The Real eBay Magic: Irrational Commerce

It’s been quite a while since my last eBay-related post, and nine months since my high traffic post, A Eulogy for eBay Express.  However, this past week Keith Rabois wrote a fairly inflammatory article for TechCrunch that I thought was worth discussing.  Keith is currently an executive at Slide, and was formerly a founder at LinkedIn and an executive at PayPal, so his consumer internet credentials are fairly substantial.

His article was entitled:

TechCrunch: How Facebook, MySpace and YouTube Killed eBay

Told you it was inflammatory.

However, I’m not normally the one to take eBay flame bait.  After all, if I was, I’d be posting twelve times a day on the topic.  But Keith actually hit upon a deeper insight in his piece that is worth calling out, because it provides insight into both eBay and other successful, engaging web products.

Although it was always classified as an e-commerce destination, the quirkiness of the eBay marketplace was once a major source of entertainment on the Web. It was where people sought and bought everything from the first broken laser pointer to Beanie Babies to Bob Dylan’s boyhood home. While the catch—anything from an antique clock to a Gulfstream II—was rewarding for the buyer, it was generally the entertainment and excitement of the chase that brought a buyer to eBay in the first place.

This insight, that eBay’s success was driven by entertainment and engagement is extremely strong.

The rest of the article follows this path:

  • In January 2004, over 47% of internet users visited eBay once per month.
  • In December 2006, while the % of audience stayed the same, people were spending 3x the time on MySpace
  • In 2007 Facebook & Youtube added to this drift of attention and engagement (timeline is off here a bit, since Youtube took off well before 2007).
  • eBay stripped out the fun, not pursuing eBay 3.0 strongly enough, and then Donahoe pushed towards an Amazon-focused approach.  Fun gone.

I don’t personally agree with much of the deductive flow here, actually.  Overall, Myspace, Youtube & Facebook have significantly increased the engagement overall on the internet, taking metrics like “daily visits” and “daily unique users” and “time on site” to previously unthinkable numbers.  It isn’t a zero-sum game, per se, because the overall number of users and time spent on consumer internet sites has grown dramatically.

More importantly, the assessment of eBay 3.0 and the current strategy makes it sound like eBay’s current approach is largely management-driven, when in reality the overwhelming global scale and activity of eBay buyers (and sellers) has made the current direction almost fait accompli.  In 2006, the number of eBay listings that were fixed price (including store listings) was already well north of 50% and rising rapidly.  The marketplace was voting through billions of bids, BINs and listings, and it was voting for a higher and higher proportion of fixed price commerce.

But I digress.  The point is that Keith got something very, very right in his article about eBay.

eBay was never meant to be just e-commerce.  It was fun.  It was exciting.  It was empowering.

It was engaging.

There are a couple strong reasons for this.

First, if you’ve read my previous posts on game mechanics in the design of engaging software and websites, you’ll know I’m a big fan of Amy Jo Kim‘s work here.  In fact, eBay demonstrates all five of the “fundamental games” that humans like to play.  This wasn’t done intentionally, but it explains a lot of the almost visceral, addictive reaction that people had to eBay.

Second, eBay captured irrational economic behavior on both the buyer and seller side of the marketplace brilliantly.  Buyers exhibited a number of irrational behaviors that we now describe and associate with behavioral finance.

These irrational behaviors on the buyer side, combined with the game mechanics of the site, effectively created a lift in demand.  Combined with the transparency and breadth of the online marketplace, you had literally a huge multiplier on e-commerce demand.

On the seller side, however, engagement was driving irrational behavior too.  Buyers of collectibles became sellers in order to “fund their habits”.  (I know this personally, since I began selling coins on the site to help keep my PayPal “slush fund” fully tanked so I could buy coins…)   More than anything, people fell in love with the empowerment eBay offered.  You didn’t have to have $100,000 to open a business, an SBA loan, or an MBA.  The web was full of stories of people just driving around garage sales, picking up items on clearance at local department stores, and stocking up at flea markets.  Some of these sellers grew businesses that measured in millions of dollars, promoting hope that anyone could build a business on eBay.

