the audience.  But I don’t think they expected what he said next.

And you know what? He’s right.

The world doesn’t need another Dell or HP.  It doesn’t need another manufacturer of plain, beige, boring PCs.  If that’s all we’re going to do, then we should really pack up now.

But we’re lucky, because Apple has a purpose.  Unlike anyone in the industry, people want us to make products that they love.  In fact, more than love.  Our job is to make products that people lust for.  That’s what Apple is meant to be.

What’s BMW’s market share of the auto market?  Does anyone know?  Well, it’s less than 2%, but no one cares.  Why?  Because either you drive a BMW or you stare at the new one driving by.  If we do our job, we’ll make products that people lust after, and no one will care about our market share.

Apple is a start-up.  Granted, it’s a startup with $6B in revenue, but that can and will go in an instant.  If you are here for a cushy 9-to-5 job, then that’s OK, but you should go.  We’re going to make sure everyone has stock options, and that they are oriented towards the long term.  If you need a big salary and bonus, then that’s OK, but you should go.  This isn’t going to be that place.  There are plenty of companies like that in the Valley.  This is going to be hard work, possibly the hardest you’ve ever done.  But if we do it right, it’s going to be worth it.

He then clicked through to a giant bullseye overlayed on Michael Dell’s face.

I don’t care what Michael Dell thinks.  If we do our job, he’ll be wrong.  Let’s prove him wrong.

All I can remember is thinking: “Wow. Now that’s how you regroup, refocus and set a company in motion.”  I had seen speeches by Gil Amelio in 1996, and there was nothing comparable.  Please remember, at this point in time it wasn’t at all obvious that Steve or Apple would actually succeed. But I felt like I’d witnessed a little piece of history.

Fast Forward: eBay 2006

That meeting left a huge impression on me that extended well beyond Apple.  Steve’s actions and words at Apple in 1997 represented the absolute best in leadership for a turnaround situation.

It wasn’t until 2006, however, that I found myself at another large technology company looking to rediscover itself.  In the summer of 2006, I was one of a relatively small number of product leaders to tour a draft of a new initiative at eBay called “eBay 3.0″.  Led by the marketing team, a small, strong team had done a lot of research on what made eBay different, and what people wanted from the eBay brand.  The answer was that eBay was fun, full of serendipity, emotion, thrill.  The competition of auctions, the surprise at discovering something you didn’t know existed.  This reduced into a strong pitch for eBay as “colorful commerce”.

I was excited about the research and the work, because it echoed some of the things I remembered about Steve & Apple, and the simple vision he had for a company that made products that people lusted for.  But I also remember voicing a strong concern to several members of the team.  I told them about Steve’s speech to the Rhapsody team, and asked: “Does eBay want BMW market share, or Toyota market share?”  At the time, eBay was more than 20% of all e-commerce, and all plans oriented towards growing that market share.

Unfortunately, eBay tried to do both with the same product.

It’s not typical for a large, successful public company to basically say market share doesn’t matter, and to drive a company purely around a simple focus and vision.  When things are the toughest, unfortunately, that’s when leadership and vision matter the most.

Final Thoughts

Who would have imagined that Apple would have the largest market capitalization in the world?  Who would have thought that in the year 2011 that Apple – not Microsoft, not Dell, not Sony – would be defining the market for so many digital devices and services?

Most importantly, who would have thought that a leadership mandate that eschewed market share would achieve such dramatic gains?

Apple so easily could have gone the way of SGI, the way of Sun.  Instead, it literally shapes the future of the industry.  All because in 1997 Steve was able to offer a simple and compelling reason for Apple to exist.  A purpose.  And it’s a purpose that managed to aggregate some of the most talented people in the world to do some of their best work.  Again and again.

So I will add here a simple thank you to Steve Jobs for that meeting, and for changing the way that I think about every company’s purpose – their reason to exist.  Rest in Peace, Steve.

On January 21st, Ikai Lan (@ikai) posted this tweet:

What’s the big deal, right?  So what if Ikai found a better deal on Amazon for his Star Trek geekfest?

Here’s the big deal. This was my response to Ikai:

The issue here isn’t that I was somewhat obnoxious (although clearly, I was a bit obnoxious).  Ikai & I worked together at LinkedIn, so it’s not unexpected to have a little bit of fun with the back & forth on Twitter.

The problem is that Ikai is a smart, technical guy.  He’s also someone who looks for a good deal.  If someone like Ikai thinks that Amazon has a cheaper price on an item like the complete DVD collection for Star Trek DS9, then eBay has a real problem.

eBay’s Value Problem

When I wrote my Eulogy for eBay Express in 2008, I talked about four key value propositions that eBay navigates: value, selection, trust and convenience.  One of the motivating factors behind eBay Express was trying to find a way to leverage eBay’s huge advantages in value and selection, while shoring up perceived weaknesses in trust and convenience.

But here we are in 2010, and while eBay has the item, apples-to-apples, for over $100 less than Amazon.com – Ikai didn’t know it.  And you know what?  If a low price falls in the forest and no one is around to hear it, it doesn’t make a sound… or a sale.

eBay’s Value Problem is actually a Search Problem

The point is, despite the fact that Ikai is an engineer working at Google, he couldn’t find the item.  So a $115 price advantage was nullified.   Why?

I’m not a 100% sure what Ikai did to identify the proposed “$350 price”.  When I searched on eBay, I found literally dozens of items priced below $300, many of which were from top sellers, and many of which that offered returns.  In fact, I saw items as low as $130, but I tried to find the lowest priced item that matched the quality of service Ikai would expect from an Amazon third party seller.

Of course, I’ve been on eBay since 1998, and I spent years working on structured data and search products at eBay, so I have a hunch why I found the items and he didn’t.

He typed the wrong query. My guess is that he typed something like this “Star Trek DS9 season 1-7” in the DVD category.  Makes sense, right?  Unfortunately, this only returns two items, the cheapest of which is $299.

Despite years of investment, the eBay search engine still doesn’t understand that “DS9 = Deep Space Nine”, and that “1-7″ is a range, and that “season” is an attribute that DVD sets for television series can have.

Now, what I did do?  Simple:

1. I typed the query “deep space (nine, 9)”
2. I selected the category for DVD
3. I selected “Buy It Now” for listing type
4. I sorted from highest price to lowest

Let’s review the tricks I used:

1. The () notation is how the eBay search engine does OR.  So I was able to find listings with both “nine” and “9″ in them.  To be fancy, I could have used “DS9″ in there too, but it wasn’t necessary.
2. Filter to DVD category to clean out other clutter.
3. I figured Ikai didn’t want to bid on an auction
4. Sorting from high to low is a counter-intuitive trick, but if you assume that the collection will be more expensive than individual DVDs, it makes sense.  I use this all the time with high priced items, since quality tends to float to the top.

I then scanned down the list to find the cheapest collection sold by a credible seller (someone with high feedback and % satisfaction).  And then I tweeted it to Ikai.

Would anyone else know how to do this? Would anyone else want to do this?

I do it, largely because I still love eBay, and because I actually know how to do it.  Plus, I really appreciate saving money on items like this, so the $115 is worth a few minutes.

But all I know is that if eBay can’t leverage it’s intrinsic price advantage with buyers like Ikai, then it has a serious problem.  They can never beat Amazon or traditional retailer e-commerce sites on trust and convenience.  They can, however, beat them on price and selection.

But customers have to be able to find those advantages to value them.

From CoinNews.net:

Released at Noon Eastern on Thursday, December 3, 2009, the Platinum Eagles were limited to a mintage of only 8,000. Over 7,200 of those sold in the first few days, even with a household order limit of 5 pieces in place. The US Mint sold just 4,769 of the one ounce proof coins during all of last year.

Some had theorized that this year’s run would be challenged by the high price of the coin ($1792.00) and the relatively unpopular new design.  However, given the huge demand for precious metals this year for investment (gold, silver, platinum, palladium), it’s hard to be completely surprised that this coin sold out so quickly.

Nope.  2008 the US Mint only sold 4,769 coins.  This year, they sell out early at 8000 coins.

The case for buying platinum right now is fairly strong:

• The relative price of platinum to gold is extremely low, given gold’s huge run up.  A few years ago, platinum cost over 3x an equivalent amount of gold.  At current prices, the two metals are approaching parity.
• Simple investment vehicles in Platinum and Palladium, like ETFs, do exist (they trade in London), but don’t have popular US versions (yet), so investment demand remains weak compared to it’s ETF-rich brethren of gold (GLD) and silver (SLV).
• The automotive industry, which is the largest consumer of platinum and palladium, is extremely depressed.  However, since the demand for fuel efficient cars is growing, the use of these metals in catalytic converters and fuel cells seems to forecast significant future demand when the industry recovers.

That being said, I was surprised when I searched eBay for completed listings for the 2009 Platinum Eagle.  Normally, when there is a sell out at the US Mint, you immediately see panic buying on eBay for huge premiums over the US Mint price.

Here is the query.  What you see is that, as of December 12, the prices range from $1727 to $2050, hardly a premium given the transaction costs of eBay / PayPal which can easily run 8-9%.

As a result, I have to wonder:

• Was the sell out the product of true individual demand for the coin?  Or was this a case of coin dealers speculating on a sell out and premium collectible opportunity?

The problem with the Platinum Eagle series is that it’s unclear how many collectors actually try to build “the complete set” of these expensive coins.  Set building is typically the primary driver for premium values for the silver and gold eagle series.

I’ll be watching the completed auctions closely this coming week.  There are a couple sellers already experimenting with higher prices.  Let’s see if they stick.

His article was entitled:

TechCrunch: How Facebook, MySpace and YouTube Killed eBay

Told you it was inflammatory.

However, I’m not normally the one to take eBay flame bait.  After all, if I was, I’d be posting twelve times a day on the topic.  But Keith actually hit upon a deeper insight in his piece that is worth calling out, because it provides insight into both eBay and other successful, engaging web products.

Although it was always classified as an e-commerce destination, the quirkiness of the eBay marketplace was once a major source of entertainment on the Web. It was where people sought and bought everything from the first broken laser pointer to Beanie Babies to Bob Dylan’s boyhood home. While the catch—anything from an antique clock to a Gulfstream II—was rewarding for the buyer, it was generally the entertainment and excitement of the chase that brought a buyer to eBay in the first place.

This insight, that eBay’s success was driven by entertainment and engagement is extremely strong.

