Google Steps Into EBay Territory
Joel Boblit started buying and selling action figures on EBay in 1997. This year, he expects to sell $3 million worth of G.I. Joes, Transformers and Zoids.
That’s good news for EBay Inc., right? Wrong. Boblit is on the front line in the coming clash between two Internet titans that are winning customers and making money on the Net.
Boblit uses EBay, the world’s biggest Internet auction site, only for clearing out inventory from his online store. He gets most of his leads from Google, the world’s most popular site for searching the Web. It’s a cheaper way to reach customers, he says, and he doesn’t have the bother of running auctions: His prices are fixed.
Boblit and about 100,000 online vendors pay Google Technology Inc. to put their Web address and a couple lines of ad copy either in a colored stripe above Google’s search results or in shaded boxes on the right side of the screen.
Boblit’s ads have appeared when a user searches for “action figures,” “toy store,” “toys” and related subjects. It costs him about 8 cents each time a customer clicks on his site, BigBadToyStore.com. Since June 2002, he’s gotten 43,000 clicks from searches from “action figures” alone.
EBay, by contrast, charges a fee of 30 cents to $3.30 per listing. And it takes 5.25% of the first $25 in sales, plus smaller percentages beyond that. Adding boldface type costs $1. A colored band is $5. A digital photograph is 25 cents.
“If we were selling what we are now on EBay, our fees would be $8,000 to $10,000 a month,” Boblit says. He spends $1,200 a month on Google. “EBay is inconsequential at this point,” he says.
Boblit and thousands like him are turning Google into an online marketplace and pitting it against EBay, the Web’s most valuable company.
Google was the No. 5 Internet brand in the United States in March, with 44.7 million users, according to Nielsen//NetRatings. EBay was No. 6, with 36.4 million users.
Revenue at closely held, Mountain View, Calif.-based Google may reach $800 million this year, says Richard Fetyko, an analyst at Kaufman Bros. in New York. Profit may be as much as $200 million, he says.
EBay’s revenue, which consists of fees and advertising sales, rose 62% to $1.2 billion in 2002. Net income almost tripled to $250 million.
EBay’s stock has risen 86% in the last 12 months, giving the San Jose company a market value of $34.3 billion -- compared with $16.1 billion for Amazon .com Inc. The Standard & Poor’s 500 index has risen 9.4% in the same period.
“Companies that have figured out how to make money on the Net are going to get bigger than any of us imagined,” says Tim Draper, managing director at venture capital firm Draper Fisher Jurvetson in Redwood City, Calif.
Google and EBay stand out in post-bubble Silicon Valley for their staying power as well as their once improbable rivalry. Google’s headquarters, a two-story building beside U.S. Highway 101, is a throwback to the glory days.
Its offices look like a cubicle farm after Mardi Gras.
Chinese paper lights and streamers hang over the desks. Life-size cardboard Star Trek characters guard the hallways. Six lava lamps bubble away in the lobby in blue, red, yellow and green -- the candy colors that spell Google on the Spartan Web site.
In the five years since Stanford University students Sergey Brin, 29, and Larry Page, 30, founded Google, it’s become synonymous with Web searching. People “Google” one another before dates to find out where they went to school. They look for information on rare diseases or recipes that fit the contents of their refrigerators.
All of that adds up to more than 200 million queries a day, answered by 10,000 computers grouped in secret locations around the globe. Brin and Page declined to comment for this story.
Google is capitalizing on its reach by offering merchants such as Boblit the chance to bid on AdWords -- search terms that describe their wares and that can lead to top billing alongside the unpaid search results on Google’s site.