Of course, there was a kernel of truth to this.  An unprecedented number of successful businesses were built over eBay.  But most sellers were nowhere near any sort of traditional business scale.  There is a reason, after all, that PowerSeller starts at just $1000 a month.  And that’s $1000 of sales revenue, not profits.

Can you imagine any real-world storefront with only $12,000 a year in sales?

People would spend 8, 10, even 12-hours a day looking for inventory, listing items, answering questions, and shipping goods.  When people went to the first eBay Live, they even made sure that on the road trip out to California, they brought enough packing materials to keep shipping items.  They made buyers happy because it wasn’t just a business for them, it was a way of life.

In every sense of the word, it was irrational commerce.  It was a labor of love, not economics.  Sure, it was a good way to pad the income of a family.  But for many the money was just a rationalization – they were really in it for the excitement, the activity, the empowerment, and of course, the community.  If you calculated the “wage rate” of many of these sellers, it would be shockingly low.  But no one did, because that wasn’t the point.  It was fun.  It was empowering.  And it was only just the beginning…

I didn’t get to go to the first eBay Live in 2002, but I did go to three starting with the third in New Orleans in 2004.  I’ll never forget, at one point Pierre was touring the booths (I believe he was giving a speech that day).  A group of us were discussing how to manage the insanity of the event – the intensity and sometimes aggression of some attendees who had to have every pin, every collectible.

I won’t get the quote right, but Pierre said something there that has stayed with me to this day.  To paraphrase, he said that he loved the energy, and that the insanity is part of what made eBay great.  If eBay became just another sales channel, then it would lose its magic.

It has been five years,  and for me personally the growth in my understanding of game mechanics, behavioral finance, and web 2.0 product design have given me terms and tools to help explain the irrational engagement that people had with eBay, and currently have with sites like Facebook, LinkedIn & Twitter.

eBay has a very metrics-driven culture, but while site and business metrics accurately reported the results of the incredibly engagement and activity on eBay, as always they never actually provided  the full picture around causality.

So, from my point of view, Facebook, MySpace & Youtube did not kill eBay.  (eBay, of course, is no where near killed in any case, since it continues to be an incredibly large and active site.)

Instead, eBay fell victim to a much more insidious threat than simple competition for eyeballs or time on site.  It fell victim to a version of the Innovator’s Dilemma.  There is a limit to how many people will wrap their lives around selling on eBay.  There is a limit to what percent of people’s purchases they will pursue through an auction process.  There is a limit to the disposable income to spend on collectibles and hard-to-find items – most purchases, in fact, are of new, standard commodity products.  Thus the company and the site follows the aggregated votes of hundreds of millions of buyers and millions of sellers, their “best customers”, and those votes are eventually dominated by the bulk of the e-commerce market.

Reading articles this weekend, like this piece in VentureBeat, they quote Donahoe in the Wall Street Journal as follows:

Asked about eBay’s identity, Mr. Donahoe said he wants shopping on the site to offer the same sort of low-price experience as buying at bulk retailer Costco Wholesale Corp. There, “the inventory is somewhat fluid, but everything they’ve got is a great deal,” he says in an interview.

(Ironic for me, since Costco was one of the examples we looked to frequently in the design and thought behind eBay Express.  I am a huge, unrepentent fan of Costco as both a customer and as a student of great companies.)

eBay 2009 cannot go back to the eBay of 1999, or even 2004.  The size and scale and make-up of the market means that any attempt to “crowd-out” the less engaging aspects of the market would mean drastically reducing the size of eBay.

That doesn’t mean there isn’t hope.  There is still time for eBay to re-invigorate its experience to capture and create elements that drive engagement.  There is time to learn from both the past and the present, and chart a course that will inspire and empower millions.