The rest of the article follows this path:

• In January 2004, over 47% of internet users visited eBay once per month.
• In December 2006, while the % of audience stayed the same, people were spending 3x the time on MySpace
• In 2007 Facebook & Youtube added to this drift of attention and engagement (timeline is off here a bit, since Youtube took off well before 2007).
• eBay stripped out the fun, not pursuing eBay 3.0 strongly enough, and then Donahoe pushed towards an Amazon-focused approach.  Fun gone.

I don’t personally agree with much of the deductive flow here, actually.  Overall, Myspace, Youtube & Facebook have significantly increased the engagement overall on the internet, taking metrics like “daily visits” and “daily unique users” and “time on site” to previously unthinkable numbers.  It isn’t a zero-sum game, per se, because the overall number of users and time spent on consumer internet sites has grown dramatically.

More importantly, the assessment of eBay 3.0 and the current strategy makes it sound like eBay’s current approach is largely management-driven, when in reality the overwhelming global scale and activity of eBay buyers (and sellers) has made the current direction almost fait accompli.  In 2006, the number of eBay listings that were fixed price (including store listings) was already well north of 50% and rising rapidly.  The marketplace was voting through billions of bids, BINs and listings, and it was voting for a higher and higher proportion of fixed price commerce.

But I digress.  The point is that Keith got something very, very right in his article about eBay.

eBay was never meant to be just e-commerce.  It was fun.  It was exciting.  It was empowering.

It was engaging.

There are a couple strong reasons for this.

First, if you’ve read my previous posts on game mechanics in the design of engaging software and websites, you’ll know I’m a big fan of Amy Jo Kim‘s work here.  In fact, eBay demonstrates all five of the “fundamental games” that humans like to play.  This wasn’t done intentionally, but it explains a lot of the almost visceral, addictive reaction that people had to eBay.

Second, eBay captured irrational economic behavior on both the buyer and seller side of the marketplace brilliantly.  Buyers exhibited a number of irrational behaviors that we now describe and associate with behavioral finance.

These irrational behaviors on the buyer side, combined with the game mechanics of the site, effectively created a lift in demand.  Combined with the transparency and breadth of the online marketplace, you had literally a huge multiplier on e-commerce demand.

On the seller side, however, engagement was driving irrational behavior too.  Buyers of collectibles became sellers in order to “fund their habits”.  (I know this personally, since I began selling coins on the site to help keep my PayPal “slush fund” fully tanked so I could buy coins…)   More than anything, people fell in love with the empowerment eBay offered.  You didn’t have to have $100,000 to open a business, an SBA loan, or an MBA.  The web was full of stories of people just driving around garage sales, picking up items on clearance at local department stores, and stocking up at flea markets.  Some of these sellers grew businesses that measured in millions of dollars, promoting hope that anyone could build a business on eBay.

Of course, there was a kernel of truth to this.  An unprecedented number of successful businesses were built over eBay.  But most sellers were nowhere near any sort of traditional business scale.  There is a reason, after all, that PowerSeller starts at just $1000 a month.  And that’s $1000 of sales revenue, not profits.

Can you imagine any real-world storefront with only $12,000 a year in sales?

People would spend 8, 10, even 12-hours a day looking for inventory, listing items, answering questions, and shipping goods.  When people went to the first eBay Live, they even made sure that on the road trip out to California, they brought enough packing materials to keep shipping items.  They made buyers happy because it wasn’t just a business for them, it was a way of life.

In every sense of the word, it was irrational commerce.  It was a labor of love, not economics.  Sure, it was a good way to pad the income of a family.  But for many the money was just a rationalization – they were really in it for the excitement, the activity, the empowerment, and of course, the community.  If you calculated the “wage rate” of many of these sellers, it would be shockingly low.  But no one did, because that wasn’t the point.  It was fun.  It was empowering.  And it was only just the beginning…

I didn’t get to go to the first eBay Live in 2002, but I did go to three starting with the third in New Orleans in 2004.  I’ll never forget, at one point Pierre was touring the booths (I believe he was giving a speech that day).  A group of us were discussing how to manage the insanity of the event – the intensity and sometimes aggression of some attendees who had to have every pin, every collectible.

I won’t get the quote right, but Pierre said something there that has stayed with me to this day.  To paraphrase, he said that he loved the energy, and that the insanity is part of what made eBay great.  If eBay became just another sales channel, then it would lose its magic.

It has been five years,  and for me personally the growth in my understanding of game mechanics, behavioral finance, and web 2.0 product design have given me terms and tools to help explain the irrational engagement that people had with eBay, and currently have with sites like Facebook, LinkedIn & Twitter.

eBay has a very metrics-driven culture, but while site and business metrics accurately reported the results of the incredibly engagement and activity on eBay, as always they never actually provided  the full picture around causality.

So, from my point of view, Facebook, MySpace & Youtube did not kill eBay.  (eBay, of course, is no where near killed in any case, since it continues to be an incredibly large and active site.)

Instead, eBay fell victim to a much more insidious threat than simple competition for eyeballs or time on site.  It fell victim to a version of the Innovator’s Dilemma.  There is a limit to how many people will wrap their lives around selling on eBay.  There is a limit to what percent of people’s purchases they will pursue through an auction process.  There is a limit to the disposable income to spend on collectibles and hard-to-find items – most purchases, in fact, are of new, standard commodity products.  Thus the company and the site follows the aggregated votes of hundreds of millions of buyers and millions of sellers, their “best customers”, and those votes are eventually dominated by the bulk of the e-commerce market.

Reading articles this weekend, like this piece in VentureBeat, they quote Donahoe in the Wall Street Journal as follows:

Asked about eBay’s identity, Mr. Donahoe said he wants shopping on the site to offer the same sort of low-price experience as buying at bulk retailer Costco Wholesale Corp. There, “the inventory is somewhat fluid, but everything they’ve got is a great deal,” he says in an interview.

(Ironic for me, since Costco was one of the examples we looked to frequently in the design and thought behind eBay Express.  I am a huge, unrepentent fan of Costco as both a customer and as a student of great companies.)

eBay 2009 cannot go back to the eBay of 1999, or even 2004.  The size and scale and make-up of the market means that any attempt to “crowd-out” the less engaging aspects of the market would mean drastically reducing the size of eBay.

That doesn’t mean there isn’t hope.  There is still time for eBay to re-invigorate its experience to capture and create elements that drive engagement.  There is time to learn from both the past and the present, and chart a course that will inspire and empower millions.

The original needs that drove eBay to success still exist.  People are finding some of the serendipity and empowerment from Craigslist… but it’s not as actionable or broad.   The game mechanics, for the most part, aren’t there.  Amazon has increased its breadth, but it’s truly an ecosystem designed for large sellers (by eBay standards).  Google has enabled independent websites to purchase traffic… to an extent.  But the more you make selling online like running a business, the more you lose that sense that this is fun instead of work.

Collectors still want to collect.  People still want to find ways to make a little extra money and to be a part of something bigger.  Little kids still collect and trade things from a very young age – no matter if they are stickers, baseball cards, Pokemon, or whatever small colorful items come in sets with variable rarity.  I sold my brother’s broken iPhone (he dropped it in the ocean) for $130 to a man on an island (Reunion) that I had never heard of.  Those eBay stories still exist. Small businesses are still being built on eBay.  Sellers are multi-channel, but eBay can and should offer them unique dynamics that capture a disproportionate amount of their attention, if not their business.  Apple has a small fraction of the computer market, but it captures the lionshare of its attention.  That could be eBay if it was prepared to act boldly and ask hard questions about what eBay reall should be… and shouldn’t be.

eBay cannot be MySpace, Facebook, LinkedIn, YouTube, or Twitter.  Nor should it be.

It should be eBay.

Update (5/27/2009): Turns out I had missed a great post from Rob Go on this same topic, just a few days ago.  Worth reading.

2009 Lincoln Penny Mania

A quick review of recently completed eBay auctions shows unmarked rolls selling for $30 to $50 each. Single pennies have sold for $2 to $4 each. Rolls with a Lincoln postage stamp and cancellation from the first day of issue at Hogdenville, Kentucky have sold for over $200. Most astoundingly, a single 2009-P Lincoln Cent graded NGC MS66RD and attributed “First Day of Issue” has sold for $400.

View the current eBay auctions.

It’s truly bizzare.  $0.50 rolls of the new Lincoln pennies are going for $30-$50 on eBay.  That’s insane.  We’re talking about a coin that will be minted in the hundreds of millions, if not billions, this year.

What I would love to do is to “short” these rolls – effectively presell them at this price, collect money now, and then send the rolls in a few months when you’ll be able to source them at less than $1/roll.

Unfortunately, that violates eBay policy. It’s for good reason, since short selling actual inventory is hard to distinguish from a scam transaction.  After all, how do you know the seller will make good on the future delivery?  What is the recourse for the buyer?

The lack of short selling, however, means that temporary supply/demand imbalances like this lead to effective price gouging for buyers who assume the eBay price is “fair”.  It’s certainly fair for the moment, but the expected ROI on this purchase for the collector is likely to be disasterous.

Still, I wouldn’t mind the ability to short sell a few hundred rolls.  If you have access to a bank that actually has these rolls, you’d be a fool not to put them up on eBay quickly, before the prices settle down.  Do I have any readers in Kentucky?  If so, can you pick me up a box?

Today, I checked my stats briefly and noticed something really strange: my post about eBay Express, A Eulogy for eBay Express, had jumped with a vengence to the number one post on the blog.  My overall traffic spiked a bit too.  A little strange for a post that is over 6 months old.

Perusing my top referring sites, I saw one obvious culprit: eBay Strategies.  Scot Wingo has a new post up entitled Episode IV – How to fix eBay (you are here) – A NEW HOPE – Introducing eBay 2.0. It’s a long post, but there are a couple of paragraphs in it that point directly to my last eBay Express post:

You may recall an experiment eBay had called eBay Express where they tried to extend the brand with a different fixed-price site, but failed.  Ex-eBayer, Adam Nash had a great eulogy and behind-the-scenes view of what happened that I recommend everyone read to see his perspective.

I always likened eBay Express to diet donuts.  It just isn’t an extension and you are admitting that, well, if you have an eBay express, that makes eBay – what- eBay slow and poky?  There were other problems too that Adam details, like they didn’t send it any traffic and small things like that.  Also the way the inventory worked was all jacked-up, it was a sub-set of fixed-price items on eBay (what?!).  I’ve read all of Adams thoughts on eBay Express and chatted with him before on what eBay’s doing wrong/right and many of his ideas have found their way into eBay 2.0. (BTW, eBay needs to get this guy back.)

