September 22, 1999
Night of the Living Bid: Four Tales From an Hour of Ebay
By LISA GUERNSEY
It was just after 7:30 on a Monday evening in August, and Eric Clayberg, a 35-year-old software entrepreneur, was fixated on his computer screen. An auction on Ebay was minutes from closing, and Clayberg wanted to be the final bidder. Over the last month and a half, he had perfected his strategy, a nimble mix of patience, quick clicking and good timing.
Then it happened. Another bidder stepped in, offering $527.99. It was time for fast fingers. Clayberg clicked the bid button, frantically typed $537.99, hit the submit button and reloaded the page. His bid showed up with 13 seconds to spare. In previous Ebay sessions, Clayberg had learned that it typically took more than 20 seconds to enter a new bid. Even if someone else wanted the arcade game, it was too late. "I put in my final offer and it took," he exulted the next day.
Clayberg is one of thousands of people who have been bitten by the Ebay bug. Since the online auction house opened in 1995, more than 3.8 million people have registered to participate and millions more have visited its site, Ebay.com. In the second quarter of this year, gross sales topped $622 million. By the beginning of September, nearly 2.6 million items were listed on the site at one time.
The site's popularity, some industry analysts say, is more than just a craze. The company and other sites that offer online auctions, like Amazon.com and Yahoo, are changing the rules of online commerce. They have redefined business for collectors, resellers, consumers and even shipping companies. Along the way, they have created ways for everyday people to connect with other everyday people who have the same interests, needs and must-have obsessions for items like coin-operated video-arcade games, circa 1980.
"People are doing business in a way they really couldn't before," said Meg Whitman, the chief executive of Ebay, which is based in San Jose, Calif. "Out of this has grown a community."
Watch the items for sale on Ebay and traces of the new E-commerce community emerge. Within that 7 o'clock hour in which Clayberg won his arcade game, for example, several other auctions were closing, too. They included a Minnkota speedboat motor, a piece of software designed to "double the speed of your PC in minutes," a computer with a 500-megahertz processor, a trio of Beanie Babies with American flags stitched into their cloth, a computer with a 450-MHz processor, a vintage Zeiss Ikon camera and 12 more sets of multicolored Beanies. Here are a few of their stories.
The Game Collector
Clayberg, the software entrepreneur, telecommutes from his home in Middleton, Mass., to Portland, Ore. But in the evenings, you may find him in his basement, amid his arcade-game collection. As an avid collector, Clayberg created a personal Ebay Web page to keep track of the new games auctioned each week.
That is how he found the Taito Elevator Action, a game on which he says he wasted much of his college years in the 1980's. (A secret agent uses the elevator to obtain documents and dodge bad guys.)
He had seen pictures on the Ebay site -- bulky but beautiful, with colorful stickers -- and a seller's promise, declared amid multiple exclamation points, that the machine was in "good shape!!"
When he first saw the game listed a week before, Clayberg bid less than $75, a low-ball offer. Each day he checked back and often raised his bid. He wasn't alone. By the close of the auction, the machine had received 58 bids from only 16 people.
The same evening, 1,400 miles away in Tulsa, Okla., 30-year-old Dan Riggs was also poring over a computer screen, seeing how the bids turned out. Riggs was the seller of the Elevator Action game, one of nearly a dozen arcade games that his company, MVP Vending, had been trying to sell on Ebay that week.
MVP Vending specializes in new and used arcade games and pinball machines, and most of the time Riggs is on the road in the Midwest, selling the games to restaurants and arcades. But over the last six months, he has decided to pursue some business online, too, by auctioning some of his older machines on Ebay.
Riggs does it, he said, for the exposure. Some of the Web pages that showcased his games have received more than 1,000 visitors. "That's the same as, say, 1,178 people coming into the shop," he continued. "You can't even compare that to the storefront."
On Ebay, Riggs said, arcade games usually sell for more than what he would have charged in a traditional transaction.
He said he thought the difference could be attributed to the cost of living. Someone in New York, for example, might expect to pay a lot more than someone in Tulsa.
Locally, Riggs would expect to sell a similar game for $450 to $500. "I met what I wanted to get for it about four days before the auction even ended," he said.
Despite some prices that exceed those charged in stores, buyers are still flocking to online auctions, and sellers are finding them to be lucrative. online auctions like Ebay have become the No. 1 place for many collectors to trade items, Clayberg said.
"If you have a comic book collection for sale, you are not going to put an ad in your local paper," he added. Posting an item on Ebay can cost as little as 25 cents.
Other arcade game collectors, he said, talk about Ebay constantly. They communicate through an e-mail newsletter, exchanging bidding stories, information about new items and rumors about sellers or buyers who have bad reputations.
On the same day that Clayberg was basking in victory, having bought his arcade game, he read comments about another bidding war, one that had turned ugly.
In that battle, a different game had been bid upon every few minutes by a bidder who lived in the same town as the seller and who withdrew his bids at the last minute. Arcade game collectors grew suspicious, and many assumed that the bidder had been set up as a shill, someone who conspires with the seller to drive up prices. That game was offered for sale again later that week, but people were shunning the item, Clayberg said, "because they don't want to get scammed."
The Disappointed Seller
Omer Erden, a 40-year-old Seattle resident, is the seller behind the computer with the 450-MHz chip being auctioned that same evening. Erden built the computer and for days had been watching the bids trickle in. The going price hovered around $600. Then, in the final seconds, it shot to more than $1,200 and closed at $1,376.
