Were Online Auctions Just A Fad?

Many eBay users are up in arms about the changes in fee structure on the site that favor large vendors selling goods at fixed prices on a "Buy it Now" basis instead of eBay's original auction format. The little vendors who have made the site what it is today don't like it, but eBay might simply be acknowledging the obvious: Online auctions were a fad, and the fad might be over.

What happened to auctions? Not only do shoppers want convenience, they're also looking for value. And the proliferation of pricing information online has made it easier for consumers to bargain-hunt and lessened the need to risk overbidding in an auction. Hershenson recalls when a new $40 toaster could fetch $80 on eBay, thanks to a bidding frenzy. Now, a buyer can figure out the retail price with a few mouse clicks. A study earlier this year by the Pew Internet and American Life Project found that 81% of Internet users research products online before buying. "People have a lot of information at their disposal and that sets a reserve price of what they are willing to pay," says John Horrigan, an associate director at Pew. "It makes sense for eBay to set prices to appeal to that."

So eBay becomes Amazon's competition, with a dash of Craigslist. The real money for the company might be in what was once an afterthought: They own PayPal, and the method of paying for things conveniently on the web might turn out to be a much bigger business than the things themselves.