OK, it’s hard not to find that last line flattering.

Scot’s post is fairly long and detailed, and while I don’t agree with everything in the article, I did find all the talk of “New Coke” amusing in one sense.  You see, Malcom Gladwell’s book Blink had just been released when we kicked off the eBay Express concept efforts.  As a result, one of the specific guiding statements for the project was: “Don’t build New Coke.”  As I mentioned in my original post, one of our key goals for eBay Express was to NOT change the original eBay, but instead focus our efforts on a new site in order to protect what buyers & sellers loved about eBay.com.  Our analogy was, in fact, Diet Coke, which is not totally surprising given that I have an entire category for Diet Coke-related posts on this blog…

Still, the branding point around the name “eBay Express” is fair, and as I mentioned previously, branding was one of the obvious mistakes made in retrospect.

In any case, a little more snooping and I discovered that while eBay Strategies was the source of some of the new traffic, even more traffic was being sourced from the Seeking Alpha distribution of the article.  I’ve been an active reader of Seeking Alpha as an investment site for years, and I’ve noticed their recent push for sourcing content from any major blogger.  However, this is some real evidence that bloggers who leverage Seeking Alpha are likely seeing significant boosts in distribution.

I wonder if I have any posts that are Seeking Alpha worthy… I’ll have to think about experimenting with them at some point.  I’ve actually been cited in Seeking Alpha posts before, but typically with pointers to my articles on investing in Timber as an asset class…

USPTO: Patent #7,490,056

• Filed: November, 2004
• Granted: February 10, 2009

Ironically, I wouldn’t have known about it except for a promotion catalog I got in the mail today with a list of plaques I could buy to commemorate this patent from some souvenir company in Florida.  Yes, I know.  Weird.

This was the first of several patent applications I submitted while at eBay.  This particular application surrounded the logic and algorithm around assessing popularity for e-commerce listings based on “following” behavior, aka “Watch” in eBay terms.

Yes, this was the “Most Watched” patent, from the debut of eBay Pulse.  (Sadly, it looks like the patent office has actually moved faster approving this patent than eBay has updating eBay Pulse since that 2004 launch.)

There is a lot I could comment on here about the USPTO, the dubious nature of software patents, the length of time, etc.  Normally, I’d go on at length about some of these issues.

Instead, however, I’ll just note that it’s a somewhat sentimental moment for me, because I always remember hearing about how my late grandfather had filed an important patent on his path to business success.

Needless to say, saltwater does not do good things to an iPhone.  It doesn’t boot anymore.   No recourse with Apple or AT&T.  He had to get a new phone.

As a result, I ended up with my own variant of Pierre Omidyar’s famous broken laser pointer… I listed the broken iPhone on eBay.

Well, it sold today, for $122.50.  However, it sold to an international buyer… in Réunion.

Réunion, as it turns out, is a little island in the Indian Ocean, off the coast of Madagascar.  It is a French island, and happens to be the first place in world (due to time zone) to adopt the Euro.

So, would you ship a broken iPhone to Reunion?

They paid with PayPal.  All the info lines up, roughly.  eBay has a hotmail address for the user, but the payment came from a wanadoo.fr email address.  However, the name and address on both is the same, although eBay lists United States for the registered country (with the Reunion address).

That could be a sign of fraud.  Or it could be the sign of a user who moved.  eBay data is pretty messy at times.

He has made recent purchases with positive feedback.  A cheap piece of wireless equipment, and an expensive ($259) piece of tree climbing equipment.  So, not just trivial items.

So, do I ship it?  Not sure.  The worst that would happen is that the credit card would end up being stolen, so PayPal would seize the funds.  And I’d be out a broken iPhone.

But, on the plus side, selling to Reunion is a new destination for me.  I’ve sold to over 30 countries on eBay at this point, and it’s getting harder to attract buyers from new ones.

I think I’m going to ship it.

People are basically good… right?

I was happily reminded of an event that I absolutely would have shared on this blog at the time – if I had been writing this blog at the time.  It seemed worthy of a posting now, three years later, especially since it comes with some dot-com bragging rights.

The event?  The time I sold a Leonard Speiser mask to Golden Palace Casino on eBay for $400.

Strangely disturbing, isn’t it?

Details

The auction was put up in May, 2005, shortly after the official “going away” party for Leonard, which we held at the Tied House in Mountain View.  It was a large event, and we took up the back room.  There was food, drink, and the requisite roasting of Leonard “see attachment” Speiser.  (We’re not rolling back, we’re rolling forward!) It also included infamous video from a particular usability test, on permanent re-run.

It was a fun time, and as party favors everyone was given these hand-made copies of Leonard’s face, taken from his Halloween rendition of Harry Potter.  They were just color copies, stapled onto rulers.

On a lark, I listed one that night on eBay, hoping to raise money for his going away present.  I had recently launched the first version of eBay Pulse, a popularity page ranking queries, stores, and most watched items on eBay.  (There is actually a patent pending on the latter).  Through a grass roots email campaign, I got a sufficient number of eBay employees to watch the item, propelling it onto the “Top 10″ list for most watched items on eBay.

At that point, Golden Palace Casino found it.  At the time, they were buying up crazy items on eBay as a form of PR, starting with the famous Virgin Mary grilled cheese sandwich.  Yes, I know the memories are coming back to you now.

After some furious bidding, they won the item for $400, providing enough cash to buy Leonard an engraved video iPod (the hot item at the time).   He claims he still has it. 

In any case, we delivered the item, signed, to Golden Palace, and they posted it on their website.   It’s hard to find now, but a little Google sleuthing uncovered it.  Here’s what they had to say:

A handheld sign, made from a ruler and a cut-out of Leonardï’s head, was sold on eBay for $400.00. GoldenPalace.com bought the item, which was made for Leonard Speiser, an eBay Product Manager who was leaving his job. In order to raise money for the send-off party and roast, the sign was auctioned off on eBay. The sign has staples in it to roughly make a slot for the ruler, which you use to hold it up.

Itï’s funny to see actual eBay employees putting items up on eBay, but we are assured that: “this listing in no way, shape, or form represents any type of official eBay business. This listing is purely a loving gesture for one of the truly great members of the eBay community.”  Leonard will apparently be greatly missed by many, and they are trying to raise money for a going away present, to be given to him at the party. All the online casino got for their money is the sign and ruler; nothing more, nothing less.

Leonard Speiser went on to found Bix.com, which was acquired by Yahoo in 2006.  Leonard is still there, as you can see from his current LinkedIn profile.

Just in case he tries to feign ignorance of this whole event, I have proof he was a party to it:

This is such a fun memory, really symbolic of some of the best times at eBay… I’m really happy that I’m getting a chance to capture it here.

The first coin sold for about 10% over the original purchase price last year.  Since that’s roughly the cost of eBay & PayPal fees, let’s just say that owning the coin did no damage financially.

This week, I have both Abigail Adams and Thomas Jefferson’s Liberty up for sale.

Bidding is on eBay all through the week.

Enjoy.

2007 First Spouse Proof Martha Washington Gold Coin

For those of you reading my blog for a long time, you know a couple things about my history with this series:

• I managed to get one of the first coins, even though they sold out within hours
• I wrote the top ranked eBay Guide on this series
• I was on the fence about collecting this series all the way through

I’ve decided that this series of coins isn’t for me… it’s too much cash tied up in coins, and frankly most of the first spouses just aren’t that interesting to me.  I may buy one or two in the future (Jacqueline Kennedy?), but I’ve decided to opt out of the full series.

As a result, I’ll be selling the first five off at a rate of one a week.

I think I’m going to steer clear of the more trendy, obvious collector-bait series going forward.  Yes, Native American $1 Dollar Coins, I am talking to you.  Of course, I am a sucker for truly beautiful new efforts.

Just remember, all bids on eBay are binding.  And you must bid from a PayPal account with a confirmed address.

Here is the new PayPal Micropayments site, which explains the terms.

For those of you unfamiliar with PayPal economics, PayPal charges a fixed fee and a variable rate on every transaction for premium customers.  A premium customer, by the way, is basically anyone who wants to receive more than $500 a month and/or accept credit cards.

The payment scheme is similar to the credit card companies, although of course PayPal charges the same fee for bank & debit payments too.  They even charge the fee on PayPal balance purchases.  There is a reason why PayPal is a phenomenal business in its current form.

The problem is that for low cost items, the PayPal fixed fee can be expensive.  The fees for a basic premium account are:

$0.30 + 2.9% of the transaction.

So, if you are selling a $100 item, your fees would come to:

$0.30 + $2.90 = $3.20, or 3.2% of the transaction.

Not a huge fee, but certainly a significant line item for normally thin retail margins.

Now look at the cost for a $5 item:

$0.30 + $0.145 = $0.45 (rounded), or 9% of the transaction.

Wow.  9% for payment processing.  Hard to build a great business there.

The micropayments service offering fixes this, by lowering the fixed fee, and raising the variable fee.  The new fee structure is:

$0.05 + 5% of the transaction.

So, that same $5 payment now costs:

$0.05 + $0.25 = $0.30, or 6% of the transaction.

6% is still high, but much, much better than the old fees.

Of course, given the scalability & cost issues with PayPal infrastructure, the launch is typically limited in terms of implementation:

• You can’t really find this on the site, you have to go to the magic micro-site to sign up.
• You have to sign up for this fee structure separately.  You can have the micropayment structure, or the normal structure, not both on a single account.
• You have to wait 2 days for the fee structure to take effect.

This means that as an e-commerce seller, you have to keep two accounts open – one for your items over $12, and one for the rest of what you sell.  It also means you have to juggle the fact that PayPal doesn’t like to see two accounts linked to the same bank account, credit card, or email address.

Still, it was fairly trivial for me to set up a new email address on my personal domain, and get the new account.  I’ll start using it immediately on Media items, like used DVDs, that tend to get below $10 prices.

If I was in the eBay selling tool business, I would definitely build in a feature to automatically assign the right PayPal account to listings based on the fixed price or expected final value of an auction.  It probably wouldn’t take more than a day or two to implement.  An eBay seller with $100,000 GMV per year, with 50% of items below $10 could likely save thousands of dollars with this technique – that’s margin that is worth taking.

I’m not sure this fee structure will get PayPal into the true micropayments arena.  If they want to be collecting payments under $1, they will really need a fee structure that operates on the aggregate – grouping together charges like they do for iTunes to minimize charges.  Still, I’m glad to see them make at least this small step forward.  It must not have been easy to face the potential cannibalization for existing sellers who are using PayPal today on eBay for under $10 items and who will move to this payment structure.