The original needs that drove eBay to success still exist.  People are finding some of the serendipity and empowerment from Craigslist… but it’s not as actionable or broad.   The game mechanics, for the most part, aren’t there.  Amazon has increased its breadth, but it’s truly an ecosystem designed for large sellers (by eBay standards).  Google has enabled independent websites to purchase traffic… to an extent.  But the more you make selling online like running a business, the more you lose that sense that this is fun instead of work.

Collectors still want to collect.  People still want to find ways to make a little extra money and to be a part of something bigger.  Little kids still collect and trade things from a very young age – no matter if they are stickers, baseball cards, Pokemon, or whatever small colorful items come in sets with variable rarity.  I sold my brother’s broken iPhone (he dropped it in the ocean) for $130 to a man on an island (Reunion) that I had never heard of.  Those eBay stories still exist. Small businesses are still being built on eBay.  Sellers are multi-channel, but eBay can and should offer them unique dynamics that capture a disproportionate amount of their attention, if not their business.  Apple has a small fraction of the computer market, but it captures the lionshare of its attention.  That could be eBay if it was prepared to act boldly and ask hard questions about what eBay reall should be… and shouldn’t be.

eBay cannot be MySpace, Facebook, LinkedIn, YouTube, or Twitter.  Nor should it be.

It should be eBay.

Update (5/27/2009): Turns out I had missed a great post from Rob Go on this same topic, just a few days ago.  Worth reading.

The Ultrasound Tells the Tale

Funny thing happened to me over the weekend.

My immediate family (parents, siblings, etc) were visiting to see the new baby, Jordan.  My mom is holding the baby in the yard, sitting under the plum tree.


All of a sudden, it hits me.  I’ve seen that picture before.

Sure enough, I whip out my iPhone (yes, I have a lot of photos on my iPhone), and quickly flip to the photo.  It’s the ultrasound from January (when the baby was about 20 weeks along. I loved seeing my baby inside me so much that I bought a womb music heartbeat monitor for myself and maybe to lend out to a future mama!

2009.01.09 Baby 3 Scan 5

Kind of amazing.  I remember remarking back in January about that little sharp nose.

Problems with the New Star Trek Movie Reboot

Before I get into this, let me just warn that this post contains spoilers.  Don’t read any further if you haven’t seen the new Star Trek movie.  Or at least, don’t read any further and then complain to me.

First off, I know that the movie is doing really well.  I also know that almost everyone seems to really like it.  So I don’t expect this post to be popular.  Still, there were a few small things (and one large thing) that bothered me about it, and it seemed blog worthy.

The big issue is the premise of the “reboot” logic.  This movie was explicitly designed to appeal to a whole new audience, and as a result, it deviates in many ways from the previous “canon”, ie, the character & future history established by the other movies and TV Series.

Unlike Superman Returns, or The Dark Knight, however, this movie tries to explain away the differences with a plot device.

The plot device is as follows:

A Romulan captain of a mining ship, in the late 24th century, witnesses the destruction of Romulus.  Infuriated, he blames Spock for failing to save the planet (and his wife and child).  He attacks (old) Spock, falls through a black hole and ends up in the early 23rd century.  As a result, the timeline is forever changed, because the first thing he does (almost) is kill George Kirk, James T. Kirk’s father, putting him (and Starfleet) on a different path.

Ugh, it sounds worse when I write it.  It felt pretty par-for-the-course in theater for a Star Trek time-travel plot.

Here’s the big problem. The last two years of the Star Trek series Enterprise were literally based on the Temporal Cold War.  (In fact, this was an extension in some ways of the “Relativity” episode in Star Trek Voyager and the “Trials and Tribble-ations” episode of Deep Space Nine.)  Without descending into a geek singularity, the basis premise is that in the future, time travel technology is mastered, leading to a set of accords among governments to “protect” the timeline.  Some people violate those accords (“The Temporal Accords“), and thus there are future Federation people and ships whose purpose is to help apprehend these criminals and restore the original timeline.

