Talking about technology giants who started their business in garages is a very popular topic. Larry Page and Sergey Brin began work on GOOG in the garage of their girlfriend Susan Vodzycki in 1998. Jeff Bezos began work on Amazon in his garage in Bellevue
As for the most famous story of a garage start-up, this is, of course, the story of Bill Hewlitt and David Packard and the garage room rented by them in 1939, where the electronics company originates, which will later bear their names. Today this garage is a private museum
listed on the National Register of Historic Places of the USA.
It turns out, however, that many other important and large technology companies have their origins in a more respectable part of a typical American home - the living room.
It was there that the idea of LinkedIn began to appear
in 2003, after the founder of the platform, Reid Hoffman, invited several hundred of his friends to register online profiles on his website, which he was supposed to become an online networking site for professionals.
Living room literally served as the
basis for another service - Airbnb. After learning that a major conference would be held in San Francisco, and all the hotel rooms were completely sold out, two 27-year-old guys bought three inflatable mattresses and turned their living room into a bed and breakfast hostel. Six days and one launch of a website called airbedandbreakfast.com later, three guests paid Joe Goebbia and Brian Chesky $ 80 for the opportunity to sleep on the floor in the living room on these mattresses and try the breakfast prepared by the hosts the next morning. A year later, Airbnb was launched.
On the weekend before Labor Day 1995, Pierre Omidyar in his living room wrote the
first version of the code for the company, which would later become known as eBay. Initially, the site was called AuctionWeb, and the first item that appeared on it was not the Pez candy dispenser at all, as is commonly believed
, but a broken laser pointer that Omidyar purchased for $ 30. He set it up as a faulty thing, set a starting rate of $ 1, and witnessed a dashing struggle for the right to own this item: the pointer was sold for nearly $ 15. They say that Omidyar was so amazed that someone was really ready to pay for a broken laser pointer that he was convinced of the great prospects of the online market, where people could buy and sell collectibles, including broken ones.
Nearly 22 years later, another startup founded in 2004 in a different type of living room — the dorm room at the Harvard University campus — may end up being the most promising customer. It's about Facebook.
From the living room to the basement
EBay has been on horseback for most of the first decade of its operations.
2 years after the successful sale of a broken laser pointer, Omidyar received financing from Benchmark Capital in the amount of 6.7 million dollars and changed the site name to eBay. A year later, in March 1998, Meg Whitman was hired as president and CEO. In September of that year, eBay became a publicly traded company.
The first trading day closed at $ 53.50 per share on Ebay — three times the expected target price. Four years later, in 2002, eBay announced
it was acquiring PayPal for $ 1.5 billion — a move aimed at improving and simplifying the mechanisms for paying for items: this may seem incredible, but most of the deals were paid at the time with checks.
Almost overnight, eBay turned into a Mecca for collectors and seekers of lucrative deals and the “Craiglist killer”, as it was then called, expanding its operations to 27 countries. In August 2001, The Industry Standard published a
material in which it noted the unlimited growth potential of the company, due to the fact that the platform simplified the sale of goods and interaction between buyers and sellers, without having to deal with the goods themselves. According to the authors of the article, “this is the story of how a freaky auctioneer of useless collectible items grew into a commercial giant ... and, probably, the only major and yet undoubtedly successful player who survived the dot-com crisis.”
In 2004, Fortune published an article
that praised eBay as the fastest growing company in the last 8 years, ahead of Dell or Microsoft in this indicator. The material described a chronicle of eBay growth from the time when the company's revenue in just eight years had grown from a modest 5.7 million to 3.2 billion dollars.
But over the next 4 years, eBay will experience the volatility of market dynamics.
Consumers began to tire of auctions — it became more difficult to attract and retain sellers. Users began to complain about the difficulty of navigating the site, caused by the awkwardly working search function on the site - not the best feature for the service, whose success very much depends on how quickly you can find the necessary item on it. There were also complaints about the quality of the goods sold and the low level of service in cases where the consumer reported that the received item did not fit its description.
The sellers also had their complaints about the tariffs and commissions of the platform, which, in their opinion, were too high. They also spoke sullenly about the sharp drop in sales
and traffic on their pages, due to fatigue from the auction model and growing competition from other online merchants (including Amazon) offering new products with discounts on websites with simpler purchase schemes. and more convenient navigation.
Therefore, eBay has launched a number of innovations aimed at mitigating the impact of such market processes, as well as attracting new buyers and sellers to its platform.
The auction model is largely a thing of the past. It was replaced by the "Buy Now" button and fixed rates. In 2007, eBay acquired the StubHub online ticketing service, and in 2011, GSI Commerce and Magento e-commerce technology platforms to create greater synergy with online retailers who were its customers.
Speaking of online retailers. The company tried its best to achieve their location. In 2012, eBay CEO John Donaghou
, who replaced
Meg Whitman in her post in 2008, to some extent constantly retailers made it clear that “Amazon is your enemy and eBay is your friend” in order to convince them to upload their product catalogs in eBay-branded storefronts. According to Reuters
, that year, 50,000 American stores did, including Home Depot, Neiman Marcus, Lowe's, JCPenney, Barnes & Noble, Best Buy, Target, and GNC. They all used eBay as a way to sell their products that they could not sell through other channels, offering them to eBay customers at a discount.