What would be great is a true wrap account from PayPal that would mix together a true micro-payment pricing (sub-$1), low price item band (sub-$10), and regular merchant fees, with PayPal handling all the aggregation and management to deliver payments for a broad product line at a fixed rate based on monthly volume.

Still, I’m sure there are a few people at PayPal who slaved over this recently, and I do want to say to them thank you for shipping it.  I’m hoping this will help make selling lower price items viable again for me.

Marc Andreessen has joined eBay’s board of directors, effective immediately.

Andreessen is most noted for co-founding Opsware and Netscape, and served as AOL’s CTO immediately following its acquisition of Netscape. His current venture is Ning, a new consumer Internet company founded in 2004 that is focused on building a next-gen platform for social networking. Rather than having its users join one all-encompassing social network, Ning encourages and allows users to create their own social networks for anything they’re passionate about. In four years, more than 480,000 social networks have been created by users on Ning.

I had a chance to meet Marc briefly as part of the OpenSocial launch @ Google last year.  There is no question in my mind that eBay will benefit from having his perspective on the board given their current challenges.

Some interesting facts & links:

• Marc has one of the best blogs out there, bar none.  If you don’t read it, you should.
• Marc has a fairly strong LinkedIn profile.
• Mac is the Co-Founder & Chairman of Ning, which is the wide-open, community platform for building social networks.

In particular, I’m going to flag a post I wrote over a year ago about how eBay missed its opportunity to buy Ning cheaply, and why that acquisition would have made sense.  I caught some flack for that last summer… feeling at least partially vindicated here.

Congratulations to the team, and welcome worldofgood.com.

World of Good is an attempt to produce the first, global-scale marketplace for socially beneficial goods.   Yes, when you shop the site you will see badges for:

• Eco-Friendly
• People Positive
• Animal Friendly
• Supports a Cause

It’s a nice initiative because it combines some of the raw, positive economics from aggregating demand for these poorly distributed goods, allowing many of the vendors to reach buyers they otherwise would be unable to find.  It’s a classic eBay play to try and make an inefficient market more efficient.

I’m not sure of the overall business opportunity here for eBay, but it’s great to see this two-year effort pay off for Seema and the team.  Congratulations.

Last week, eBay quietly announced the death of Bid Assistant, a product concept that I remember fondly from my days at eBay, and I thought it would be worth a few minutes to reflect back on lessons from the life span of that effort.  The truth is, while eBay gets a lot of press coverage from both the traditional media and from bloggers, I see very little, if any, actual detailed discussion of the features themselves, whether good, bad or ugly.  Usually, you just see factual reports, like this.

Bid-O-Matic, the original concept behind Bid Assistant, is an idea that goes back to at least 2005, if not earlier.  The problem it was attempting to solve is pretty much as old as auction bidding on eBay:

• As a buyer, you often find several auctions for the item you are looking to buy, at various stages of completion.
• If you bid on only one auction, the price of that auction might go too high, and you might have missed out on one of the other auctions.
• If you bid on more than one auction, then you run the risk of winning more than one item.

eBay, of course, frowns on retracting bids, let alone backing out of a completed winning bid, so it’s a difficult situation to handle.  If you talked to any of the regular auction buyers on eBay, they would give you a personal story relating to this problem.  Try bidding on a digital camera some time, and you’ll feel the issue pretty quickly.

Enter Bid-O-Matic.

Bid-O-Matic was supposed to be the first step in building a true eBay assistant for bidding.  You, as a buyer, would pick out a list of equivalent items to bid on.  Bid-O-Matic would then place bids for you, attempting to win exactly one of the items at the lowest possible price.

That was the idea, anyway.  Like many great product ideas, it had its roots in a real customer problem;  a customer problem expressed in earnest by some of eBay’s best customers, it’s regular auction buyers.  And it was a classic case where technology could dramatically improve the customer experience.

And like many a road to hell, it was paved with good intentions.

Bid-O-Matic originally failed to get traction within the company, largely because the cost of building the feature did not seem to justify the incremental improvement to the eBay business.  The problem mathematically is that frequent auction buyers actually already buy a lot, so it was hard to see how this tool would really help them buy that much more.  In addition, the problem is unique enough to advanced users that it was hard to imagine that many auction buyers who weren’t regular buyers adopting the tool.

Bid-O-Matic stayed just a concept, until renewed focus on improving the auction experience really took hold in 2006 as part of the “eBay 3.0″ concept.  Bid-O-Matic seemed like the perfect example of a feature that eBay’s best auction buyers would love, and so despite the numbers, the feature was given the green light.

Without going into too much gory detail, after much pain, schedule changes, cost increases, design compromises, and a typically horrific naming process, Bid Assistant was born.

While I was a huge fan of the initial concept, and of the people who worked on it, as a user I was never really able to engage with Bid Assistant.  It required a fairly arcane knowledge of “Watching”, the eBay process for bookmarking auctions.  The integration points were also fairly tortured – there was very little in the actual Finding and Buying experiences to lead you to discover the Bid Assistant.  Worse, I think fixed price listings severely limited the potential benefit of the feature.  Bid-O-Matic was never useful for multiple, unique, one-of-a-kind collectibles.  And if you are buying a commodity item, like a specific model of digital camera, then just buying it on eBay Express (or Shopping.com or Amazon.com) made much more sense.

Like all Product professionals, features like Bid-O-Matic leave me torn.  On the one hand, I want to say that there was a real user problem here, and that with the right research, design inspiration, and iteration, eBay could have come up with a great product here.  On the other hand, that time and effort is expensive, and there are likely much more important problems eBay could be putting that effort towards.

In any case, I just want to say goodbye to the Bid Assistant, and a brief acknowledgement to the team that built it.  Better to have tried and failed than to never have tried at all.

AuctionBytes has coverage, as does Business Week, but I actually think Randy Smythe has the best summary I’ve seen to date.

There are a huge number of changes, and I’m not going to cover them all. Instead, this post is dedicated to one of the smaller bullets in the announcement:

Closing eBay Express: The best features are now on eBay. We’re continuing to bring the best features of eBay Express into eBay.com including more selection in Fixed Price merchandise, improved buyer protection from PayPal, and easier, more intuitive ways for buyers to find your relevant listings. So we’re closing eBay Express and focusing our resources on improving and bringing buyers to eBay.

Since my name was so closely associated with this effort at eBay during my last two years at the company, I figured it was appropriate to post a few thoughts here for those who are either personally or professionally curious.

First off, there is no way to avoid the fact that I feel sad to see eBay Express close. When you build a team and put literally thousands of hours into something, you want to see it continue to live, grow, and flourish after you’re gone. But I’m not going to spend a lot of time on what might have been now.

Instead, I’d like to reflect on just a few key topics: why eBay launched eBay Express, what we got right, what we got wrong, and why eBay Express likely doesn’t fit with eBay’s current strategy.

Why eBay launched eBay Express. This is one is pretty simple, and was publicly discussed in several forums, but I rarely see it accurately reflected in regular press/analyst coverage. It all started in Q4 2004, which was a real wake-up call for eBay. It was the first quarter where the metrics made it clear that there were significant issues with the way buyer demand was scaling on eBay.com.

eBay Express was the culmination of three years of various forms of market and customer research that effectively argued a simple truth: as e-commerce continued to become more and more mainstream, an increasing number of buyers were looking for a different shopping experience. At the time, we called them “convenience-oriented buyers”. While buyers loved the value and selection of eBay, convenience-oriented buyers were looking for more convenience and trust in their shopping experience. They wanted good prices on fixed-price items from reputable sellers, with first-class convenience in checkout and customer service.

When we looked at the needs of both buyers and sellers to make this type of market successful, we found that they were radically different than the auction model eBay.com was based on. eBay Express was the culmination of one possible solution to that problem – a site that leveraged the tens of millions of high quality fixed price listings that eBay already had, while providing a brand-new shopping experience for buyers.

The key to this bet was that with literally zero additional work for sellers, we could boot-strap a brand new marketplace with millions of sellers and tens of millions of items from day one. Once the marketplace had traction with buyers, we would then be able to roll out new seller features and services more appropriate to a high-volume, fixed-price venue.

What we got right. Without getting into the weeds here, there were quite a few things eBay got right with eBay Express. Not all of them may be appreciated by those outside the company.

First and foremost, eBay Express represented a radical break with the way eBay designed and built products. We had volumes of research from over the years, and we literally went across every page, every flow, and asked the tough questions on why this couldn’t be simpler, easier, better for the buyer. The team had two fundamental principles:

• Keep the site “seller agnostic”, ie, 100% backwards compatible with existing seller process. Selling on eBay Express should be so compatible, sellers shouldn’t even necessarily know that their items were selling on eBay Express.
• Always ask, relentlessly, “What’s best for the buyer?”

With a strong, dedicated founding team, the effort drew many of the best and brightest from within eBay to assist with every area of the product and across technology, design, and product. At the time, most people at eBay worked on a large number of projects at once, with divided focus across many different features. With eBay Express, time was of the essence, so people had a chance to spend 100% of their time dedicated to the effort.

The end result was a huge leap forward in both technology, patents, user research, and design thinking for many product areas. A modern search classification engine. Relevance sorting. A full featured shopping cart. A completely rethought integration with PayPal. 24/7 Customer Service. No listing fees, with revenue coming purely from promotion and successful sales conversion. Even though the team did not win all of its feature fights to break with the old, the team asked the hard questions, and fought the hard fights.

Not as visible to end users, the groundwork was also laid for significant changes to the way eBay Express would integrate with other sites, both inside and outside of eBay. Half.com integration. Shopping.com integration. Dynamic CPC & CPA-based Featured Placement. API-based platforms to allow any e-commerce site to offer multi-vendor inventory to complete their offerings.

Most importantly to me, eBay Express was designed with extremely heavy involvement from our customers, both buyers and sellers, as well as development partners. In fact, it was reviewed so many times, that even at launch, I don’t think one “new” question came up that hadn’t been raised previously. That isn’t to say that every customer loved every decision made for the site, but it did mean that every concern, every suggestion was considered and incorporated into the design when possible.

What we got wrong. This could be a long section too. Like all 1.0 products, there were a lot of small things we missed. But there were a few big ones that seem so obvious in retrospect.