I’m not talking about one or two flaky episodes here with a minor inconsistency.  I’m talking about dozens of episodes and a major timeline of future history with key events between the 20th century all the way to the 31st century.

In any case, in order to believe this plot reboot, you have to believe that somehow with all those time ships and policing, Agent Daniels, the USS Relativity, and all those others just let a random mining captain from Romulus rewrite the history of the Federation without correction.  They go to huge lengths to save Captain Archer, but not Captain Kirk?

Sorry.  That doesn’t work.

I think what I’m more disappointed about is that the movie didn’t even try to explain it away.  For example:

Old Spock from the future, for example, could have added 30 seconds to his explanation to either New Kirk or New Spock to say that this timeline is permanent, or why it won’t be fixed.

Spock: “In general, major timeline changes in the past have been corrected by the Federation in future centuries.  However, we had been warned that the use of “red matter” could leave us vulnerable to untrackable temporal events.  In my rush to save Romulus, I have put the entire future at risk.”

This really wouldn’t bother me if the movie was a clean reboot of the series, like Battlestar Galactica.  But J.J. Abrams is trying to have his cake and eat it too.  He clumsily and awkwardly brings everyone together for the new Enterprise crew (exactly how unlikely was it that Scotty would be on that one base on that one moon…)  In some ways, the half-hearted attempt to maintain continuity with the time travel device is worse than just doing a straight reboot, no questions asked.

Now I realize I fall into a very tiny minority of people who even watched Star Trek Enterprise (or Voyager for that matter).  And I realize I fall in an even smaller fraction who liked Enterprise.  (1 in a million?)

Still, if they wanted to hardball ignore the series, they could have just asserted something early that made it clear that the series Star Trek Enterprise didn’t exist in this universe (ala Superman III/IV being axed in Superman Returns).  For example, they could have just asserted that this was the first human starship with the name Enterprise.

The most ironic element to the reboot plot device is that the one series it doesn’t change is Star Trek Enterprise, because that series takes place before the federation was founded!  So in this timeline, we don’t know whether there will be a Captain Picard, a Deep Space Nine, or a Captain Janeway.

But we do know, of course, that Scott Bakula was captain of the NX-01 Enterprise.  Rich, rich irony for fans who hated that series.

Don’t get me wrong – I liked the movie enough to see it again, and I think it achieved its goal of reaching out to people who have never seen Star Trek before (or didn’t watch much of it.)  I was actually surprised to see so many “wink wink, nudge nudge” moments in the film – references to other characters, catch phrases, moments, etc.  When Spock gives the transwarp transport formula to Scotty, I half-way expected some reference to transparent aluminum (Star Trek IV).

Maybe that’s what bothered me the most – they clearly put some effort into lining this up with canon in minor ways that didn’t really matter, but then ignored the big gaping hole around time travel.

Anyway, just for fun, here are some other small nits that bugged me:

  • There is a canyon in Iowa?
  • Was the Nokia placement really necessary?  Did it even make sense?  There are still private companies in the future?  They still operate?
  • Wow!  The Enterprise is really big now.  Huge.  How big is the crew?  That Romulan ship must be immense.  Kirk can just run around and find his way?  It must be miles long!
  • Captain Pike decides to make a not-quite-graduate with 3 years in the academy First Officer.  Really?  Maybe they know more about nature vs. nurture in the future.
  • Sulu carries a sword around with him?
  • Movie jumps the shark when Kirk crash lands on the ice planet/moon.
    • First, he plays Empire Strikes Back with the native wildlife (unnecessary).
    • Second, he just happens to crash within a few miles of Spock?
    • Exactly how close is this moon/planet to Vulcan, so that it appears huge in the sky of this world?
    • Spock is placed within walking distance of a Federation outpost, and is waiting for… ?
    • Scotty just happens to be stationed at this outpost?
    • Spock doesn’t go with Kirk because he doesn’t want to hurt the bonding experience for Kirk & Spock?  Seriously?  He’s really taking this new timeline thing in stride.
  • “Red” matter?  That’s what they went with?  “Red” matter?  Was this sponsored by Bono or something?
  • Flagship of the fleet goes to new graduate.  I know there isn’t supposed to be a lot of politics in the future, but I have to think someone got passed over here and is kind of pissed about it.

