From The Wall Street Journal Online
In its search for growth, eBay Inc. is starting to go after teenagers' wallets, teaming with social-networking sites to lure younger customers.
The San Jose, Calif., online auctioneer is working on launching a feature for visitors to social-networking company Bebo Inc., which caters largely to teenagers. The idea is, Bebo users would be able to use the site to post lists of items they want to sell or buy on eBay. Clicking on an item on the list would send Bebo users to eBay, bringing eBay a potentially lucrative stream of new visitors.
EBay is "looking to engage a younger demographic in a very creative way," says Jim Scheinman, vice president of business development at Bebo, San Francisco. The majority of Ebay's users now are 35 to 44 years old.
This is just one of several overtures that eBay has recently made to social-networking Web sites, the popular online hangouts where people can build personal profiles with photos and videos, and send messages to each other. EBay has also been talking to News Corp.'s MySpace, the biggest social-networking site, which counts teens and 20-somethings among its core user base, about ways to partner on "peer commerce," say people familiar with the matter. This would allow MySpace users to buy and sell items from each other using eBay's online-commerce technology and PayPal electronic-payment system, these people said. MySpace declined to comment.
In January, eBay also quietly made a deal with Facebook Inc., another large social-networking site aimed primarily at college-age users. Facebook's users can now search for used textbooks on a special eBay-sponsored "Student Superstore" page on Facebook, and join a group associated with the page. To search for or buy items, users can type words into a search box that then directs users to Half.com, a discount e-commerce site that eBay owns. Another search box directs users to the main eBay site. EBay paid Facebook an undisclosed amount to create the page and post other advertisements.
Cody Lyell, a 17-year-old high-school student in Stamps, Ark., joined the "Student Superstore" group on Facebook a few weeks ago and has visited it six or seven times since. He was already an eBay fan, but recently he used the Facebook link to eBay to search for a cellphone instead of opening a new window in his browser. "I'm on Facebook all the time, and it's easier to get to," he says.
"It makes sense that eBay would advertise Half.com on Facebook," says Mike Murphy, Facebook's vice president of media sales. "Half.com is targeted at college students and young adults, and Facebook engages that demographic like no other site can."
The move to build partnerships with hot social-networking sites comes at a time when eBay's growth has slowed. Last year, eBay's revenue grew 31% to $6 billion, down from its triple-digit pace in the late '90s. EBay has reached a saturation point with its existing audience, analysts say. To spur new growth, eBay has tried expanding overseas in countries including China and Korea, and has launched a more mainstream site called eBay Express to sell products at fixed prices, which has so far fallen flat.
EBay could now be looking to attract new Internet users as they come online. EBay's visitor traffic dwarfs that of MySpace, Facebook, and Bebo -- it attracted 80.7 million unique U.S. visitors in January, compared with 61.5 million for MySpace, 19 million for Facebook, and 3.6 million for Bebo, according to comScore. But the social-networking sites, which have been around for just a few years, are growing quickly among a coveted younger audience that sees the sites as a new front door into the Web. Today, only 38% of eBay users are 12 to 34 years old, compared with 46% of MySpace users, 55% of Facebook users, and 69% of Bebo users, according to comScore.
Working with social-networking sites "establishes eBay as the resource to find what you want -- a used iPod, for example -- and gets [young users] aware early," says Patti Freeman Evans, an analyst at JupiterKagan Inc.'s JupiterResearch. Still, she notes that young people actually spend less money online than their older counterparts, as they have less disposable income.
EBay is playing down its partnerships with social-networking companies. Spokesman Brad Williams says the efforts are disparate deals, with the Facebook venture amounting to a straightforward advertising purchase, and the Bebo deal a way for eBay to take advantage of a feature that Bebo provides to all of its users. "We're always talking with potential partners and making deals," he says, adding that making deals with social-networking companies to reach a younger audience is "not a strategic priority for us." But he acknowledges any deal with MySpace could potentially be more significant.
Internally, eBay is also looking at ways to leverage the social-networking phenomenon. EBay Research Labs, formed in 2005 to research new technologies, is examining how eBay could let its buyers and sellers join communities on its Web site based on their interests and buying habits, just as high-school students on MySpace might create groups around a common interest like a rock band.
The tie-ups with young Web companies may not only help eBay attract a younger audience. They also are a test for eBay's effort to use partnerships to pull in traffic from other Web sites.
Some of its current relationships are becoming more complicated. Last week, 10.1% of traffic to the main eBay site came from Google, compared with 9.4% in the year-ago period, according to Hitwise, a Web-tracking service. EBay last year signed a multiyear deal with Google Inc., allowing the Internet search giant to exclusively display text ads on eBay's sites outside of the U.S. in exchange for paying eBay a portion of the revenue from some ads.
But Google is now becoming more of an eBay rival, giving eBay a motive to seek new partnerships that would bring visitor traffic its way. Google last year introduced Google Checkout, a service that rivals eBay's PayPal electronics-payment service.
Adding to that, search-engine advertisements are increasingly costly. Some of eBay's biggest sellers have built their own retail Web sites outside of eBay and are using ads on Google to drive customers there. That adds to competition for search-engine keywords from mainstream rivals like Target Corp. "When one channel is wildly successful for you as well as for others, it will become more costly, and you'll naturally want to look for diversification," Ms. Freeman Evans says.
One potential downside: Establishing a presence on the popular social-networking sites gives some eBay critics a high-profile forum for their gripes. At Facebook's "Student Superstore" group, which recently counted more than 1,900 members, one student posted a message that read, "how cool ebay on facebook..." But another commented, "Half ripped me off don't use them."
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