1. Branding. It was a tough decision. If you don’t use the eBay brand, you lose any possibility of the positive affiliation and traffic that comes with a known consumer parent brand. But, if you use it, you are also stuck with the negative attributes. eBay means auctions to most people. We ended up going with eBay Express because in the end, it was eBay inventory and we expected traffic to flow from the eBay association. It didn’t, and it also didn’t generate any real unaided awareness for us.
2. Traffic, traffic, traffic. One of the unanswered questions was how to drive sufficient traffic to the new site. We had initial stabs at this problem, but eBay was still in a phase where it believed in buying traffic. TV, Catalogs, Email, Paid Search. It doesn’t take an Internet genius to realize that buying traffic is horrendously expensive, and frankly, ineffective. Our biggest course correction post-launch was a crash course on how the rest of the e-commerce world looks at traffic generation. Figuring out how to drive traffic in volumes to the site, and build organic traffic in the long term became our 24×7 focus.
3. Inventory and merchandising. It may be hard for most people to believe this, but eBay at the time was incredibly under-developed on many of the retail basics of merchandising, inventory selection, and promotion. Why? Well, because eBay.com isn’t actually a retailer of anything. We realized post-launch that we needed to develop that expertise, quickly, even to the point of understanding sourcing, distribution, and product selection. Having 10 million+ products is great, but it’s no good if you don’t have the right products at the right price.
4. International. We designed and built the site, from the ground up, to meet the different needs of the US, UK, and Germany. In fact, I even spent time on concept versions for India, China, and a host of other countries. There were some fundamental disagreements about which model would be most effective, so we built a platform to handle them all. In retrospect, we should have done the US only, and only expanded internationally once we nailed the basics. The distraction, debate, and expense was counter-productive, and in the end, a mistake.
5. Expectations. There was so much enthusiasm internally around the various aspects of the project, and it was impossible to contain expectations rationally. The reality is that building a consumer brand and a billion dollars in sales doesn’t happen overnight, and it isn’t cheap. Look at how long Amazon has been stretching to build it’s third party sales efforts. We believed we could cut that time in half, but rationally, that was still a minimum 5+ year effort. In the best of times, that kind of effort requires a company with long term focus and commitment. And as we all know now, 2006+ were not the best of times for eBay.

Why eBay Express likely doesn’t fit with eBay’s current strategy. If you’ve actually made it this far through the article, you probably already know the answer to this question.

At a high level, economics speak loudly here. eBay needs to focus on its core marketplace business, and for the most part that means that investing people, technology and dollars towards building new businesses has to take a back seat. You’ve seen other announcements from eBay about closing other businesses, and that stems from this simple truth.

More importantly, eBay has decided against the premise of eBay Express. Our entire reason for building a separate site was because we believed that the changes needed for buyers and sellers in a massive fixed-price marketplace were not compatible with the experience of the traditional eBay auction site. As I used to tell buyers and sellers, we built eBay Express so that we would not have to change the auction experience that millions of buyers and sellers loved on eBay.com.

eBay has now decided that it needs to fold the convenience and trust we identified into the core platform itself. So there is no need for a separate site to preserve the original.

How this new strategy will fair is good topic for debate, but for another time. With eBay’s new strategy, eBay Express will now live on as its feature design concepts and technology innovations become the basis for the new buyer experience on eBay. Of course, the team at eBay has made a large number of improvements and changes in the design concepts to adapt them for the needs of the core marketplace, both from a technical and user experience perspective. eBay Express also lives on as a relentless focus on building a great buyer experience, and a recognition that the needs and economics of high volume, fixed-price sellers are different.

In retrospect, I’m a little jealous of the progress Amazon has made with its FBA and API programs since then. These were all part of our long term thinking as well, so it’s nice to see the validation of their success, but it’s never as much fun to see someone else with that success. Maybe, just maybe, back in 2005 before Amazon had it’s run-up in stock price, eBay & Amazon could have merged, and the the eBay Express backend could have been used to power the Amazon marketplace. Easier said than done, of course.

For the 600+ people who had a hand in creating perhaps the greatest technology & product effort in eBay history, please do join the eBay Express Alumni group on LinkedIn. One of the great things about this industry is that we all get chances to take our lessons from each challenge, and then go and change the world again.

Go with peace, my friend.

Update (08/20/2008): Wow.  This post has been really popular.  Over 300 page views already.  Given the interest, I’m digging up some of my earlier posts on eBay Express:

• Happy Birthday, eBay Express (4/24/2008) – reflections on eBay Express
• eBay Rolls out Best Match (1/21/2008) – reflections on the challenge of relevance-based search
• The Time Has Come… (5/12/2007) – reflection on my last day at eBay

Found this today on the eBay Ink blog.  Points to a WSJ piece from last week that explains how the new housing bill includes provisions that require payment providers to report accounts with over $10,000 in transactions to the IRS.  Hello, PayPal.  Hello, eBay sellers.

The new reporting requirement is similar to a proposal the Bush administration has put forward in its most recent budgets as a way to ensure that taxes owed are being collected. It also applies to intermediary banks that process card payments for restaurants and brick-and-mortar retailers. Congressional tax estimators predict the reporting change will help the IRS collect an additional $9.5 billion in taxes owed by online and traditional businesses over the next 10 years.

The payment processors will be required to file a 1099 form for each merchant to the IRS and to the merchant. They won’t have to file for merchants with less than $10,000 in gross sales and less than 200 transactions in a given year.

And they won’t start reporting until 2011, giving the banks and the merchants a couple years’ head start to make sure everything is in order.

It was likely inevitable, of course, that the government would find it necessary to insert monitoring hooks into payment services and online marketplaces.  And this new policy doesn’t take effect until 2011.  But I don’t think people really appreciate how much this might affect the economics of online selling and small businesses.

Look at the advice given to eBay sellers:

Report all income from online sales, even from casual or hobby selling. If you made a profit from goods sold on eBay — whether vintage KISS action figures or hand-knitted doggy sweaters — you owe income or capital gains taxes, and likely self-employment taxes, too. No taxes are owed, however, on used items that you sold for less than what you paid for them, essentially using the online service as a virtual garage sale.

If you mean to deduct expenses, act like a business. One of the most common mistakes eBay sellers make on their tax returns is to claim deductions to which they aren’t entitled. The tax code allows deductions for business expenses, but deductions are limited for individuals who sometimes make a little money on the side from hobbies.

One rule of thumb the IRS uses to determine whether an individual is engaged in a business is whether they made a profit in any two of the past five years. Another is if the person would still, say, frame landscape photographs, or carve garden gnomes, or buy and sell rare 45s, regardless of whether or not they made any money from the activity.

“If the answer is yes, you may be on the wrong side of an IRS argument that you are taking a hobby loss,” said Tom Ochsenschlager, vice president of taxation for the American Institute of Certified Public Accountants.

Keep your personal and business accounts separate. Make sure you have a PayPal business account separate from your personal one, an eBay business account that is separate from any casual buying and selling you do, and a separate business checking account.

These steps will not only make it easier for you to determine how much you owe, but may help protect your deductions by signaling to the IRS that you are serious about running a business. “Everything you can do to treat it like a business will help,” says Kristine McKinley of Beacon Financial Advisors, based in Independence, Mo. Ms. McKinley specializes in tax advice to eBay sellers.

Claim the home office deduction. While this deduction has fallen out of favor because of a popular belief that it triggers IRS audits, it is still a valuable deduction if you have a separate space in your home that you use exclusively for business purposes, according to Ms. McKinley. It’s true that you will owe more taxes when you sell the home on amounts that you have depreciated. But the deduction can still be a major benefit because it will reduce your income for the purposes of self-employment tax, she said.

If you don’t think issues and requirements like this don’t translate into overhead for small businesses, then I have a bridge to sell you.  More importantly, I don’t think people realize how issues like this can stifle the initial enthusiasm for selling that often predates any idea that you might be able to “make a living” selling online.

Very few people realize the economic magic that eBay enabled in the last decade, making “small business” activity available and affordable to millions of people who normally would not have thought to step out on their own.  It facilitated nationwide markets with low transaction costs for highly illiquid markets.

Because very few people realize this, it will most likely die a quiet death; unmourned by those who assume that the priority should be protecting the older, “real life” small businesses and their particular economic structures.  There is an argument to be had there, but only after some analysis has been done on the new economic systems and opportunities that have been created in the past decade.

My bet is that argument really isn’t happening, and that the inertia of the real world will overwhelm these new entrepreneurial opportunities.  These online retail businesses will retreat, like physical retail, back into the hands of a smaller number of larger entities who can handle the regulatory and economic challenges.

At eBay Live 2004, I remember a woman coming up to me after a talk I gave on Buying & Selling Lots on eBay.  She had been a paralegal, but had quit five years before to sell cosmetics on eBay.  Her business was not large by retail standards, but enough money for her to stay home with her children.  She told me her son had now placed into an advanced program at school, and she credited eBay for giving her the time to stay home and support him.  She said she hoped that he would go to great schools, and go on to work for a company like eBay someday.

It’s the kind of story that sticks with you.  And it makes me a little sad to see that economic opportunity disappearing.

A PowerMac G5 2×2.5Ghz with w/2.5GB RAM

All tricked out, with original packaging materials.  Only one problem…

… it doesn’t boot.

See below for the listing text, and feel free to bid on eBay:

Apple PowerMac G5 Dual-2.5Ghz Liquid Cooled Workstation
2.5GB RAM – No Hard Drive – ATI Radeon 9600XT – Airport Extreme – Bluetooth – 16x SuperDrive

This listing is for a used, Apple PowerMac G5 with dual-2.5Ghz processors, liquid cooling, and top of the line hardware.  You can read the full specs of this machine here on Apple’s website.

Before you go any farther, please note that this machine does not boot, and is being sold for parts.  The story of how this happened is a bit depressing, but read on and I guarantee you are about to be part of the deal of the year.  As they say, my loss is your gain.

I’m a former software engineer for Apple Computer, and a fairly active computer user.  I tend to demand top of the line hardware for performance, but I also strive to take care of my machines.  In fact, you’ll see that this machine is in almost pristine condition, despite regular use for over three years.  I even save the original box, manuals, discs and materials.  I’ve upgraded the hardware over the years, adding more RAM and a faster SuperDrive (16x) over the years.

One day, as I was just finishing an install of the latest Mac OS X Update, I rebooted the machine and… it hung.  It hung hard.  It sounds the boot chime, gets to the grey mac screen with the rotating lines, and then freezes.  Hard.

