Good Luck Trying to Take eBay Down

I like to think that no business is so great that it can never be challenged. It looked like that for Microsoft five years ago, but now they are in a very competitive battle with Google, Yahoo!, and Apple. But if there's one business out there that I would put my money on being the market leader for the indefinite future, it would be eBay.

I say this not because I think eBay is run better than any other company, or because I don't think there are any worth competitors out there, but because eBay is in the unique business of being a facilitator between buyer and seller. That means that eBay's customers are BOTH buyer and seller.

Most business only have buyers as customers. It's EXTREMELY difficult to concurrently build a base of buyers and sellers. You can't have one without the other. If you have buyers without any sellers, they aren't going to find what they are looking for. If you have sellers without buyers...well you won't have sellers very long because they won't be able to sell their stuff!

eBay has the largest group of both in the world. If you are really looking for a challenge, try creating a larger marketplace. I think it's the closest thing out there to impossible in the business world.

There have been numerous challengers to eBay and all have fallen flat on their face. It wasn't because of a lack of capital or effective technology, but because they couldn't find a way to concurrently attract enough buyers and sellers.

I found this out the hard way with SportsLizard in the collectibles industry. Relatively quickly, I realized that I was going to adjust my business model. I started offering something that no one else does - a way to compare collectibles for sale on my site, eBay, Amazon, and other sites all at once. I make money by passing traffic to one of those sites if people don't find what they're looking for on my site. Hey, if you can't beat 'em, join 'em :)

Pierre Omidyar, founder of eBay, put it best in Net Entrepreneurs Only (the book I reviewed last post):

We faced competition, even in our very early days, from people who were better funded. They've all generally downsized. The reason is quite simple. If you're
a buyer or a seller you're looking for the largest marketplace. That's eBay. If you're a seller, you're looking for two things. Do I sell my item? How much do I get
for it? You can only maximize those two things by going to the largest marketplace. It's very hard for a new competitor to pull people away from us or to get
new people once they know about eBay. In order to get sellers, you must have buyers.