Sunday, 20 April 2008

Money makes the world go around?

Money makes the world go around. Oh no it doesn’t! It’s inertia that makes the world go around … until it stops.

Inertia! What a powerful influence, or at least that’s what John Donahoe, the new boss eBay, is hoping. Donahoe is raising eBay’s fees and changing its rules, and assuming that its clients won’t desert the auction site in their droves for another Some of the smaller players in this eBay ‘community’ are threatening a boycott this May Day. The activists claim that the site is favouring the big players to the detriment of the vast number of small timers.

The Internet is really fascinating. Why is it that one site (possibly two) rise to dominate each sector, and people stay loyal despite better offers appearing in the more boutique specialist competitors? Don’t give me that brand loyalty nonsense. Brand recognition, yes! Google, Amazon, eBay, Skype, Facebook/Myspace are the first points of call in their particular sectors, and so they rule their particular roosts. Do they give a superior service to their clients, or is it apathy or laziness that fuels this inertia? Is it an example of ‘better the devil you know’? Or is it the gravitational pull of a critical mass, preventing large enough numbers to break away to form a viable competitor?

Whatever the reason, it is only to be expected eventually that familiarity breeds contempt. Is eBay taking its community for granted? If so, they had better beware. Entropy is a permanent fact of every system. A ‘tipping point’ will eventually be reached where the system dives into decline, and users will move on to more favourable climes.

I wonder which of the Internet Big Boys will be the first to fail?


Riz said...

I'd say a main reason is that the value of a lot of these sites is the number of users on the site.

The value of having a large amount of people agglomerate at one auction site like ebay is you bring together a lot of buyers and seller. Similarly for facebook, it wouldn't be valuable if most of your friends weren't on it. For right now these network effects/economies of scale impose a large switching cost (or loss of value) for those considering moving.

This gives the sites (once they're big) a lot of room to annoy their users (think facebook's ad network) without mass defections. However, give people a compelling enough reason to switch, and they will.

sirisha said...

i never really understood why u were called fondly,the angell of Dooom...but after reading the blogs,i think it is justifiable.....hilarious

Govind said...

In this age where customers want more services for free, I wonder whether Ebay's tactics of charging a subscription fee would work.

Opportunistic behaviour such as this, where they are trying to cash in on user's inertia to change might not work out. For all this while the users have been obtaining this service for free. Why should they all of a sudden start paying for the same service?

Moreover this is the ideal opportunity for the smaller players to take over e-bay in the auction site marketspace. As Riz put is , given a compelling reason such as the subscription fee , perhaps people might switch.