I’m no stranger to crashes and fixing Macs, I immediately tried booting off DVD, and external drive – you name it.  No luck.  Same symptoms.  I zapped the PRAM, reset the SMU, same problem.

I took it to the local Apple Store, and they kept the machine for a full week diagnosing it.  The good news – the power supply is good.  The bad news, they narrowed the problem to either the motherboard or the CPU unit, two expensive parts.

Now, normally, I would have ordered a new motherboard & CPU unit on eBay, swapped it, fixed the machine, and sold it for over $1000.   I then would have sold the extra good part as well, leaving just one bad part.  The problem is, with a busy day job and two small kids at home, I just don’t have time to do this right now.

So my loss is your gain!  You can buy a top-of-the-line PowerMac G5 that doesn’t boot, and you have the choice of either fixing it yourself, or selling it off for parts.   My guess is that you could likely fix this machine, put in a new hard drive, and sell it for between $1000 and $1500 today on eBay.  You also likely could sell the parts alone for over $1000, as they are extremely expensive.

To get this auction moving, I’m starting the bidding at just $0.99.  I need the money to compensate for buying a new machine.  This auction includes the following (full specs here):

• Apple PowerMac G5
• Dual-2.5Ghz processors with liquid cooling
• 2.5GB of DRAM (4-512MB DIMMs, 2-256MB DIMMs)
• Original box, manuals & discs (Mac OS 10.3)
• Airport Extreme Card (802.11b/g) and Bluetooth (with antennae)
• ATI Radeon 9600 XT w/128MB DRAM
• DVI & ADC Ports
• 16x SuperDrive (only 3 months old!)
• 3 full-length PCI-X Slots, 1 8x AGP slot
• 10/100/1000BaseT Ethernet
• 56K Modem (yes, hardware internal)
• 2 Hard Drive Bays, with SATA cables (empty)
• Firewire-400 and Firewire-800 (IEEE 1394) and 3 USB Ports
• Audio ports
• Original Mouse, extra cables (DVI -> VGA, USB Extension, Phone Cable, Power Cord)
• Original box & styrofoam!

The only things I have taken out are the hard drive and the keyboard.  Everything else is included.

Please feel free to ask questions. I’ve attached pictures to help show the quality of the machine, case, full SKU label.

Please bid with confidence – I have over 800 positive feedback, and I am a former Apple employee *and* a former eBay employee.  I will take care of you and your purchase.

Shipping. Shipping is a flat $35 through USPS Parcel Post.
Payment. I accept payment through PayPal only.  Please note that I cannot ship the machine until PayPal releases funds, which can take 3-5 days if you pay with eCheck.
Return Policy. If you are unhappy with the purchase for any reason, I will accept returns within 7 days for a full refund.  I will refun 100% of your payment upon receipt of the machine back to me in the original condition sold.

I’ve continued to shy away from posts about eBay and eBay Express in the past year.  Somehow, it feels inappropriate to comment too deeply about my former company.  But tomorrow (April 24th) is a special day for eBay Express, and I thought it would be wrong not to acknowledge it.

Happy Birthday, eBay Express!

On April 24th, 2006, eBay Express officially launched it’s beta site to the world.  In actually, the site had been running internally as of March 20th, but we officially made the DNS entry available outside of eBay for it’s beta debut.  (Actually, we originally thought it could take up to 48 hours for the DNS to propogate… it turned out to take 5 minutes, which led the site to actually go live during the launch party on Friday, April 21st.)

It may not be obvious from the outside, but eBay Express was exciting for a number of reasons:

• Mission. eBay Express had a real mission – to build a best-of-class, retail buyer experience with the value & selection that buyers love about eBay, but with significant improvements in convenience & trust.  This high-level goal led the founding team to craft several principles which guided every decision and led to an incredible passion across the team and the company.   Principles like, “Always ask what’s best for the buyer.” and the concept of making the platform “backwards compatible” with existing seller business process, were kept consistent across the site.
• Innovation.  Never before had eBay committed so broadly to investment in new technology & systems designed around a holistic end-to-end business & experience.  In each and every area, leveraging the principles of the site, we re-examined the best technology eBay & Paypal had to offer, and in many cases invested heavily to break through a number of long-standing roadblocks to platform innovation.
• Entrepreneurship. eBay Express was an important experiment for eBay, which has a long history of acquiring new businesses, but less experience in building them.  eBay Express was a significant test for the organization and for the business.

It’s two years later now.  Much of the technology that we developed during eBay Express has informed new designs for technology for the core eBay business.  Many of the principles of eBay Express have now also been transferred to the entire eBay markeplace.  In fact, if you read through the transcript of Lorrie Norrington’s speech today, a vast majority of it echoes strongly with the original vision.  Of course, it differs in one important way: one of the basic tennants of eBay Express was that we were building a different site so that we didn’t have to change what buyers & sellers love about eBay.com.

One of the founding team’s greatest fears with eBay Express was the long term ability of eBay to invest in building a new business in a very tough market.  Amazon spent almost an entire decade interating on their model for third-party fixed-price sales on Amazon.com.  Of course, it is very successful now, but it’s easy to forget the amount of capital and the number of missteps that Amazon endured in the process.  I continue to be extremely proud of the incredible sales growth & volume that the team generated in just their first year (and even into their second!).

When I worked at Apple in the 1990s, one of the lessons I learned was that it is very hard for a large business to invest in new markets when it’s core business is suffering.  It seems like ancient history, but when Steve returned, Apple focused first on stemming the bleeding in its core Mac market with the Think Different campaign and the iMac years before it debuted the iPod & iTunes sensation.  To this day, Apple’s success is a pairing of its new businesses and its old.

eBay’s priority now has to be it’s core eBay marketplace business, and that’s why you see tell-tale signs of cutting back on investment in ancillary businesses.

There were plenty of lessons learned from eBay Express – things done right, things done wrong.  But that’s not really the purpose of this post.  The purpose of this post is to say “Happy Birthday” to the site while I still can, and give a brief shout out to the original founding team who got pulled off every other “top” priority at the time:

• Luke Wroblewski
  
• James Reffell
  
• Chung Meng Cheong
  
• Adam Nash

Special nod to MD, LR, AH, SM, RV, CF, RV & ES for their support, and to the entire Express team.  eBay Express will always be special to me.  And of course, there is the ever growing list of eBay Express alumni on LinkedIn. 

P.S. Just in case she’s wondering, yes, Rebecca, 4/24 is first and foremost your birthday in my heart.  Happy Birthday, Rebecca!

You see, I wanted to run an experiment using Amazon’s new For-Sale By Amazon and EasySell products, which Randy Smythe has been blogging about.  I’m interested in them, because, in theory, we often discussed on the eBay Express team what directions we would have to move in to support selling of fixed-price, new-in-season products in the future, and Amazon FBA looks an awful lot like one of those ideas.

In any case, I can’t tell you about Amazon FBA yet because a bug in Amazon’s seller on-ramp flow is preventing me from upgrading my account.  I contacted Amazon’s customer service by email, and got an incredibly poor reply.  Fortunately, Amazon now has click-to-call support, and that worked beautifully.  The Amazon customer service rep was very apologetic, and knew about the issue immediately.  It’s not fixed, but I’m confident they are working on.

(In case you are wondering, the bug is that when you try to upgrade to Amazon Marketplace 2.0 BETA, you get a login screen where someone else’s email address is pre-populated and not-editable – which pretty much locks you out.)

In any case, I can say one thing:

Amazon Marketplace + DVDs + PayPal Shipping is a pretty darn good system for selling DVDs.

Here is why:

• Amazon listing process has the best elements of Half.com.  Type a UPC and condition comment, then pick a price based on Amazon current stats, and you are done.
• Amazon has ample DVD buyer demand.  Something eBay has, but Half.com doesn’t.  (Something we tried to rectify by adding Half.com inventory to eBay Express).  So if you price at the low price, you sell in 24 hours, even for titles that aren’t particularly hot.
• PayPal shipping makes fulfillment a breeze.  Just enter the sale data, and get a printed postage label ready to go, with tracking info!  All for a great price.

In case you are wondering, it is in-fact possible to print postage with PayPal on non-PayPal transactions.

It’s the same way eBay let’s you print postage for Half.com transactions – the base PayPal Postage form, available as long as you have a merchant account with PayPal.   I do all my shipping, both e-commerce & personal, with it.  In fact, I have a second tray in my laser printer, filled with peel-and-stick label paper, just so I can easily print and stick postage on my packages.  It offers Media Mail, First Class, Priority Mail, and Express options…

PayPal has a lot of features that they built specifically to support the eBay marketplace.  Historically, PayPal did not see these as a third-party opportunity – after all, what other marketplaces were there?  But 2008 is not 2003, and PayPal should expand their efforts around their marketplace products.  A lot of sites are adding transactional third party inventory, and PayPal has already solved many of the problems related to these transactions.

I would love a link from Amazon to just print postage with PayPal.  I would love to have the form pre-populated, and to be able to tap into the money from the sale to do it.

I’m not saying that Amazon would go for this, since they want to own fulfillment.  But the right integration between Amazon & PayPal could address those issues by linking Amazon’s fulfillment ecosystem to PayPal for supporting third party shipments.

In any case, I still use eBay for almost all my selling, and Half.com for textbooks.  But for DVDs, I haven’t been getting great prices lately on my auctions, and the listing process is just too long right now for individual items for something that’s only going to get $5-$10.

Now, if eBay finally starts showing Half.com DVD inventory on eBay.com, I’ll be back in a flash.

It has been just over 10 months since I left eBay for LinkedIn.  Really loving Linkedin – for the people, the product, the opportunity, and just to be a part of building a great, new company.

But it’s fun to see these little sign posts of the past that say, “I was there”.

Of course, there are a few others lying around.  Like this one.

Motif, Inc., a leading global knowledge-based BPO services provider announced today that Karl Wiley has joined the company as President of U.S. operations. Mr. Wiley will be responsible for all of Motif’s U.S. based operations, including corporate strategy, sales & marketing, key account management and M&A. He will be focused on driving accelerated growth for Motif by attracting new clients, expanding into additional industries and service lines, and growing activity from Motif’s current client base.

Mr. Wiley joins Motif after more than six years as an executive with eBay. Most recently he served as the Chief Operating Officer of MicroPlace, eBay’s start-up initiative providing a retail investment marketplace in the Microfinance industry. Prior to that, he was the general manager of eBay’s $5+ billion Technology and Media categories, and led eBay’s B2B wholesale initiative. In these roles, Mr. Wiley was responsible for strategy, consumer marketing, product management and customer service, and managed eBay’s relationship with many major branded retailers and manufacturers.

