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e-Customers, What's A Wallet Worth?

For well over a year I've said eBay looked overvalued vs. its peers. While being a fan of its huge growth the valuation always seemed ahead of itself. Well after crunching the numbers on the market value per e-customers the data showed eBay registered customers at 308% of the average.

And if you think valuation is more art than science I've got some weird science for you straight out of oingo boingo: CDNow customers trade at 7% of the average value per e-customer according to my analysis. The average e-customer for the top 7 etailers (Amazon, eBay, CDNow, Egghead.com, uBid, Onsale, Cyberian Outpost) on the Web trades at $2,750.

Only eBay (NASDAQ:EBAY) and Amazon.com (NASDAQ:AMZN) hum along at premiums to the group.

Allocate some of the pop from brand value yet there's also underlying hyper-growth. I would attribute that to Amazon's seemingly obvious goal of trying to be a etail portal bar none. By adding video and gift sales, and now calendaring to remind you to buy, buy, buy it appears Amazon is going for the fences with its swing.

While many observers would speculate that Amazon's competition lies in barnesandnoble.com I believe that Amazon.com now may be close to bumping up against plain old portals and eBay and vice versa. AOL and Yahoo, for example, pose the biggest threat to Amazon.com's future I think more than any other entities. It's not about books or music or videos, it's about customers across the board. AOL's got 16 million of them.

eBay felt the heat from Amazon's latest move into auctions as its share price dropped yesterday a few points, off 4%. Amazon is perhaps the only firm that could knock EBAY shares down. Now more than ever eBay needs a buy to boost its membership base, round out its offering as a 'complete' real-time retailer.

The larger trend occurring, however, looks like auctions becoming a commodity, a preferred way of commerce in the interactive space. So any firm moving into auctions may in fact be more like "sucked" into auctions as e-customers demand the power to price their goods more efficiently than random brain cell generated rigid pricing systems.

Classifieds are dead. 'One price fits all' pricing is dead. Priceline.com (pending IPO) pioneered the name your price concept to some extent but it's really just a twist on the auction.

Onsale.com (NASDAQ:ONSL), arguably one of the first publicly-traded auction pioneers, at $673 per customer/registered bidder trades at 24% of the average e-customer; geektailer Egghead.com sits at 58% of average; similar techcentric seller Cyberian Outpost (NASDAQ:COOL) also shows a discount per e-customer at 63% of average.

The litmus test for sustainable value in my opinion centers on how each site is able to do several oxymoronic things at the same time: focus on its core customer while seeking to attract that same customer to buying more items in different product areas that may not be as strongly stocked in offerings.

Ultimately it's about the lifetime value of an e-customer. As that becomes central to the equation I believe higher ticket sales will be necessary for any etail or auction effort to make up the loss in going for mass discount and volume on the low end. it may boil down to the difference between selling one car vs. 10,000 CDs or 5,000 books.

Shakeout and consolidation may have to happen to create the scale needed to make the ka-ching sound across the product spectrum.

Accolades :

"Fresh and provocative" -CBS Marketwatch, who named Steve Harmon one of the top Internet stock analysts and only independent one honored

"I am a huge fan of Steve Harmon's analysis" -Kleiner Perkins' John Doerr