"I couldn't believe it just doubled like that," he said in an e-mail interview. Erden sent a congratulatory message to the highest bidder.
But the sweet surprise soon turned sour: "I received an e-mail saying he didn't want the computer anymore and he was sorry he'd bid on it," Erden said.
Dealing with bidders who back out is one drawback to Ebay and other online trading forums. Ebay cannot force anyone to follow through on a bid, other than to tell them that their bid represents a legal contract. Nor can it control sellers who suddenly decide not to sell. The site works on an honor system; the grease that turns the gears is the trust between two people who have never seen or talked to each other yet are willing to make a transaction.
People who have to cope with flighty sellers and bidders do have one recourse: the site's feedback forum. Some criticize the forum as ineffective, but most Ebay users praise it as a salve for the uncertainty of anonymous transactions. Bidders and sellers are encouraged to rate each other on their professionalism and view each others' ratings.
Erden did just that, giving a bad rating to the bidder who changed his mind. Then he sent an e-mail message to the next highest bidder for the machine. He is still waiting. Meanwhile, he is dealing with what he calls a "humongous bill" from Ebay for listing items. Ebay charges sellers 25 cents to $25 for listing items and a commission for items that sell. Commissions depend on the value of the final bid and start at 5 percent for items that sell for less than $25.
The Business Owner
Meanwhile, Albert Chidiac was also watching the action that evening. His company, a custom-computer store called Bear Solutions in Houston, was auctioning a fully loaded computer with a 500-MHz chip.
Since his company started listing computers on Ebay three months ago, Chidiac said, his business has doubled. He attributes some of that to his Ebay feedback rating. He has received a 100 percent positive response from Ebay participants. "It's like a Better Business Bureau," he said.
Chidiac had a better experience than Erden that night. After 42 bids, he sold the computer for $1,400. Within a few minutes, he received an excited e-mail message from the winning bidder. After more e-mail messages, the buyer called to provide a credit-card number and order parts that were not part of the initial offering.
Bear Solutions, a company with seven employees, used free space on Ebay to put up a Web site advertising its business. The site offers information on Bear Solutions' function and products. This has given buyers the comfort of knowing whom they are buying from, Chidiac said, and has also translated into prime advertising space, with almost guaranteed Web traffic.
"We've gotten calls from people saying, 'We'll send you a check for $3,000' and not think twice about it," he said. "We've had three businesses that have come through Ebay to purchase systems from us. One made a purchase and then called us back and purchased nine other ones."
A Dutch Auction
About 6:15 central time that same night, Tracy Miller and Shirley Rankin were getting ready to leave their office at the Tharpe Company in Statesville, N.C., which runs employee-recognition programs. The two co-workers are friends who between them have collected nearly 300 Beanie Babies for themselves and their children. Ms. Miller, who estimates she has bought as many as 25 items on Ebay since she registered in May, had decided to check the site for new items that afternoon. She noticed that three Beanies coveted by her friend were on sale. In a few minutes, the two would have to leave the office and head home, where neither had high-speed access to the Internet.
The Beanies were being sold in a so-called Dutch auction, which offers several copies of the same item and, in the end, typically distributes them to multiple bidders. In this case, a toy distributor was selling 12 sets of three Beanies -- a butterfly called Flitter, a fish called Lips and a beady-eyed bear named Birthday Bear. They are highly prized because Ty Inc., the company that makes Beanie Babies, would distribute them only to a small number of retail stores.
Dutch auctions can be confusing for new Ebay users; instead of the highest bidder winning the item, the highest bidders win the items but only have to pay the lowest amount that was bid among them.
In the case of Flitter, Lips and Birthday Bear, for example, 50 people bid for the items. But only the top five bidders were successful. They included a person who bid $125 each for 10 sets, one who bid the same amount for just one, another who bid $125.01 for one, another who bid $127.75 each for two, and Ms. Miller -- acting for her friend -- who bid $130 for one.
In the end, four of those five bidders got the number of sets they wanted. The bidder who wanted 10 sets won only the remaining 7. Under Dutch auction rules, the lowest bid of the highest bidders -- the $125 offered by the person who wanted all 10 -- was the amount that each bidder would have to pay.
Ms. Miller -- who goes by QueenieBeanie3 on Ebay -- had become adept at Dutch auctions over the last few months. She knew that if she bid $130 and essentially outbid everyone else, her friend would be guaranteed to get one set of Beanies for less than the amount she bid. "A Dutch auction can be a pretty good deal," Ms. Miller said.
The next day, when the two women came back to work, they logged on to Ebay and found that Ms. Miller's instincts were right. Ms. Rankin sent a money order for $125 to the seller by overnight mail. Flitter, Lips and Birthday Bear arrived three days later.
Since then, Ms. Rankin has signed up for her own account on Ebay. Her latest purchase: a first-edition Beanie Baby called the Millennium Bear, with tags that have the word "millennium" spelled with only one "n." "They are now worth a lot because of the misspelling," said Ms. Rankin, who bought hers for $15.50.
She has also been watching, she said, for Beanie Babies that her daughter, who is 18, would want to add to her collection. "Normally you'd spend a lot of effort," Ms. Rankin said, "Now it's so easy to sit at the computer and say, 'She needs this one.' "
"Here in Statesville they sell them at a card shop," she added, "but they are so much cheaper over Ebay."