eBay Is Losing its Knack for Listening to the Market!

Everyone has less acute hearing as we grow older. Include eBay in this group as well. New eBay chief John Donahoe has recently done several things to decrease his maturing company's ability to listen to its customers. In doing so, he has put the company on a path toward a more "traditional" e-retailer at the very time the market for social media--arguably something eBay helped create--is taking off.

First, Donahoe has muffled the ability of sellers to rate buyers. At the same time, he has created volume discounts for his larger sellers while raising prices on the little guys. These are all typical moves for a bricks and mortar player: give discounts for volume and default to "the customer is always right" -- even when he or she is a jerk. On top of that, he is pushing more fixed price product through the eBay Express site, giving less emphasis to bidding, and thus, undercutting eBay's true distinguishing characteristic as the world's dominant auction site.

There are new protests emerging by the thousands and even YouTube videos from disgruntled community activists. What Donahoe apparently misses in all these changes is that eBay is not a retailer, but rather a social organism that created a way to find latent demand and link it up to sources of supply. To that end, he should not be focusing on new modes of retailing as a means of growth but pursuing new ways to discover even more nascent forms of demand and even more innovative supply methods.

Here's one idea: Do a deal with Fundable -- a company that helps anyone collect money for anything -- creating a new movie, buying airline tickets in bulk, or supporting a charitable cause. To understand how it works, consider the example of bulk airline tickets. A seller posts a "collection" on Fundable to raise, say, $5,000 to buy 20 round-trip tickets from New York to Fort Lauderdale at $250/each. The tickets are $300 when bought individually. The seller is tapping into latent demands that simply need funding to be realized. Funders are just buyers shifted in time - they "buy" before the supply exists.

For this retail form of fund raising, Fundable charges 7%. With Fundable in the fold, eBay could extend its vast audience's desire to acquire well beyond what's available through sellers -- to pretty much anything they can think of. In essence, this will allow eBay to create new supply with the demand already baked in.

This is a natural extension of the original eBay business model - finding new sources of supply and demand and lowering the transaction and search costs that keep those buyers and suppliers apart. Fundable's 7% would be great for eBay's bottom line. Moreover, there are also enormous social benefits for eBay here as they would take Fundable's powerful tool to raise money for charitable causes to an enormous new audience.

Would a deal with Fundable solve all of eBay's growth challenges? No. But it's the type of move I believe eBay should be making: extending its model of organic, social commerce to new markets -- rather than sliding ever closer to the e-retail space dominated by Amazon.

(This post can also be seen at coversationstarter.hbsp.edu)

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