Full disclosure: I'm a former eBay'er who spent 5 years at the company and had a good experience working there.
I don't agree that eBay is evil. It's just a big company behaving like all big companies eventually do. Still, I've given much thought to why no Western companies (Asia is a different issue) have been effective at competing with the company over the years.
I think there are three issues:
1) Trust and Safety is what eBay calls the never-ending cycle of identifying fraud, modeling it, and preventing it from happening in the future. It's a difficult, expensive, ever-evolving challenge that is far more complex than I realized before working at the company. Craigslist, which has recently seen a massive flood of spam on some of the more popular categories, is seeing how difficult it can be to keep a lid on this stuff. eBay is in a never-ending battle against criminals who are often very smart and highly motivated. New entrants in P2P payment systems have to deal with this problem to even get started. People think there is a lot of fraud on eBay, but they have no clue how much of it is killed before it sees the light of day. In many ways, eBay is like an immune system that can fight off infections it has seen before. It's the new stuff that gets through the system. Competitors won't have the benefit of eBay's decade-long immunity memory.
2) eBay spends millions on search marketing to maintain their position by keeping buyers coming to the site. eBay is, by most accounts, Google's largest ad buyer. It didn't used to be this way. There was a time when most users went directly to eBay.com to start their shopping, and that's still true of auction fanatics. But a large percentage of sales on eBay are now fixed price (or buy it now), and commodity shoppers increasingly start their shopping with a Google, Yahoo, or Live search. The cost of acquiring new fixed-price customers will be a major problem for anyone hoping to enter the general goods retail category.
3) It's still the best auction platform. The bottom line here is that no one has come up with anything fundamentally better than eBay's auctions. Personally, I think this is eBay's soft spot because the company is focused on fixed price goods and because they've owned this market for so long. The margin on auctions is very, very high, and someone could take them on. A better (more fun, cheaper) product would be a good place to start.
I agree with those who suggest that niche players will chip away at eBay's dominance, much like niche retailers at the mall chipped away at department stores over the years. If I was going to build an eBay competitor (and I'm not), I'd choose a single category of easily-shippable, high-resale-value items (e.g. SLR camera lenses or whatever) and create a better C2C trading system that kicks butt on that specific category.
Your point about fraud may be one of those cases where the barrier to entry is different from how it appears on the outside. A better website or auction system may be beside the point, if it's not the really hard problem.
I don't think I'd have appreciated this before reading the Levchin interview in Founders At Work, which made it clear that Paypal's advantage was in staying a step ahead in fraud detection. They knew that any competitors who couldn't do that would be eaten alive (and were).
I don't agree that eBay is evil. It's just a big company behaving like all big companies eventually do. Still, I've given much thought to why no Western companies (Asia is a different issue) have been effective at competing with the company over the years.
I think there are three issues:
1) Trust and Safety is what eBay calls the never-ending cycle of identifying fraud, modeling it, and preventing it from happening in the future. It's a difficult, expensive, ever-evolving challenge that is far more complex than I realized before working at the company. Craigslist, which has recently seen a massive flood of spam on some of the more popular categories, is seeing how difficult it can be to keep a lid on this stuff. eBay is in a never-ending battle against criminals who are often very smart and highly motivated. New entrants in P2P payment systems have to deal with this problem to even get started. People think there is a lot of fraud on eBay, but they have no clue how much of it is killed before it sees the light of day. In many ways, eBay is like an immune system that can fight off infections it has seen before. It's the new stuff that gets through the system. Competitors won't have the benefit of eBay's decade-long immunity memory.
2) eBay spends millions on search marketing to maintain their position by keeping buyers coming to the site. eBay is, by most accounts, Google's largest ad buyer. It didn't used to be this way. There was a time when most users went directly to eBay.com to start their shopping, and that's still true of auction fanatics. But a large percentage of sales on eBay are now fixed price (or buy it now), and commodity shoppers increasingly start their shopping with a Google, Yahoo, or Live search. The cost of acquiring new fixed-price customers will be a major problem for anyone hoping to enter the general goods retail category.
3) It's still the best auction platform. The bottom line here is that no one has come up with anything fundamentally better than eBay's auctions. Personally, I think this is eBay's soft spot because the company is focused on fixed price goods and because they've owned this market for so long. The margin on auctions is very, very high, and someone could take them on. A better (more fun, cheaper) product would be a good place to start.
I agree with those who suggest that niche players will chip away at eBay's dominance, much like niche retailers at the mall chipped away at department stores over the years. If I was going to build an eBay competitor (and I'm not), I'd choose a single category of easily-shippable, high-resale-value items (e.g. SLR camera lenses or whatever) and create a better C2C trading system that kicks butt on that specific category.