Peter Griffin: Fee increase not enough to turn users off eBay

The online world let out a collective yelp of outrage last week as the huge auction website eBay imposed a fee increase on its millions of members.

From February 18 it will in many cases cost 60 per cent more to flog goods through eBay and although the outrage is unlikely to die down, the selling will continue with equal intensity.

That's because in the internet world, eBay has become the closest thing to a monopoly there is. It's also a very good service.

Where else could you find a signed copy of sci-fi writer Ray Bradbury's Dandelion Wine for US$75 or a glove box hinge for a 1965 Ford Mustang for US$10?

Even if you don't buy anything on eBay, or visit the site, media reports of wacky eBay sales are always a good laugh. There's the Florida woman who recently auctioned a grilled cheese sandwich reported to bear the image of the Virgin Mary - for US$28,000!

Last year eBay had 135 million registered users and earned US$778.2 million, or US$1.14 a share, on sales of US$3.27 billion. With that sort of scale the fee rises will generate a significant amount of extra cash for eBay.

Those increases range from a 60 per cent jump in the subscription rate for sellers who run eBay stores (from US$9.95 to US$15.95 a month) to a doubling of the cost of listing items for 10 days (to 40USc an item from 20USc).

So-called "Buy It Now" fees will no longer be charged at a flat rate, and will instead be determined based on the Buy It Now price.

If you're selling the odd trinket you won't feel the difference. But if you're a regular eBay seller you'll come to resent it.

New Zealand eBay members, many of whom are still waiting for their minute share of last year's settled class action lawsuit against eBay, received the same unapologetic letter as overseas members.

"These changes will help us continue to sustain and develop a thriving global marketplace, while balancing the needs of our buyers and sellers around the world," the letter read.

Usually it is lower prices that lead to a thriving marketplace and lower prices are usually driven by competition. But no one in the online auction world is close enough to touch eBay so there's certainly no incentive to cut fees.

The auction site has bumped up its prices simply because it can, and in doing so rendering all talk of defecting from eBay pure hot air.

The Motley Fool rightly described talk of bypassing the dominant auction site as trying to "boycott air". If you're an online wheeler-dealer, you can't live without it.

But the situation raises interesting questions about what will happen in the next decade as eBay grows more powerful and buying and selling online becomes the standard way of trading goods and services.

Will eBay face the same type of regulatory pressure as Microsoft has? I don't think it will get to that.

eBay is not like a telecoms giant or an electricity generator which is still reaping the benefits of having an infrastructure built by the state and later privatised.

It sprang from nowhere in the 90s. The great thing about the web is that by nature it has few barriers to entry.

And while eBay is vastly profitable, the future is not all record dividend payouts.

Wall St baulked at eBay's fourth quarter result, which didn't quite meet expectations, and is nervous about eBay's expensive investments in China, a fledgling ecommerce market.

Although eBay will remain dominant, anything can happen when technology is central to the proposition.

And the next few months may well prove for eBay's more agile competitors that the price rise plays right into their hands.

The rival auction site Overstock.com has already cut its fees to lure disgruntled eBay customers away.

TradeMe, New Zealand's own version of eBay, is in exactly the same powerful position but faces the same threat - companies that want part of the action and are working out how to fine-tune the auction process.

For the moment, there is nowhere to reach as wide an audience, sell your odds and ends as quickly or find rare trinkets as on eBay.

That's why I'll keep coughing up the extra money when I want to sell something.