eBay: Long Tail Marketplace or Commodity Exchange? Part 1
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eBay is in a transition period. The auction sites early success was that of one of the world’s first “Long Tail” markets. eBay’s corporate vision seems to think that greener pastures lie in the realm of what is basically a commodities exchange marketplace.
What’s the difference?
A Long Tail market describes a niche strategy of business in which the market offers a large quantity of unique items in relatively small numbers. Chris Anderson coined the phrase, and published an influential book on the subject entitled, The Long Tail: Why the Future of Business is Selling Less of More.
This Long Tail concept in a nut shell is that there is money to be made in selling obscure goods to niche markets. The graph below provides a pictorial representation of the Long Tail concept. The vertical axis represents the popularity or mass market appeal for an item. The horizontal axis represents a particular product. For example’s sake, let’s call them DVD’s. The “Head,” the part of the graph that is shaded green, represents the popular, mainstream movies. This is where a significant portion of the market is concentrated – but not all of it.
Traditional markets typically are constrained to the Head (green area) because of physics:
- How many products can the merchant stock in a limited amount of space?
- How many customers in the local area are willing to pay for those products?
The niche strategy of business seeks to break these constraints by selling a large number of unique items.
The Long Tail
The yellow part of the graph represents the Long Tail. These are the movies that not everybody is interested in, but there are niches of people who would like to own or rent those particular titles. Your neighborhood Blockbuster is going to devote their limited shelf-space to the more popular titles in the green portion while, in aggregate, Netflix rents more videos from the Long Tail portion of the graph than the green portion.
The factors that keep most business models in the green section of the graph above deal with search, storage, and distribution. I’ll discuss these specific topics in greater detail in a future post, so let it suffice to say for now that the costs involved with marketing to small niches, storing the goods until they are sold, and distribution were so prohibitive for most entrepreneurs that most didn’t consider it a viable opportunity before the internet existed in its present form.
eBay’s early success has been in providing a marketplace for the Long Tail. The company provided a central location and a search mechanism for consumers interested Long Tail products to buy them, and a venue for Long Tail merchants to sell to this market.
The Consumer Commodity Exchange
Now eBay is heading away from their roots and focusing on becoming a venue for products that have a mass-market appeal. Even while more and more of the internet is becoming aware of the value of the Long Tail market (what Chris Anderson describes as “selling less of more”), eBay is focused on becoming what is essentially a consumers commodity exchange.
Economists define a commodity as something of value, of uniform quality, available in large quantities by different producers. Do a search for iPod or WebKinz on eBay and you’ll soon understand that these are basically a commodity.
The price of a commodity is universal and fluctuates based on supply and demand. There’s little profit for sellers of commodities unless they control some aspect of the supply or can successfully predict fluctuations in demand. Therefore, the sellers who will be able to compete successfully on the new eBay are not necessarily those who were able to compete successfully on the old eBay.
Why is eBay moving from the Long Tail market to the consumer commodities market?
- More consistency over who sells in their market and what’s selling. (Does this open them up to more piracy and counterfeit risk?)
- They think that’s what the consumer wants. (Didn’t Coke make the same mistake 25 years ago?)
- The think they will make more revenue. (After all, Amazon is growing.)
It’s worthwhile to remember that it’s the commodity brokers that make the most money in the commodites markets. They make a commission whether the market is going up or going down. The commodities traders (the new eBay sellers) are open to constant risk when they play the market – and are usually encouraged by the brokers.
Are you ready to play the market on the new eBay?
The phrase “old-fashioned internet auctions” seems like an oxymoron, but several pundits have declared traditional auction formats, if not dead, terminally ill.
According to the New York Times, the days of the traditional online auction format on eBay are numbered:
The golden era of the small seller on eBay, hawking gewgaws and knickknacks from the basement or garage, is coming to a noisy and ignominious end.
Consumers appear to be tiring of online auctions, and rivals like Amazon.com are attracting more shoppers with fixed-price listings, while eBay has been struggling for growth.
eBay seemed to confirm this sentiment a week later when they offered a promotion aimed squarely at encouraging the number of fixed-price listings on the “auction” site.
Maybe I’m just old-fashioned (seems like a strange term to associate with the internet) and stuck in the first part of this decade, but I still have a strong preference for buying and selling on eBay using the auction format.
Selling with the Auction Format is Still Fun
I’ll admit that I don’t sell on eBay full-time, so I my indulgence in the traditional auction format is a liberty that many full-time sellers can’t afford, but I still like my listings to have a absurdly low starting price with no-reserve.
