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This was in today's Business section of the New York Times
*****
EBay Says Fraud Crackdown Has Worked
By BRAD STONE
The online auction giant eBay wants the world to know that it is trying to clean up its site.
In January, the 12-year-old company, based in San Jose, Calif., announced what it characterized as a significant shift in its philosophy toward protecting eBay members from fraud.
Instead of a more hands-off approach that emphasized giving members the tools to make their own choices, it rolled out new efforts to combat the sale of counterfeit items and revised its feedback system to give buyers and sellers more information about each other.
At the annual three-day eBay Live conference for its members, which begins today in Boston, the company plans to discuss the progress of those efforts for the first time.
The results are promising. The company will report a 60 percent decline in the number of complaints from luxury goods makers that counterfeits of their products are being sold on the site. It also says that in the last four months it has banished tens of thousands of sellers from its auction marketplace who did not meet new, elevated standards.
But many of its efforts have also fallen short. Other companies whose products are not yet protected by the new anticounterfeiting measures still complain about piracy on eBay, and some longtime sellers complain that they are left in the dark about changes to the complex ecosystem on which they depend.
“Whenever you do things on eBay, you never necessarily get 100 percent of people happy with you,” Meg Whitman, eBay’s chief executive, said in an interview last week.
“We are very pleased with our anticounterfeit efforts,” she said. “We’ve seen some dramatic results. We’ve also seen good adoption of our enhanced feedback system, though not every seller loves it. But I think over time it will help.”
Some ominous statistics forced eBay to get tough on fraud. The percentage of active users on the site, those who have participated in auctions in the last 12 months, declined from 41 percent in 2005 to 36 percent this year — a possible sign that fewer eBay members find the site a safe place to do business.
“A piece of improving the buyer experience is improving trust and safety,” Ms. Whitman said.
The cornerstone of that effort is the anticounterfeiting campaign. EBay says the sale of fake brand-name goods on its site exploded when it expanded to China in 2004, but rights holders have complained to eBay about the problem for years.
EBay has responded in the past by asking companies to monitor auctions of their products and send them notices on items they believe to be fraudulent. That frustrated rights holders, who had to spend valuable time and money scouring the site. In 2004, Tiffany & Company sued eBay in New York after concluding that 73 percent of the products sold on the auction site that bore its name were counterfeit. The trial is scheduled to start in October.
Rights holders say their demands have pushed eBay into taking a stronger stance. EBay has rolled out these new measures to the 100 categories most favored by counterfeiters, including clothing and luxury goods like handbags.
Under the new rules in these categories, sellers face limits on the number of items they can sell and cannot sell items using short one- or three-day auctions, which are a favorite of scammers who hope to take their money and disappear. EBay also introduced a host of geographical restrictions, like preventing sellers in China and Hong Kong, where piracy is rampant, from putting up listings in those categories at all.
The new measures seem to be working, sellers in categories prone to counterfeiting say. “Almost overnight you saw a lot of fake Nikes disappear,” said Matt Kubancik, a 20-year-old footwear retailer from Louisville, Ky.
But not everyone is pleased. The Software Industry Association of America, a trade group, says that 90 percent of the software for sale on eBay is sold illegally. John Pinheiro, vice president for legal and human relations at FileMaker, a subsidiary of Apple, said his company had noticed little change in the last few months.
“They promised a lot of things over the years, and not much has materialized,” Mr. Pinheiro said. “It took us four years to get to these few antipiracy efforts.”
EBay disputes the 90 percent figure and says it is only beginning to expand its new antipiracy measures to the software category.
Many rights holders say they would also like the ability to approve auctions of products bearing their brand before they are posted to the site. Ms. Whitman said of that, “We have thought about it, that it may ultimately be in the second phase of what we do.”
In addition to its anticounterfeiting measures, eBay has also sought to raise the standards for sellers on its service. It has banned sellers with chronically bad “feedback” (the ratings left by buyers), and it now requires all new sellers to register with its payment subsidiary, PayPal, which verifies their identity by asking for a credit card or bank account number.
EBay has also updated the feedback mechanism, calling the expanded system, which was introduced on its United States site last month, Feedback 2.0. It added four dimensions to the ratings, asking buyers to separately evaluate the item description, the quality of the seller’s communications, the shipping and the shipping charges.
“We wanted new ways to help buyers distinguish good sellers from mediocre sellers,” said Rob Chestnut, eBay’s global head of trust and safety, who noted that too many sellers had nearly perfect approval ratings. “The old system was giving sellers a great pat on the back but not enough constructive criticism.”
Again, eBay’s good intentions yielded mixed results. Many sellers complained that they had no control over the shipping time and cost and that it was unfair to rank them on those topics. About 400 eBay sellers have signed an online petition against the new feedback system.
Also, fewer buyers are using the more complex and time-consuming rating tool. Scot Wingo, chief executive of ChannelAdvisor, which helps large retailers sell on eBay, says the number of transactions receiving feedback has declined by 10 percent since the system was introduced.
EBay said that the system was still new but that 70 percent of its sellers around the world were using it.
The reluctance of buyers to use the new feedback system is characteristic of eBay’s biggest challenge: making improvements to a network that has so many stakeholders that it is almost impossible to nudge it painlessly in any one direction.
“What happens is, as eBay plugs one problem, others come in and fill their spot,” Mr. Wingo of ChannelAdvisor said.
But Ms. Whitman said the company had no plans to rest on its laurels. “Fraud is inherent in marketplaces of our scale,” she said. “We have got to stay ahead of the bad guys. They get more sophisticated, so we have to get more sophisticated.”