Karl was one of the great eBay Category Managers.  I first worked with Karl when he was part of the Business & Industrial team, which turned out to be an incredible pool of leadership talent.  At the time, Karl was the primary driver & business sponsor for product support for wholesale lots at eBay. For me, it was one of the first projects where I felt like I was truly working on features that were driven by the eBay selling community itself, and not from just internal motivation.  I learned a lot from my efforts with the B&I team, and even after the category management for wholesale lots was disbanded, I still ended up leading the course on Buying & Selling in Lots at eBay Live in 2004 & 2005.  Packed rooms, both times.

Congratulations, Karl, and best of luck with your new venture.

One minor quip, of course, is that it’s time to update your LinkedIn profile…

Hit 800 feedback on eBay today.  Of course, I’ve accrued more than 800 positive feedback over the years, but the score only reflects positive feedback from unique users.

Most of my feedback is from selling, not buying, although I’ve done a fair bit of that too.  703 feedback items as a seller, 166 as a buyer, last count.

I was selling much more earlier last year, as I ramped up the sale of the new US Presidential dollar coins.  However, lately, I’ve been too busy to sell much more than my typical odds and ends, so the ascent to 1000 has been delayed.

I remember joining eBay in 2003 with a feedback rating of just 43, all selling.  As a product manager, I believe heavily in using and living your product as much as possible, which is why I scaled my eBay selling over the years, experimenting with different models that I learned from the eBay community and from old-hands within eBay.

Originally, my goal was that purple star at 500 – a rare commodity to be sure.  But once you hit 500, is 1000 really that far a way?

Here is what my eBay feedback page looks like now:

My first positive feedback on eBay is from December 15, 1998, and it’s from Mr. Eric Cheng.  This is back when you could receive feedback from anyone, not just people you had sold to.

“I’ve bought from Adam before — he’s honest, and everything went smoothly.” –echeng

The more things change, the more things stay the same.

First, here is the original post on eBay that announced the test of Best Match as the default sort in five major categories, dated January 16th. Just a few days ago, really.

I caught this blog post over the weekend from Randy Smythe, and realized that I had a few things to say about the launch of this test.

The first of which is congratulations to the eBay Finding team. The launch of this test represents an inevitable step towards the future of a search engine on the eBay.com site optimized for the best possible buyer experience. For all the back-seat driving and Monday morning quarterbacking that they receive, very few people understand the complexity of the problems that the eBay Finding team has to tackle.

The second thing I have to say here is get ready to drink from the firehose. This move is bigger than anything I can think of in the history of the eBay buyer experience, and it’s going to test eBay and the eBay community in new ways. There is no playbook for this type of change, there is no simple pattern match. There is going to be a lot of churn, a lot to learn, and lot of quick action & analysis needed to make this successful.

It might not seem obvious to outsiders how big a change this really is. But believe me, it’s huge. There is a $60 Billion economy that is all predicated on the way that hundreds of millions of buyers search through and find billions of items for sale on eBay. That’s roughly the Gross Domestic Product of the country of Vietnam.

To explain why this change is so dramatic, let me explain a bit of the background behind this change. Let’s start with how eBay search works today.

eBay search has a history of being extremely literal and transparent. Until changes were made in the last few years, eBay search would literally do only the following:

1. Look at the keywords entered by the buyer
2. Look at the title keywords of every listing on the site
3. Return only the listings that had 100% of the keywords entered by the buyer
4. Sort the listings by “time remaining”

When I worked on the eBay Finding team, it was always surprising to me how many active eBay users I would talk to, both buyers and sellers, who assumed there was “something more” to the way eBay returned items. In fact, I would sometimes ask potential product managers, interviewing at eBay, to describe how they thought the eBay search engine worked. I would get the correct answer less than 10% of the time.

This system had some clear and obvious benefits. It’s simplicity meant that it was transparent to sellers and buyers, at least, in theory. Sellers would, in theory, experiment over time to find the right keywords to use in their listings. Buyers would also experiment. Over time, assuming that eBay was a fairly efficient market, sellers would provide listings with keywords to match the keywords that buyers would use. Supply would meet demand.

Sorting by time remaining had some natural benefits too. For an auction that ending soon, the differences between zero bids, one bid, and more than one bid are stark. One bid guarantees a sale, two bids puts you on a fast path to an efficient price. There was inherent benefit for sellers and for eBay to see auctions that were ending soon get exposure to a disproportionate number of buyers.

So, if it’s not broken, don’t fix it, right? Well, the good news is, the search system was good enough to grow eBay to the giant it is today. The bad news is that it had some fairly obvious shortcomings that became unsustainable over time.

There were a few obvious ones that almost anyone who used eBay ran into. Inexperienced sellers, just casually listing, had no idea what keywords to put in their titles. Pitty the poor seller, trying to sell their $1500 PowerMac G5, if they instead called it a “PowerMac G-5″. Inexperienced buyers also had no idea that searching for “Apple Macintosh” would bring back radically different results than “Apple Mac”. eBay didn’t know how to match keywords to categories. A search for “DVDs” wouldn’t just take the buyer to the DVD category – it would literally return all listings that had “DVDs” in the title. eBay didn’t even understand plurals! “DVD” would bring back very different results than “DVDs”.

eBay started addressing these issues in earnest about five years ago. They slowly rolled out improvements like transliteration (plurals), as well as some experiments with “generic keywords” like DVDs.

Why slowly? Well, the problem is, tinkering with a multi-billion dollar economy is, to lack a better word, scary. It’s scary because you have millions of sellers who have already adapted to the old search engine. You have billions of dollars of purchasing at stake, which means a 1% blip in finding efficiency can mean the difference of tens of millions of dollars in revenue for the company. And last, but not least, it’s scary because it’s hard to objectively find a measure of success that everyone can agree on.

How do you measure the success of search? When a buyer does more searches, is that a good thing or a bad thing? If a buyer views more items, does that mean you’ve done a good job showing them relevant items, or a bad job because they have to click through a lot of items to find one they want?

This gets even more complicated when you take into account the financial relationship between eBay and its sellers. eBay gets paid basically two ways: fees paid up-front when listing the item, and fees paid when an item sells. As a result, sellers pay eBay an up-front amount assuming a certain amount of visibility for their item. eBay does not guarantee impressions, clicks, or sales, but over time, sellers get used to the rough economics of their activities on eBay. They learn which keywords, which categories, which items get them enough clicks and sales to make their business works. That’s how they decide when and where to pay eBay it’s fees.

In any case, those changes merely affected the results that were returned by eBay’s search engine when the buyer performed a search (Step 3). It didn’t affect the sort order, which determines which items are on the first page of a buyer’s search results.

Unfortunately, changing the sort order was just a matter of time. “Time Remaining” is a very good sort for auction items, but it is almost meaningless for fixed price items. Over time, as eBay grew, more and more items on eBay were fixed price. In fact, if you include eBay Stores, eBay has had vastly more fixed price items than auction items for some time. What’s more, all the Step 3 changes mentioned above added more items to the search results, making it even less likely that you’d get good results on your first page.

If you are familiar with internet search, then you know sorting your items to provide the best possible results on the first page is incredibly important. And a meaningless sort for a majority of your listings is just not going to be sustainable without sacrificing a significant amount of your buyer experience and sales.

So, this rollout of Best Match is a big deal. Best Match does not change the results that are returned by eBay for a given keyword, but it does change what appears on that first page. It is a new way to sort items. And that, by itself, is huge.

Not surprisingly, sellers have noticed. Randy’s blog post quotes a seller who has purportedly seen a 40% drop in sales. It’s certainly possible. Best Match will alter the amount of time that listings will have at the top of results. Some sellers might see no change in their activity. Most will see small changes. But there will be a few who see huge swings from their existing metrics.

Most interestingly, it is practically impossible to predict what the outcome will be for any particular seller. To be sure, eBay will guide Best Match to increase overall sales for the site. That means, more items will receive bids and be bought. The economic pie will be bigger for the eBay selling community. But there is no known way to effectively simulate what the outcome will be for any particular seller with their existing listings.

This is a fundamental challenge for eBay. eBay has stated they will focus on improving the buyer experience. eBay will also continue to manage the marketplace to a greater number of sales. However, that won’t change the fact that some sellers will do better under this new system, and others will do worse.

Don’t be surprised to see sellers start to dissect public patent applications for clues on how eBay Best Match works. This is their lifeblood, as much as Google PageRank is the lifeblood for content websites. There is huge economic value in “cracking the code”, and one thing is for sure, the eBay community is full of entrepreneurs who will try to harvest some of that value. Like Google PageRank, Best Match is designed to be opaque. As a result, eBay will make no guarantees about how it functions, and they will actively change it over time to improve it and to prevent abuse.

Also, don’t be surprised when sellers are, in the aggregate, upset about this change. This adds uncertainty to their business, and even though every other site out there is based on relevance sort, they hold eBay to a different standard, and for good reason.

The version of Best Match that eBay is rolling out now has gone through more testing than any new piece of functionality that eBay has ever released. They have gone through numerous versions of the technology, numerous experiments with different factors and systems, and elaborate economic experiments to ensure that it results in higher sales for the marketplace and happier eBay buyers.

And now the real test begins. The eBay Finding team will need to listen, learn & react more in 2008 than they ever have before. It will not be easy, for anyone. But then again, the most important changes never are.

Update (1/24/2008): It looks like this post was picked up in the internal Weekly Gazette inside of eBay. I am, of course, flattered to be highlighted. Of course, I am not an unbiased source, since it was on eBay Express that we first discovered the need to move away from “ending soonest” and “lowest price” sorts, and launched the very first, crude version of Best Match.

For years, eBay ruled the e-commerce roost. Each holiday season, more visitors spent more time and looked at more pages on eBay.com than on any of its rivals, including Amazon.com. It made sense; eBay is a wide open forum for every kind of seller and item, while Amazon has traditionally pushed a selection of products through its network of physical warehouses.

But all that is now slowly changing. Amazon has opened its site to independent sellers, while eBay’s auction model is running into problems with fee-fatigued sellers and buyers wary of fraud and counterfeit items.

Now the latest audience figures from Nielsen Online confirm that the e-commerce traffic crown has changed heads. For the month of December, for the first time, more Americans clicked over to Amazon.com (59,624,000) than eBay (59,374,000).