Sure, some of my auctions will close for less than they should, but I’m still surprised by how often a listing will close for more than it should. That’s because there’s an emotional component to buying at the auction format that you just can’t duplicate when you are selling at a fixed price or on Amazon.
This keeps selling on eBay fun for me. And you don’t hear a whole lot of sellers talking about fun anymore. Maybe there’s a connection between the level of satisfaction and the listing format.
Buying on eBay is About Bargains
eBay is pushing the fixed price format because they want to be more like Amazon and “are concerned about the buying experience.” Message to eBay: I buy on eBay because I’m looking for a bargain. That’s the buying experience I’m looking for on eBay. The bargains are the lightly-used stuff that has been sitting in some person’s closet that they are listed in the traditional auction format.
Even when a listing has a buy-it-now price of only 5% more than the current auction-style bid price, I’ll take my chances placing a bid, thank you very much.
I’m looking for a bargain, and maybe hoping to have a little fun while I’m doing it. A lot of bloggers mocked eBay’s marketing slogan’s (Windorphins and Don’t just shop, win), but I think it really captured the true buying experience that I most enjoy on eBay.
Apparently I’m not the only person with a whimsical fondness for the glory days of eBay buying a selling. Here’s a few great comments from SlashDot’s post about the NYT’s article quoted above:
One feature alone would instantly pull me from eBay to whatever competitor there is: search and filter by “used item” vs. “new item” and also “individual seller” vs. “large retail outlet”.
When I go to online auctions, I’m looking for a deal on something used. I’m tired of living in a society where paying full priced new is the only option: it means individuals who’d be happy with a used widget have to spend more and our landfills fill up with still-useful widgets.
When I search eBay now for (tools/computers/whatever), I get 90% listings from large businesses selling new, usually crappy knock-off, items. I don’t want a cheap Chinese $20 wood router that barely functions. I want a used porter-cable router from some hobbyist who is downsizing his garage or upgrading to a newer tool. But the floods of cheap Chinese crap are all I can find on eBay!
I completely understand that businesses need to make money, and the buydotcom route may be one way to do that. However, eBay is WIDELY opening a door for another company to undercut them in the small seller market, and those of us who collect, buy, and sell anything used on a small scale and aren’t interested in just shopping online for new stuff that we can get down the street at Wal-mart or wherever.
How far eBay has strayed from it’s original purpose of being the “garage sale of the Internet” to now just essentially being an outlet mall. Perhaps it’s just an inevitable result of gaining too much popularity; regardless something tells me there’s money to be made in picking up the slack.
There’s your entrepreneurial idea for the day kids. I’m sure garagesale.com is already taken (and isn’t a Web 2.0 name anyway), but just go read a Klingon dictionary and I’m sure you’ll find a good alternative. Your tagline is “What eBay used to be”, at least until you pop up on their lawyers’ radar. Market it as specializing in collectibles, unique trinkets and such, and in your literature equate eBay with Wal-Mart.
I like the idea of a viable online auction site whose marketing mantra is “What eBay used to be.”
Randy Smythe argues that the company best poised to capitalize on the old-fashioned internet auction market is eBay itself. In a recent post, Randy suggested that eBay spin itself into three different entities:
The gist of the idea is this:
- eBay Stores have been the red-headed step child of eBay because they aren’t as profitable as other segments of the business, yet there are over 500,000 stores/shops worldwide. eBay should set them free –empower eBay store owners and get out of the way.
- Auctions: I contend that Auctions are dying because of Fixed price being in the same marketplace, many of you disagree. Auctions need scarcity and uniqueness of product to thrive and the concept of auctions is 100’s of years old — It just isn’t a high growth business any longer. eBay should set them free — empower auction sellers and get out of the way.
- Fixed-Price: A fixed price retail environment is the growth engine for ecommerce and eBay needs to maximize this business, but they can’t do it on the same platform as Auctions and they can’t do it without spending money. eBay Express was a good idea that was poorly executed from a business and marketing standpoint. It always need to be a separate platform with separate inventory and a huge, well thought out advertising campaign without one mention of the name eBay.
eBay has precious few months, if not weeks to turn this ship around or it will be a painful experience for all involved (employees, investors, sellers and buyers).
That’s great advice eBay, are you listening?
A relatively basic technique of manipulating a web page’s ranking in Google and the other search engines is called keyword stuffing. According to Google:
“Keyword stuffing” refers to the practice of loading a webpage with keywords in an attempt to manipulate a site’s ranking in Google’s search results. …Typically, these will be lists or paragraphs of keywords, often randomly repeated. … Filling pages with keywords results in a negative user experience, and can harm your site’s ranking.
