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Tuesday, February 08, 2005

eBay Vs Google Battle - Google Is Controlling The Distribution Of The Internet

Like platform players competing in the enteprise application business, the internet economy is heavily dominated by a few players, and their dominance is all set to grow in the near future. In this context it is interesting to make an assessment of EBay vs. Google to find out who's controlling the Web today. Bambi Francisco ( Via marketwatch)writes
while seven-year-old Google is worth $54 billion- EBay's worth $4 billion less because by the end of this year
, for the first time, Google's cash flow is projected to trump that of eBay's. Excerpts :
Last year,eBay delivered slightly more cash flow. Google delivered cash flow of $1.2 billion last year while eBay's was $1.3 billion, But as the dollars are projected to flow in favor of Google this year, it begs the question: Will search advertising ultimately become a better mousetrap for sellers? Or to what extent will search advertising take away the potential dollars that were once expected to flow onto eBay's marketplace? Or, are advertising dollars being thrown to search engines without people really knowing the return on investment (much like what happened in the bubble years), meaning the pendulum will swing back in eBay's favor? If price hikes are any indication, then search engine marketing is beginning to look like a compelling, alternative mousetrap to capture buyers.
On the flipside, eBay - which has the biggest pool of potential buyers on the Web lowered listing fees on items starting at 99 cents, which many sellers believe is just a token gesture, and hardly helpful.) One reason customers are able to entertain new avenues like Google today is that they're far savvier about the resources on the Internet.
eBay attracts mostly buyers and not a whole host of other people looking for knowledge or to be entertained, Google and Yahoo attract a larger audience than eBay. In December, Yahoo had 119 million unique visitors while Google had 71.6 million and eBay had 66.5 million, according to comScore Networks. But if more than half of Yahoo's traffic and more than 90 percent of Google's audience are potential buyers, then eBay sellers would be in front of just as many potential customers.
Assuming a seller can be in front of the same number of buyers, Google also looks like a good alternative to eBay because of the premium a seller can ask for. A seller would likely get higher prices on Google than eBay. eBay is still one of the best places, if not the best place to set up shop. That's largely due to conversion rates. At search engines, there's hardly a conversion rate attached to the spending. A seller may still have to pay for clicks without knowing if those clicks are worth anything. EBay is cheaper, unless a merchant can get a better than 4 to 5 percent conversion rate on clicks from search engines as against current average of 2% to 3%Final assessment is that eBay isn't going to lose customers to Google. But the advent of search as an alternative will take away the potential eBay once had. Moreover, the search engines are making it harder for eBay, and other commerce companies like Amazon.com to make a living because they rely on search engines for traffic. What's happening is that Google is controlling the distribution on the Internet.For eBay - The source of its traffic is the same source that is putting a damper on its ability to raise prices, or make money. Sure, there's cooperation and competition everywhere, and eBay has been relying on traffic through its keyword purchase from search engines for years. But the cost of eBay's traffic is rising faster than what it can charge its customer - This is the challenge at eBay.

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Sadagopan's Weblog on Emerging Technologies, Trends,Thoughts, Ideas & Cyberworld
"All views expressed are my personal views are not related in any way to my employer"