Despite the slim margin between the two companies, eBay’s visitor count is particularly alarming. According to the Nielsen data, the number of visitors to eBay.com dropped 10 percent from December 2006 to December 2007.

The full article is here.

Now, in all fairness, Amazon’s rise in traffic isn’t all good news for them.  After all, the GMV (gross merchandise volume) on eBay is much higher than on Amazon, which means Amazon is far less efficient at converting traffic into dollars of sales.  In addition, given Amazon’s overall profit margins, it also looks like Amazon takes more traffic to generate a dollar of profits than eBay, by quite a bit.

Still, this is a really significant milestone for Amazon, and a significant warning sign for eBay.  Amazon’s ability to grow into categories through it’s seller marketplace is now hitting it’s stride, and it’s pretty clear that as e-commerce matures, it will be fixed-price e-commerce, and not auctions, that dominate the market.

eBay has a tremendous amount of fixed price capability at its disposal, but the fixed price market is about trust and convenience, not just about selection and value.   Merchandising and product promotion is also crucial, and these are areas eBay will need to invest in heavily.

Here’s hoping 2008 is a year where eBay hits some new milestones of its own.

Across the street from eBay’s “South Park” (the original 8 buildings that have eBay HQ in San Jose) there is a Spoons restaurant.  It’s right across Bascom avenue from Building 0, “Toys”.  Many an eBay employee has jaywalked across Bascom (very dangerous) to get to an after-hours Spoons run.

Well, thanks to Nate Etter, I found this pointer on Valleywag.  The Spoons is being replaced by Hooters.

Now the question is, will they still honor the 10% discount they gave to eBay employees with a badge?  Lunch special?  Spoon tacos were one of the cultural favorites at the eBay South campus.

Since I left eBay in May 2007, I’ve tried to be careful here on this blog with regards to eBay.  It’s hard sometimes, when you read a column online that is wildly off base, to not want to jump in and “set the record straight”.  Of course, when you work for the company, you tend not to do this because it’s hard to separate a personal rebuttal from an official company response.  Ironically, when you leave the company, you also really aren’t free to respond, because it now isn’t your place to fight those battles.

I read an article this week, on Auctionbytes, about the new Detailed Seller Ratings and the relatively low ranking of the Top 25 eBay Sellers, and I felt I had to comment.

In case you are unfamilar, eBay rolled out new “Detailed Seller Rankings” to their feedback page last year, in one of the biggest enhancements to the feedback system since it’s debut.  These detailed ratings allow buyers to rate sellers on four additional dimensions, from 1-5:

• Item as described
• Communication
• Shipping time
• Shipping & Handling charges

Seems like an obvious improvement to most buyers.  However, no part of the eBay ecosystem is simple to modify, and there has been considerable angst and discussion among top sellers about this new improvement.

I’m not going to get into the debate and issues that sellers have raised with the new system.   I’m not an expert on the system, and I haven’t read all the arguments in detail.  The fact is, the original feedback system did not gather any structured data about the end-to-end service offered by eBay sellers, and this system is definitely a first step in attempting to gather that data.  For a company that wants to focus on a great buyer experience, this is absolutely necessary.

Instead, I want to comment on the article, largely because of its conclusion:

A study of eBay’s top sellers reveals they rank poorly in terms of the detailed ratings left anonymously by their customers, with most falling in the bottom 25 percent of all sellers for such ratings.

… It’s troublesome to see that eBay’s top sellers perform poorly with DSRs, and AuctionBytes believes the data indicates eBay needs to reevaluate the new rating system and reconsider its decision to use DSRs to punish and disadvantage sellers. It should also provide much more information about the results – on an ongoing basis – so sellers have a better understanding of how the new system is affecting purchasing decisions and sales.

(BTW The article looks at the Top 500 sellers, according to Nortica.)

Fundamentally, I agree with this line:

It’s troublesome to see that eBay’s top sellers perform poorly with DSRs

But I disagree with the resulting conclusion:

AuctionBytes believes the data indicates eBay needs to reevaluate the new rating system.

In response to this, let me ask the following question:

What if the top sellers on eBay, as measured by feedback score and/or sales volume, actually are not offering the best customer experience to buyers?

Too often at eBay, I would see these two things confused together.  There was an assumption that the top sellers, always measured by GMV (gross merchandise volume) or Feedback score got that way by being the best for the end customer, the buyers.  However, in order to believe this, you have to believe that you can only build GMV and Feedback with a great customer experience.  What if that’s not true?

What if the DSRs are telling us that eBay’s “top sellers” are actually offering buyers a below average customer experience?

Well, I’m a just an eBay seller now myself.  I don’t do huge volume, but I have almost 800 feedback, and I flirt constantly with being a bronze PowerSeller.  I have an eBay Store, and I use eBay’s Selling Manager.

My DSRs to date are (based on 81 sales with ratings):

• Item as described: 4.9
• Communication: 4.9
• Shipping time: 4.9
• Shipping and handling charges: 4.7

So it looks like I’m in the Top 25% of buyer experience on these ratings (well, above median for S&H).

What if these DSR’s are saying that buyers have a better experience buying from me than when they buy from one of the eBay Top 500 sellers?

You can buy them here.

In case you are interested, I have rolls of all four of the 2007 Presidential Dollar Coins up on eBay, in my eBay Store, here.

Here is the AuctionBytes article:

eBay Moves to Longer Lasting BIN Auctions

Actually, eBay began testing this back in July, but just recently expanded it to quite a few more categories.  Here is the original note from Sohil Gilani, the Product Manager who has spent a lot of time over the past two years studying and implementing this change:

Hi everyone, I’m Sohil Gilani with our Buyer Experience team. Over the years, we’ve routinely been asked why the Buy It Now option disappears from a listing when the first bid is placed. Our reason has been concern that it would create a confusing experience for a buyer, who could place a bid on an item, but then have someone Buy It Now (BIN) out from under them before the end of the auction. That said, we’ve done some extensive research that suggests keeping the BIN option available on a listing longer will increase the chance that a buyer wins the item and that it will close at a higher price for the seller. As a result, we’re looking at ways to change how BIN works that balance both buyer and seller needs.

In case it isn’t clear, let me explain the problem:

Ever since eBay launched the ability to add a “Buy It Now” button to an auction, it has disappeared as soon as anyone placed a bid.  So, for example, if you were auctioning a cell phone with a starting bid of $0.99 and a Buy-It-Now price of $99.99, a single bid of $1.00 would make the Buy-It-Now price disappear.

The idea is that a buyer has the chance to “snap up” the item for a fixed price set by the seller, or place a bid to try to win it at auction.  Usually, the motivation to place a bid is the belief that the bidder will get it for a lower price.

The problem is, once the Buy It Now button disappears, every future potential buyer is deprived of two things:

1. The ability to immediately buy the item, without waiting for the auction to end
2. The ability to see what the seller thought a fair “fixed price” was for the item

Many people, for a very long time, have asked why eBay makes the BIN button disappear after one bid.   Usually, they focus on issue (1).  After all, the need to wait for an auction to end is a major disincentive for a potential buyer.  eBay is likely losing quite a few buyers to the fact that useful BIN buttons are disappearing.  Sellers are also losing the ability to close a sale quickly, for a fair price that they have assigned.  Even worse, sellers actually pay eBay a fee to place that BIN button there in the first place.

The problem lies with issue (2).  As a former employee, I can’t reveal the actual number, but you would be shocked at how many auctions actually close at a price higher  than the original Buy It Now price.  This happens for a couple reasons.  First, sellers may not be very efficient at setting their own fixed prices – auctions are likely much better at fairly pricing the item.  Second, the original bidder who “knocks out” the BIN button is not likely the one who bids above that price.  Every future bidder has now lost that information, and as a result, is free to bid whatever they think is fair.  Apparently, in a large minority of cases, bidders end up with a price that is higher than the seller expected.

So, eBay has a dilemma:

• If they keep the disappearing BIN button, they are likely losing sales AND velocity (the time it takes to close a sale).  They are also encouraging sellers to use a higher starting price (to avoid losing the BIN quickly), use reserve prices (to keep the BIN), or to not use BIN at all (which is a fee-generating feature) – all bad things that hurt the likelihood of a sale.
• If they make the BIN sticky, aka “Persistent BIN”, they might actually decapitate the final selling price on millions of auctions.  That would hurt both eBay sellers and eBay itself, since both make money based on the final sales price.

The solution that eBay is testing finally allows eBay to gain some empirical data in real situations on how to best control the way the BIN price disappears.

• Do you let the BIN button stay until a fixed dollar amount?
• Do you let the BIN button stay until a fixed percentage of the final price?
• Are the results different in different categories?  For different starting prices?

Well, all I can tell you is that, as an eBay seller, I was tickled pink to see this on my latest cell phone auction this week:

As you can see, I start all my auctions with a starting price of $0.99.  Normally, I lose that BIN button very quickly.  But in this case, the BIN button stayed, even after a bid of $0.99.  In fact, the button stayed until the bidding reached $50.00, giving buyers ample opportunity to buy my phone for fixed price.  The difference?  Literally 6 days of BIN button goodness were added, since my auction didn’t clear that price until the 7th day.

(Wow, that sounds like a biblical reference.  It was evening and it was morning, and the BIN button worked for 6 days and 6 nights, but on the 7th day, the BIN button rested…”)

Anyway, I’m glad to see eBay continuing to push its understanding of one of its most popular formats.  And a big congratulations to Sohil for seeing this effort through to live-to-site.  Count me as a big fan.

BTW If you are wondering why I bother buying the BIN feature on my auctions, even though it disappears so quickly, it’s a fair question.  In my selling experience, adding the BIN button not only increases the chances of my auction selling quickly, I also tend to set it for a higher-than-average price based on my research.  The way I see it, a buyer who wants it right now tends to be willing to pay a bit more for the privilege.  If not, they can always bid.

The Native American $1 Dollar Coin Program

It now joins my other four eBay Guides:

• Collecting the New Presidential $1 Dollar Program Coins
• Collecting the New 24K Gold First Spouse Program Coins
• Collecting State Quarters: Which will gain in value?
• The New 2009 Lincoln Cent (Penny)

Interestingly, these four guides have accrued enough positive  votes to make me one of the “Top 1000″ reviewers on eBay.  In fact, I’m currently ranked #275 as of the writing of this post.

If I get to the Top 100, I get a different badge by my user ID, and you know, I’m all about eBay badges.  So if you have an eBay account, vote “yes” on my guides to recommend them.  If you don’t like them, well, don’t vote “no”.  That hurts my ranking.