It’s not uncommon to run across pages web pages when surfing the ‘net that attempt to influence or manipulate their rankings in the search engines by using keywrod stuffing Usually, you will see this technique manifest itself in a list of keywords included at the bottom of a web page with some sort of subdued font color.
According to Google’s Webmaster Guidelines, this kind of activity is frowned upon. Specifically, they advise webmasters:
Don’t load pages with irrelevant keywords.
Well, you can imagine my surprise when I noticed that eBay was using keyword stuffing on some of their pages!
Here’s a screenshot of the text that appears at the bottom of the Collectibles page under Finding 2.0 (click the screenshot for a larger image):
Here’s another instance from the Clothing, Shoes and Accessories page:
Look at those screenshots (for brevity’s sake I only included two - there are more), pretend you are eBay, and ask yourself the same question Google suggests that webmasters consider:
Does this help my users? Would I do this if search engines didn’t exist?
You can only reach one conclusion – eBay is trying to influence their search engine rankings by keyword stuffing.
Wow! Considering that eBay has made it pretty clear in their Search & Browse Manipulation Policy that attempts to influence their search in this manner won’t be tolerated, I find it extremely hypocritical that they would employ a technique that is designed to do the same in Google’s search results. eBay’s FAQ’s tell us to:
Leave out any information intended to manipulate or deceive search and browse results.
Yet they can’t seem to practice what they preach!
I find it interesting that eBay discourages Search & Browse manipulation techniques because…
Activities that make it difficult for buyers to find the items they are looking for result in a poor shopping and finding experience for buyers.
How similar is this to why Google doesn’t want webmasters to employ keyword stuffing techniques?
Filling pages with keywords results in a negative user experience.
C’mon eBay! Observe your own guidance and ”leave out any information intended to manipulate or deceive search and browse results.”
eBay Disables Best Match Search Due to Keyword Spamming
Filed Under Best Match, Industry News & Analysis | 2 Comments
Update: As of 6:30 pm EDT, Apr 13th, it looks like Best Match has been restored as the default search result. However it looks like time remaining is weighted significantly more – and keywords are currently weighted significantly lower. The other factors such as Shipping & Handling, & DSR’s appear to be still influencing the search results.
After Scot Wingo’s Blog reported that stuffing Key Words in your eBay listing title increased sellers’ placement in the search results pages significantly, eBay has apparently disabled the Best Match search algorithm.
I’m confident that this is a only temporary suspension of Best Match while eBay tweaks the search algorithm to deal with the keyword stuffing/spamming issue.
The eBay search results page still lists Best Match as the default sort method, however if you change the “sort by” method in the drop down menu found at the top of the search results to “Time: Ending Soonest,” the search results are sorted exactly the same as what is currently advertised as sorted by “Best Match.”
Scot’s blog post stated that eBay listings that stuffing keywords in the titles zoomed to the top of the listing results. Randy Smythe summarizes this technique well in his blog:
Now with Best Match, sellers add multiple keywords to their titles to get advantage in search. Now the following listing title: New, New, New, New, New, Wii5, 5, 5, 5 New New, carries more weight than New Nintendo Wii with 5 Game Bundle.
This was entirely predictable. When I broke the news about eBay’s Best Match patent application last winter, I discussed the possibility of exploiting the search algorithm in order to manipulate rankings on search results page. What is surprising is that eBay did not predict that users would attempt to exploit Best Match and have the mechanisms in place to counter the technique. Keyword stuffing is such a basic search algorithm spamming technique — Google and the other search engines fought and defeated this rudimentary tactic years ago. I’m amazed that eBay was not prepared for it.
eBay’s lack of foresight aside, you can rest assured that when they put Best Match back online, they will have reeingineered the search algorithm to counter the keyword stuffing spam techniques. I’m confident that the new algorithm will contain a penalty for keyword stuffing and the sellers who continue employ these tactics will find themselves at the bottom of the search results vice the top.
Scot Wingo’s post suggests that sellers should use these keyword stuffing techniques in order to gain higher listings. Let me take this opportunity to again suggest that optimization is different than manipulation and that eBay will eventually start punishing users that attempt to manipulate their search results. These punishments will start out relatively benign with lower search result rankings and will likely escalate to cancelled listings and closed accounts.
The temporary suspension of Best Match is an obvious signal that eBay is not going to sit idly by while users attempt to manipulate search results. I don’t think that they are going to continue such a passive approach to these efforts either. Disincentives for Best Match maniplation are on their way.
What is going to make you more money over the long term: Best Match optimization or Best Match spamming? The answer to that question is where you should focus your efforts to rank highly in eBay’s search results.