Thursday, June 23, 2005

Live From eBay Live

I attended a seminar by the legendary "Griff" this morning. He was going down eBay memory lane, from AuctionWeb to EchoBay to billion-dollar greatness. Fun stuff, great speaker.

Marketingwise, one thing that stuck out was his story about the beginning of eBay's listing fees. Originally, AuctionWeb didn't charge fees, but once they started, they quickly figured out two of the more valuable marketing and pricing lessons known to man: 1) Once you charge for something, people attach heightened value to it. And, 2) once you charge for listings people become more discriminating about what they list. Both of these factors contributed to the early success of eBay.

The first point is marketing 101. Things that are free are generally considered of little worth. Even Internet sites like eBay, sites that originated in the free, communal ethos of cyberspace, benefit from the introduction of basic monetization. If somebody wants something good, they’ll pay for it. If it’s free, it’s suspect. A free cotton t-shirt is generally cruddy, for example. There are, however, designers who sell cotton T-shirts for $60+. What’s the difference? – Quality, Value and Perceived Value. These three areas are where professional marketers earn their keep.

In Griff’s story, eBay realized that listings increased rather than decreased when they started charging fees. When people realized that listing on eBay was something of value, something that could help them make money and reach a large audience, they gravitated toward it. It’s conceivable that since eBay listing was free for so long that others kept away from it, perceiving it as illegitimate or suspect in some way.

The second point helped eBay grow quality listings. The introduction of listing fees forced people to be careful about what they listed and refrain from posting as much junk as possible. The quality of goods on the network improved, and eBay benefited as a result.

Win, win. Introducing listing fees worked out well for eBay. Many would argue that they’ve become far too enamored of fee hikes, however. ;)

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