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ChrisAt eBay, Sales Prices Are Also for Sale
By NICK WINGFIELD
Staff Reporter of THE WALL STREET JOURNAL
For years, eBay Inc. has let its users buy and sell almost anything. Now it wants to become the blue book for just about everything.
Earlier this year, the auction Web site quietly began selling to other companies huge volumes of data related to the site's auctions. Among the hottest data for sale: the average selling prices on eBay of all kinds of products, from Sony DVD players to Ford Explorers.
Recently, eBay stepped up the program with two deals that show how the San Jose, Calif., company's sales data could end up as the basis for guides used to determine fair-market prices for items that may never be purchased or sold on the site itself.
In one of those deals, the PGA of America is using eBay's data on its PGA.com Web site to show market values on the auction site for used golf clubs, including more than 76 brands and 2,000 models. And Mountain View, Calif., software maker Intuit Inc. recently began using eBay data to help people estimate the value of charitable donations when they fill out tax forms. The idea: Prevent audits by eliminating the guesswork that often goes into valuing things like old televisions or computers.
EBay is making the push at a time when its site has grown monstrously large, with enough auctions of items across various categories that the company says it can provide representative market prices. Auction listings on eBay last quarter totaled 235 million, more than triple the 68.5 million auctions it listed in the same period three years ago. The company says it doesn't expect its new business to be a big moneymaker anytime soon, though commercial licenses for the data start at about $10,000 a year. Instead, the company is hoping broad use of its auction data will give it a marketing boost.
"It's an incredibly intriguing asset to have eBay better known as the definitive source for prices," says Jeff Jordan, an eBay senior vice president. "It's the best pure market reflection of the meeting of supply and demand."
A NASDAQ FOR EVERYTHING
Market value of selected items listed in excellent or good condition on eBay:
Item Feb. 1 Nov. 1 Price Change
Dell Laptop Inspiron 3800 $567 $455 -$112
JVC 27" Standard Television $202 $121 -$81
PlayStation 2 System $158 $122 -$36
Canon PowerShot A50 camera $113 $82 -$31
Sources: Intuit, eBay
Many people have long been using eBay informally to find market prices for products, even when they weren't purchasing the items on eBay. Some technology managers, for instance, use the site to find prices for networking and computer equipment so they can get better deals from manufacturers. With auctions closing every second on the site, eBay can provide real-time market information where none previously existed.
"There are certain ways in which eBay is like the financial markets," such as the New York Stock Exchange, says David H. Reiley, an economist at the University of Arizona who has done several academic studies of pricing on eBay.
EBay will have a hard time displacing price guides that practically have become bibles in their categories. Kelley Blue Book, for instance, published its first price guide to used cars in 1926. Since then most of Kelley Blue Book's readers do their research on the guide's Web site, updated with new prices every week with data from dealers, consumers and other sources. A Kelley spokeswoman says the company's guide counts far more car transactions than occur on eBay, which facilitated $1.68 billion in car and car-part sales last quarter.
"The quantity of their data could not possibly provide a fair market value that would be as accurate as Kelley Blue Book values," the spokeswoman says. EBay says its data compares favorably to others. "From what we've seen to date, the accuracy of our marketplace data is as reliable as existing methods," an eBay spokesman says.
Still, there are clear cases where eBay has become one of the richer sources of market prices available, industry executives say. The It's Deductible division of Intuit has long surveyed thrift and consignment shops across the country to estimate the value of an old suit or a leather sofa, figures it compiles to help consumers when they're doing their tax returns (Tax laws say consumers can deduct the fair market value of their donations).
But in the past, Intuit stayed away from estimating the value of electronics, for instance, because it couldn't get enough gadget prices from stores to be statistically sound. By licensing eBay's data, Intuit was able to add electronics to its price guide, a software application that can be updated with new data over the Internet.
EBay provides a clear window into the steep decline in the price of most secondhand electronics, which quickly lose value as new gadgets appear. Just after it was released in February of this year, the Nokia 3650 -- a cellphone with a color screen -- sold for an average price of $400 on eBay. By July, it had fallen to an average of $245 on the site and this month it is selling for about $225.
PGA.com's used-golf-club price guide was created by Leigh Bader, co-owner of the Pine Oaks Golf Course in South Easton, Mass., and an eBay seller. The guide lists the price range on eBay for a steel-shafted Callaway Big Bertha Blade putter -- $38.12 to $46.43 as of Friday -- and the lower trade-in value a player could expect to get when selling it to a shop -- between $24.78 and $30.18. "It's the number of transactions that lend to the credibility of the stats" from eBay, Mr. Bader says.
There are contractual limits to how eBay's partners can use the data. The company doesn't let others compile gross sales estimates for large categories such as consumer electronics or automobiles, something that would give outsiders a precise way to measure one aspect of the company's financial performance on a daily basis. Much of the data partners get from eBay requires a lot of cleaning up, too, since auction listings on the site don't describe the condition of items in a consistent fashion.
EBay partners say the richer pricing data appear to be a hit with users. Software provider Andale Inc. licensed eBay's auction data earlier this year for use in a $2.95 a month service that lets users analyze pricing trends on the site. "It's growing faster than any of our other products," says Munjal Shah, chief executive officer of Andale.
Write to Nick Wingfield at nick.wingfield@wsj.com
Updated December 8, 2003