*****
EBay Says Fraud Crackdown Has Worked
By BRAD STONE
The online auction giant eBay wants the world to know that it is trying to clean up its site.
In January, the 12-year-old company, based in San Jose, Calif., announced what it characterized as a significant shift in its philosophy toward protecting eBay members from fraud.
Instead of a more hands-off approach that emphasized giving members the tools to make their own choices, it rolled out new efforts to combat the sale of counterfeit items and revised its feedback system to give buyers and sellers more information about each other.
At the annual three-day eBay Live conference for its members, which begins today in Boston, the company plans to discuss the progress of those efforts for the first time.
The results are promising. The company will report a 60 percent decline in the number of complaints from luxury goods makers that counterfeits of their products are being sold on the site. It also says that in the last four months it has banished tens of thousands of sellers from its auction marketplace who did not meet new, elevated standards.
But many of its efforts have also fallen short. Other companies whose products are not yet protected by the new anticounterfeiting measures still complain about piracy on eBay, and some longtime sellers complain that they are left in the dark about changes to the complex ecosystem on which they depend.
“Whenever you do things on eBay, you never necessarily get 100 percent of people happy with you,” Meg Whitman, eBay’s chief executive, said in an interview last week.
“We are very pleased with our anticounterfeit efforts,” she said. “We’ve seen some dramatic results. We’ve also seen good adoption of our enhanced feedback system, though not every seller loves it. But I think over time it will help.”
Some ominous statistics forced eBay to get tough on fraud. The percentage of active users on the site, those who have participated in auctions in the last 12 months, declined from 41 percent in 2005 to 36 percent this year — a possible sign that fewer eBay members find the site a safe place to do business.
“A piece of improving the buyer experience is improving trust and safety,” Ms. Whitman said.
The cornerstone of that effort is the anticounterfeiting campaign. EBay says the sale of fake brand-name goods on its site exploded when it expanded to China in 2004, but rights holders have complained to eBay about the problem for years.
EBay has responded in the past by asking companies to monitor auctions of their products and send them notices on items they believe to be fraudulent. That frustrated rights holders, who had to spend valuable time and money scouring the site. In 2004, Tiffany & Company sued eBay in New York after concluding that 73 percent of the products sold on the auction site that bore its name were counterfeit. The trial is scheduled to start in October.
Rights holders say their demands have pushed eBay into taking a stronger stance. EBay has rolled out these new measures to the 100 categories most favored by counterfeiters, including clothing and luxury goods like handbags.
Under the new rules in these categories, sellers face limits on the number of items they can sell and cannot sell items using short one- or three-day auctions, which are a favorite of scammers who hope to take their money and disappear. EBay also introduced a host of geographical restrictions, like preventing sellers in China and Hong Kong, where piracy is rampant, from putting up listings in those categories at all.
The new measures seem to be working, sellers in categories prone to counterfeiting say. “Almost overnight you saw a lot of fake Nikes disappear,” said Matt Kubancik, a 20-year-old footwear retailer from Louisville, Ky.
But not everyone is pleased. The Software Industry Association of America, a trade group, says that 90 percent of the software for sale on eBay is sold illegally. John Pinheiro, vice president for legal and human relations at FileMaker, a subsidiary of Apple, said his company had noticed little change in the last few months.
“They promised a lot of things over the years, and not much has materialized,” Mr. Pinheiro said. “It took us four years to get to these few antipiracy efforts.”
EBay disputes the 90 percent figure and says it is only beginning to expand its new antipiracy measures to the software category.
Many rights holders say they would also like the ability to approve auctions of products bearing their brand before they are posted to the site. Ms. Whitman said of that, “We have thought about it, that it may ultimately be in the second phase of what we do.”
In addition to its anticounterfeiting measures, eBay has also sought to raise the standards for sellers on its service. It has banned sellers with chronically bad “feedback” (the ratings left by buyers), and it now requires all new sellers to register with its payment subsidiary, PayPal, which verifies their identity by asking for a credit card or bank account number.
EBay has also updated the feedback mechanism, calling the expanded system, which was introduced on its United States site last month, Feedback 2.0. It added four dimensions to the ratings, asking buyers to separately evaluate the item description, the quality of the seller’s communications, the shipping and the shipping charges.
“We wanted new ways to help buyers distinguish good sellers from mediocre sellers,” said Rob Chestnut, eBay’s global head of trust and safety, who noted that too many sellers had nearly perfect approval ratings. “The old system was giving sellers a great pat on the back but not enough constructive criticism.”
Again, eBay’s good intentions yielded mixed results. Many sellers complained that they had no control over the shipping time and cost and that it was unfair to rank them on those topics. About 400 eBay sellers have signed an online petition against the new feedback system.
Also, fewer buyers are using the more complex and time-consuming rating tool. Scot Wingo, chief executive of ChannelAdvisor, which helps large retailers sell on eBay, says the number of transactions receiving feedback has declined by 10 percent since the system was introduced.
EBay said that the system was still new but that 70 percent of its sellers around the world were using it.
The reluctance of buyers to use the new feedback system is characteristic of eBay’s biggest challenge: making improvements to a network that has so many stakeholders that it is almost impossible to nudge it painlessly in any one direction.
“What happens is, as eBay plugs one problem, others come in and fill their spot,” Mr. Wingo of ChannelAdvisor said.
But Ms. Whitman said the company had no plans to rest on its laurels. “Fraud is inherent in marketplaces of our scale,” she said. “We have got to stay ahead of the bad guys. They get more sophisticated, so we have to get more sophisticated.”
