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Sittin’ on the Dock of eBay

The new-economy giant generates nearly $500 million in revenues, yet eBay doesn't manufacture a thing, hold inventory, move goods, or transfer payment. The 15 million or so registered users do most of the legwork.

Part of the branding comes from the chairman’s Mo-ist leanings. “The business model pivots off Omidyar’s idea that people are honest,” explains Knapp. “The company appeals to higher motives. It’s a business, of course, but one that humanizes the process of business.” Bengier sees it the same way. “We are deeply rooted in what we call the eBay values,” he says. “Fundamental to this belief system is our notion of community and our conviction that people are basically good and trustworthy.”

Well, not all of them. In late May, one eBay seller was accused of bidding on his own item, a painting purported to be the work of the late abstract expressionist Richard Diebenkorn. eBay eventually canceled the auction. Typically, though, eBay takes a back seat to issues regarding product quality or shipping timeliness. Instead, company management prefers to let users police themselves. Buyers who are disgruntled over the quality of a purchased item can gripe about it in the Feedback Forum. The comments are then turned into a seller profile, enabling prospective buyers to check the reliability of a seller before bidding on an item.

That simple idea has caught on with a number of B2B operators. “eBay’s strategy of providing feedback about buyers and sellers was an inspiration for us,” says David Centner, president of MaterialNet.com, a Lake Success, New York-based Internet raw- material-procurement trading platform. “Since we provide E-procurement to accommodate auctions,” Centner explains, “we decided, based on the eBay example, to track buyer and supplier integrity to offer a higher comfort level to our users.”

Atlanta-based Ebix.com Inc. also mimics the eBay approach, but with a slight twist. The online insurance exchange — where independent agents bid on consumer requests for automobile insurance rates — features outside ratings of agents. “We took the eBay idea of a track record and massaged it to fit our system,” acknowledges Robin Raina, CEO and president of Ebix.com. “The consumer decision is made more educated by Ebix providing access to independent ratings of each of the insurance carriers by such agencies as Standard & Poor’s, which have no ax to grind.”

Still, some analysts decry eBay’s see-no-evil approach. “eBay is hurting itself by not adding services around its model, including the most basic one — product inspection,” argues Keenan. Michael May, senior analyst at Jupiter Research, believes the auctioneer’s original model — to be as distant as possible from the transaction and absolve itself of certain responsibilities — will inevitably need some overhauling. “It worked well for the first few years, but no longer,” May says. “The online marketplace must be held increasingly accountable for the transactions that take place within it.”

But senior executives at eBay see a problem with getting too involved in policing its site. “In the United States, we are protected by congressional statute and court decisions against defamation claims,” explains Jay Monahan, eBay’s associate general counsel. “Overseas, however, there’s not the same clarity.” eBay has separate sites and servers in six cross-border markets: Australia, Canada, France, Germany, Japan, and the UK. The six sites come with local languages, local currencies — and local liabilities. “In many countries, there’s no immunity for online service providers,” says Monahan. “Therefore, we could be on the hook for claims.” To minimize exposure, eBay has established clear procedures for reporting feedback in some countries, while ditching the Feedback Forum in others.

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