E-Commerce: News Flash: eBay Is Down

When the eBay online auction system crashed in August for at least the fourth time this summer, it didn’t make the same headlines its 22-hour outage did in June. That outage was plastered on the front page of The New York Times, and the focus of headlines on news, radio and television broadcasts across the country.

A couple of days later, a wag I know came up to me and asked if I had heard that Wal-Marts across the country had been down for 12 hours, and it looked like it would be closed for about 10 to 12 hours a day for the indefinite future. "What do you mean?" I asked. "Well," he replied, "Wal-Mart stores are generally closed from nine or 10 at night until nine the next morning." Is that the same as being down?

In a way, it is the same. Though the Internet has been positioned as a 24x7 e-commerce venue, there is no reason why it has to be that way. So eBay was down for almost a whole day. In Maryland, you can’t buy a car on Sunday every week.

But the focus on eBay demonstrates the grip that high-profile forays into e-commerce have on the imagination of America. Clearly, eBay is not just another retailer – or even another auction. It is a new way for apparently millions of people to get into the business of buying and selling to each other. In essence, eBay, now followed by Amazon.com, Auction Universe, and others, have created a new marketplace almost completely dependent on the Internet.

But, the business being conducted via online auctions like eBay is not restricted to hobbyists, garage enthusiasts and others of similar ilk. In fact, eBay is a low cost way for people to go into retailing. All somebody needs to do is to post items on eBay and hope for the best. Who were the people who have complained most publicly about the eBay outages? People who have been selling 30, 40 or 50 items a week via auction, people whose online sales make a real contribution to their income. One angry antique dealer claimed to be selling $2,000 to $4,000 of merchandise a day via eBay. For many people, selling via eBay and other online auction sites is their business. In short, eBay has created new opportunities for perhaps hundreds of thousands of people. And that is good.

But remember, eBay and the other online auction sites still represent something very, very new. That is one of the reasons that the site has crashed so many times, and also one of the reasons that people have gotten so upset about the crashes. After the failure in June, eBay executives scrambled to assure their users that it would not happen again. And they took the requisite measures to correct the software glitch that caused it. As will happen with large-scale computing applications, the August outage was caused by a different glitch.

Frankly, neither the eBay technical team, nor Sun Microsystems, which reportedly has supplied much of the technical infrastructure for eBay, is to blame. Technical problems are bound to reoccur. This time, in addition to publicizing the hiring of a new technical guru, eBay has admitted that the system may be shaky for up to six months. I suspect that it will be shaky longer than that.

But for some reason, people expect eBay to be operating 24 hours a day, seven days a week. It is part of the Internet culture. Maybe the longer, unplanned crashes would not occur if eBay were offline periodically. But, even with periodic downtime, unplanned crashes might still occur.

Even more significantly, the adjustment to the technology will be the way that this new marketplace will eventually evolve. First, many safeguards are not yet in place. The online auction community has to install better protection against fraud, against using the sites to sell stolen merchandise and against having unauthorized people buying and selling. The use of escrow accounts and e-currency will become more familiar. And the actual transfer of goods needs to be smoother.

Those issues are being addressed and will be addressed in the future. The development of the dynamics of the marketplace itself will be more interesting. Currently, eBay is clearly the leading auction site with 2.4 million items for sale, compared to Amazon’s 50,000. By some estimates, eBay currently has a 70 percent market share.

But, curiously enough, size might be only a temporary advantage in this new marketplace. Many of the buyers on eBay are not very knowledgeable about what they buy. For example, there have been reports that people buy Disney goods that the seller has purchased at the local discount store. It is questionable how long that kind of business can be sustained.

More interestingly, sellers are learning that unknowledgeable buyers are often not good for business. Many people have reported that they can get better prices for their goods on specialized auction sites where people can appreciate the value of the merchandise.

In the final analysis, eBay and the other online auction sites represent the best of e-commerce. They have created a new marketplace that could not exist in this form without the Internet. Nevertheless, this marketplace is just in its infancy. The technical, legal and security problems it faces will be less significant than the changes that occur as people become accustomed to this new way of doing business.

About the Author: Elliot King is an Associate Professor of Communications at Loyola College in Maryland. He can be reached at (410) 356-3943, or by e-mail at eking@loyolanet.campuscwix.net.