Has Web auction pioneer lost its allure?

updated 5:34 p.m. ET June 26, 2005

Jewelry dealer Michael Jansma used to be one of eBay Inc.’s biggest cheerleaders.

The entrepreneur from Largo, Fla., sells roughly $250,000 worth of baubles every month on the auction site. But the revenue Jansma gets from eBay has declined over the past year, and in January the company raised fees, denting his profits.

To compensate, he added inventory on his own site, gemaffair.com, which sells about $60,000 worth of pearls and other luxuries each month. In November, he opened an account with Overstock.com, where he sells $35,000 in merchandise per month. And in February, he began selling on Amazon.com, where sales have more than doubled each month.

“I hope eBay gets the message: People have choices, and if we’re not happy we’ll look elsewhere,” Jansma said. “I hope eBay will rise to the occasion.”

With roughly 150 million registered users, eBay ranks among the world’s most powerful companies, online or otherwise. It had more than 1.4 billion items listed last year. For every $100 spent online worldwide, $14 was spent on eBay.

But some say eBay’s blockbuster growth has engendered arrogance.

Entrepreneurs grumble that executives pander to big-ticket electronics vendors and industrial manufacturers — not the teddy bear enthusiasts and numismatists who were faithful a decade ago, when eBay was founded and enjoyed a kitschy obscurity. They complain about shoddy customer service, including site crashes and anti-fraud software that too often mistakes a legitimate business for a huckster.

Meanwhile, eBay executives are looking for new revenue as growth slows in North America and competition heats up from Amazon, Yahoo Inc., Google Inc. and plucky startups. Business experts agree that eBay faces daunting obstacles, such as cracking the nascent Chinese e-commerce market and broadening the audience for PayPal, the online payment division that still does 71 percent of its transactions through eBay.

“They’ve made good strides but haven’t fully monetized other opportunities,” said David Edwards, an analyst at American Technology Research in San Francisco. “The nature of a marketplace is that once you have a critical mass, it tends to stick, and there’s not a lot that can unseat it. But that’s not to say that eBay doesn’t have significant challenges ahead.”

EBay foes concede that it would be nearly impossible to eclipse the world’s largest online auction company. But that hasn’t stopped them from carving out niches where they perceive eBay to be weak.

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