EBay Adds Services to the Auction Block

Auction giant partners with ELance to offer wide range of professional services online.

Tom Mainelli, PCWorld.com

EBay plans to build on its reputation as the place to buy and sell just about anything by offering something completely different: services.

The online auction giant has joined with service marketplace company ELance to launch on Wednesday the Services for Business section. At the cobranded site, buyers and sellers of services--everything from copywriting to graphic design to marketing plans--can meet and do business.

The move illustrates the growth potential of the online services market, and is a smart one for EBay if it hopes to remain atop the Internet exchange game, says one analyst.

Service Evolution

Offering services through EBay is a natural. In fact, many EBay users were beginning to sell skills as well as goods on the auction site, says Kevin Pursglove, company spokesperson. Evolution is a hallmark of EBay: Customers start creating their own sections to fill a need. It happened with cars, real estate, and business items, and it was beginning to happen with services, he says.

EBay monitors such evolutions and often grows them, he says. Sometimes the company throws its resources behind a new category, and other times it nurtures an offshoot through a partnership. For example, when EBay decided to grow the auto category, it partnered with Autotrader.com; it joined with ZipRealty.com to handle real estate.

Since ELance has acted as a kind of online matchmaker for contract professionals and businesses since 1999, it is a logical partner for this category, Pursglove says. EBay's service transactions will actually take place on ELance's Web site, he adds.

Auctioning services is very different from auctioning a tangible product, which is EBay's expertise, Pursglove adds.

"Services are an elusive concept that require a qualitative judgment," agrees Maria Miller, vice president of marketing at ELance.

Product auctions are simple--the highest bidder wins. Auctioning services requires the person or company that wants to fill a job to look at both the bid price and the qualifications of the "bidder." Price isn't always the deciding factor, and often people choose a provider with a higher price based on better credentials, she says.

Another difference is the method of payment. On EBay, the person who sells an item pays a percentage to EBay after the sale. With services, ELance charges a fee to the service provider who wins the bid.

EBay Adds Legitimacy

Competing services also match workers with tasks, including Guru.com and EXP.com. But EBay's partnership could push the market much larger, says Vernon Keenan, analyst with market research firm Keenan Vision.

"EBay has traffic galore," and more traffic should help grow the services marketplace, Keenan says. EBay claims 22 million users; ELance's roster has 250,000 professionals.

Beyond eyeballs, however, a services marketplace also needs strong branding, Keenan says.

"If EBay is a trusted brand, it will help ELance," he says. "It remains to be seen if the trust EBay has generated in hard goods will translate into services. Providing services is tougher than selling Beanie Babies."

But EBay may be better equipped to handle the challenge than some people expect, he says. Most people aren't aware of EBay's success with business-to-business transactions, and even fewer realize the company supports some 100,000 online merchants, he says.

Next Growth Area?

The stakes for EBay and ELance could be huge, as services will come to be a huge chunk of the Internet exchange marketplace down the road, Keenan says.

For example, Keenan expects that by 2004 nearly $9.5 billion in service transactions will be conducted for computer professional services alone. By that time, another $4.2 billion will change hands for management, consulting, and public relations; $2.8 billion for legal services; and another $2.2 billion for accounting and bookkeeping. And those are just a few examples.

A Forrester Research study estimates that the U.S. market for selling services over the Internet will reach $220 billion by the year 2003.