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
(DELL), Lycos (LCOS), [email protected] (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

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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