Looking forward to Terminator Salvation (which deals with timeline inconsistencies better), Up, Transformers, GI Joe, Harry Potter…

Jordan: My First Twitter Baby

Those of you who follow me on Twitter (or who received an email), this blog post is about old news.  But I thought I’d share here, for posterity, the fact that last Wednesday, my wife & I were blessed with the birth of our third son, Jordan Gabriel.  He weighed 9 lbs. 1 oz., and was 21 inches long.


While we’re still adapting to life with three kids in the house, I thought I’d note the tech milestone as well.  When my first son was born, we had a birth blog to commemorate the event.  That was less than five years ago.  Clearly in just that short time we’ve moved on to newer modes of obsessive documentation.

I guess that answers the question on whether Twitter competes and/or substitutes for blogging.

In any case, welcome to the world Jordan.  Our first Twitter baby.  (In fact, one of my colleagues at LinkedIn was kind enough to reserve @jordannash for him…)

Jordan Tweet

Get Ready for TEO: Twitter Event Optimization

That’s right, everyone.  A new acronym is born.

Get ready for consultants, product managers, marketing executives, and knowledgeable technorati everywhere to be talking about the most important traffic driver since… SEO (Search Engine Optimization).

That’s right, 2009 is the year of TEOTwitter Event Optimization.

The logic is simple enough.  Twitter is growing by incredible rates, and it’s inherently a high activity, highly connected distribution model.  That means that pushing out events to Twitter can help drive traffic to your application or service.

When a user pushes out a link to your content, it magnifies distribution a large number of ways:

  • The tweet/link is pushed to all of their followers (sometimes to multiple clients/locations)
  • The tweet is sometimes retweeted (at a fractional rate) to a 2nd degree of followers
  • The tweet shows up in countless Twitter searches for terms/keywords
  • The tweet is indexed in Google for natural search
  • The tweet, if hashtagged, comes up for anyone reviewing that particular topic.  (Topics on Twitter are often flagged with a # symbol.  Example: #swineflu)

One of the hardest problems that websites face is traffic generation, and I can see it in the eyes of marketing and media executives everyone.  They look at Twitter, and they see… engagement.  attention.  TRAFFIC.

And they want it.

Thus, TEO is born.  Like SEO before it, there will be a range of skillsets that will quickly be developed, and then sold to countless companies everywhere:

  • Optimizing your website to get users to issue events to Twitter (manually or automatically)
  • Optimizing the content of an event to promote click-through
  • Optimizing the content of an event to trigger retweeting (RT)
  • Optimizing the tracking of the links on Twitter for effectiveness (already happening)
  • Optimizing the landing pages of your site, so that non-members who click through from Twitter get a good experience and “convert” to direct users.
  • The list goes on…

I really haven’t seen this much collective energy around a new traffic source since Google really hit the scene in volume, and everyone realized that an alternative to paying for search advertising was to invest in optimizing your content for natural search.

It’s hard to argue that this will be good for the Twitter eco-system.  Google has fielded armies of engineers and incredibly advanced technology to help keep natural search effective.  One of the challenges Twitter will definitely face is keeping their stream relatively “clean” of manufactured content.  Whether that’s something that can be done by end users, or whether deep technology will be needed is yet to be determined.

In any case, I’m not sure if I am the first to coin the term… it’s hard to believe that with the huge buzz around Twitter that this one hasn’t been claimed already.  But, just in case you heard it here first, remember:

2009 is all about TEO