The online auction titan, eBay
(Nasdaq: EBAY), announced on Monday that they would be teaming up with online employment agency, eLance to allow users to place their services and projects up for auction.
A new section, “Business Services,” has been created to accommodate to host the new service, with links to listings on both eBay and eLance. While the current categories in eBay are limited to Computers and General, eLance categories also include accounting, writing, tutoring and legal services.
The new dimension allows eBay to expand its platform and monetize its service, according to data from Goldman Sachs. “While financially not impactful in the near term, we believe this is an important and positive step in eBay’s marketplace evolution and we anticipate that eBay will build more relationships with other service providers over time,” a research report noted.
Additionally, the GS research anticipates that eBay can generate a more than 100 percent return on investment capital during this year. “eBay has a multitude of growth opportunities via global and platform expansion — such a pricing formats, product segments, customer segments, multiple platforms and softwaare platplatforms — that require little capital investments while driving disproportionate gains from both financial leverage and network effects,” according to the published report.
Although service providers can sell their services off to the highest bidder, the more conventional format is a reverse-auction. Those with a project post details on the site and then those with the time and skills declare how much their time is worth, providing the potential client with work samples and background information. Service seekers can also browse through service provider lists and invite the service providers of their choice to bid.
The service seeker then selects the service provider of their choice; eLance then sets up a shared folder on the web for service providers to post and employers to review the work. The sites also facilitate payment and provide means for dispute resolution. Both employer and employee then provide feedback, adding to each other’s reputation.
All for a 10 percent transaction fee, paid by the service provider.
Shannon Winterstein, technical director of SA auction site Aucor Active, says that while they have sold services online, there isn’t enough demand for them to create a separate category – they mostly go under ‘Miscellaneous.’ For the same reason, they haven’t put a reverse auction system in place. But should the demand arise, he says, they’ll address it.
No other local auction sites visited specifically offered service auctions.
Selling services via the Internet, especially via reverse auction, is tricky. Given the inability to confirm identities face to face, trust is a tenuous thing. While goods are tangible, services are intangible and often subject to opinion. Additionally, employers may utilize tactics like fake bids to lower the bidding on a project.
But as digital certification becomes more commonplace – allowing the verification of both service seeker and provider by trusted third parties – and buying and seeking services online will seem more trustworthy. This could give freelancers in developing countries – e.g. South Africa and India- access to international markets, while giving companies in developed countries access to cheap quality knowledge labour. See you on eBay.