Ebay at the crossroads (part 4)
So far, we have looked at how Ebay might increase its market organically by increasing its natural share of all purchases rather than passively awaiting buyers of auctioned (mostly used) goods. This post will consider how Ebay might expand into other markets. Let’s assume, probably accurately, that Ebay wants to keep its focus on the highly profitable market that it has to itself. So we will look at areas that it could grow around its core market and core capability.
The first that I can come up with is the online music industry. That is an industry that has grown massively over the last few years, and there are signs that it will continue to grow as people move away from physical formats onto soft copies of their music. There are two possible markets for Ebay for online music. The first is to create the same sort of market for second-hand music that exists for second hand records or CDs. There is no reason why people’s tastes would change any less for MP3s over time than for their CDs. They can sell their CDs, so why do they just have to delete their digital music (which may also be very valuable). Many downloaded tracks these days have codes embedded into them to make it difficult for them to pirate, and rightly so. How about using those codes as a way for people to sell their second-hand MP3s online? They won’t have the problem of being scratched or faded, they will still be in pristine order. It would need to rely on people deleting the track that they sell, but there is already a lot of trust needed in this industry and I’m sure that it wouldn’t be hard to create some technology to monitor this. This trade would also be future-proof: there is a prediction that as memory expands, players will eventually contain every track ever recorded, with the only download required being the activation code to unlock the track – these codes could be traded second-hand.
The second online music market that they could offer would be for amateur musicians to be able to sell tracks easily. Radiohead recently put its album on its site for download, allowing fans to decide how much to pay for the album. Ebay could offer new bands the ability to sell their music over a trusted format – linking in with MySpace or Facebook or other sites that put people in touch with acts. This would be a fantastically easy model for them to create, and could again use widgets (see previous post) on the bands’ websites to drive sales.
That covers music, but there is another way that Ebay could expand around its core market. Consider Blogger for a moment. Google’s core product is advertising. Google offers website owners the facility of placing its adverts on their sites, and it created blogger to get people to drive content for them to advertise on. Why doesn’t Ebay do something similar with hobby websites? It could create a WYSIWYG website editor for hobby sites that could have easy functionality to link in with Ebay widgets. That would build its brand, and allow it to drive content on which it could advertise its services as the best place to find private sellers of the specialised goods that relate to the site – whether equipment or collectors items or anything else hobby-related.
These are just two industries that Ebay could enter while keeping its core capability of putting buyers and sellers in touch with each other and charging a fee. What about if it wanted to keep the bidding format?
There is another market that it could enter to do this: venture capital. At the moment, VC is a very time-exhaustive process for the investor and the prospective investment. That is fine in the case of large and very complex investments in very specialised areas, but as with every market there would be a lot of mid-sized and smaller sized investments for which this structure simply isn’t efficient. Ebay could create a forum for these people to pitch their investments online – possibly even using finding (at last) an integrated use for Skype in holding an online pitch and Q&A session (over sound and/or video). The VC investors could then bid for the investment, and whoever offered the best deal would win. This would create a far more efficient transaction process for minor investments, opening up the market for the prospect and giving the investor more time back to find other investments.
This could even be expanded into financial services – what about wealthy people lending through Ebay? If people’s credit reports were loaded into their profiles, then potential lenders could set their risk appetite, and then bid on the interest rate that they were willing to offer people credit at. Understandably, this would be a far more complex market with far more sensitivities, but if people are already using Facebook to lend money to each other, there are signs that there is an appetite for it to go this way.
These options would allow Ebay to grow a portfolio of more specialised business, any of which could grow to be massive. All it takes is the imagination and a bit of web development. As we know, Ebay is not short of web developers.