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RealTime IT News

Time To Light the Torches

You may be able to buy shares of eBay at discount prices for the next few days.

Thanks to premature panicking on the part of some investors in the wake of news that a group of nearly 100 Web sites -- led by Microsoft (MSFT), Dell Computer (DELL), Lycos (LCOS), Excite@Home (ATHM) -- are joining forces to create an online auction network, eBay (EBAY) shares were down more than $10 Friday afternoon.

It sounds like a formidable threat. All four of the companies mentioned run Web sites that draw sizable traffic, which they intend to use synergistically. Other Web sites in the auction alliance include MSN.com, Excite.com and Ticketmaster-CitySearch.

Called the FairMarket Auction Network, after eBay online auction rival FairMarket, which will manage the network, the various Web sites will share auction listings. Thus, an item listed on MSN.com can be found by a Web user through the Lycos or Dell sites.

It sounds like the whole Internet is ganging up on eBay!

In a way, it is. And for good reason. Major players such as Amazon.com (AMZN) and Yahoo! (YHOO) that have tried to take on eBay by themselves have gotten nowhere. Even serious outages at eBay have done little more than ping the company's reputation and market share.

Now the Web villagers, torches held aloft, are headed up the hill to the eBay castle.

While some investors clearly feel this auction uber-network represents the end of eBay's dominance in the Web auction space, I believe it actually reaffirms the strength of the company's position in the marketplace, much as the ever-changing industry cabals that try to topple Microsoft underscore Redmond's supremacy in computer software. Maybe this new group should just ask the Department of Justice to join in.

The "Everyone Against eBay" campaign also makes eBay's recent partnership with AOL even more prescient. Recently I read comments to the effect that eBay was paying protection money by teaming up with AOL. To me it looks more like a shrewd business move to co-opt your most dangerous potential rival.

eBay won't ignore this threat, nor should it. There's a lot of firepower behind this. The trick for the insurgents, though,will be execution. Holding a press conference is one thing. Making its auction network attractive enough to capture the eBay monster is something entirely different. Investors should remember that.


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