At the same time, consumers found others in the network other places where they could buy things that previously were only profitable to buy on eBay.
Founded in 2005, Etsy has grown from an online site that hosts only the unique handicrafts of craftsmen to a place to buy vintage collectibles. Commission online stores like The RealReal and Poshmark (both founded in 2011) and Tradesy (2012) offered such high-quality souvenir products that quickly became the main place where female customers (yes, mostly women) could quench their thirst for luxury or upscale design items. Founded in 2007, Gilt Groupe and Rue La La sold designer souvenirs with the highest possible discounts, and their range of goods was replenished with new things every day. Founded in 2009, Zulily, offering mothers a daily updated assortment of new products for children and sudden sales, became for them the main direction of shopping.
As for the faithful eBay customers, in the meantime they did not know what to do in a situation where eBay could not offer anything like this.
The once-lasting reputation of this site as a magic wand in the acquisition of a wide variety of high-quality collectibles, which eBay itself has been trying to get rid of for some time, has now been somewhat spoiled. Collectible items offered on the site now included too much garbage, greatly expanding the scope of such concepts as "vintage" and "antiques".
Buyers who had previously been interested in eBay offers for new products, such as clothes, electronics, toys, found that now they need to compare these deals with offers from a number of other online sites, including Amazon, which in some cases offered the best prices, as well as more convenient and predictable delivery times.
Nevertheless, the problem of the eBay market turned out to be largely masked by the indicators of the entire portfolio of businesses collected by eBay over the years through acquisitions. PayPal and Stubhub played a particularly prominent role. After the separation of eBay and PayPal, this apparent difference “before and after” became the subject of discussion for all analysts and investors. Seven months after the split, disappointing
eBay earnings triggered the sale of private investors to sell 13% of the shares, with the result that analysts talked about the extremely minimal growth in both revenue and the number of active buyers of the platform.
Unfortunately, from then until now, eBay’s business is not going at all like before.
The average amount of monthly consumer spending falls
over the past five quarters, falling to $ 41.30 at the moment. During the teleconferences on the company's financial activities in the second quarter, CEO Devin Venig said
that the revenue growth of the market direction of the platform was a modest 4%. The number of new active users in the last quarter increased by 2 million people, as a result of which the figure now stands at 171 million active buyers worldwide. Mr. Wenig also said that Stubhub, which, in contrast to the slowdown in the company's market business, always gave about 9% sales growth and 34% annual growth, this time turned out to be weaker: due to increasing competition and long-term decline in events, the gross cost of sales of services decreased by 5%, and revenue grew by only 5%. As a result, despite a 46.4% increase
in e-commerce in general, since the beginning of the year, eBay has grown by only 18.7% over the same period.
Apparently, the dynamics of changes in operating profitability are also moving in the wrong direction: if in 2012 this indicator was 50%, in 2016 it decreased to 38%, and in the second quarter of 2017 it was 20.5% in general, which is a few percent less than last year indicator for the 2nd quarter. This decrease is due to the company's investment in marketing and the main product, aimed at retaining existing consumers and sellers and attracting new customers. Many observers believe that the recently launched initiatives of a company like the Price Match Guarantee, operating on 80 thousand offers worldwide, will only increase the pressure on the already decreasing margin.
You ask if there is any good news? Yes, they belong to a small, but growing segment of the international eBay platform - advertisements for headings. According to Venig, profits from this direction in the second quarter increased by 6% against the background of strong user interest and a steady flow of traffic, reaching $ 216 million.
And this is exactly the type of business that Facebook has been trying (unsuccessfully) to launch since 2004.
From the basement to the penthouse?
From the very beginning of its existence, Facebook had ambitions to enter the commerce market.
The social network created its first market for ads by category in 2007. The long and tedious work lasted as many as 7 years, and the business itself did not bring any significant results and was closed in 2014.
And in 2009, Facebook Stores was launched - a service that was positioned by Facebook as a way by which retailers could sell products to those who supported them with their likes. After considerable investments in the promotion of their “Stores”, retailers, who expect fans of their products to easily turn into buyers, have found that users do not even become “fans”. Only 4% of users
who expressed their sympathies to one or another company ended up at least once more returning to the brand page.
You can argue by saying that 99.5% of cases of user involvement still occur in the news feed and that like is the best ticket to the top news feed. But it is not so.
At that time, there was one feature that the owners of the Facebook stores at that time did not know (this was before Facebook became a public company and its algorithms became public). Its essence was that the social network algorithms then blocked a similar mechanism for getting into the news feed. The only way to stake out a place in it and to be noticed was the purchase of advertising space and the expectation that the advertisement will be noticed by a sufficient number of users who like it, thereby promoting it to the top.
But most users did not.
Over the years, this service has evolved, new buttons for buying appeared on Facebook windows and new features were launched in partnership with various players like Shopify, aimed at empowering users to buy from windows on Facebook. Not standing still and e-commerce in the social. network. There were options for the purchase of goods directly from the news feed and advertising retailers in it. Nevertheless, the proceeds from these initiatives turned out to be so unimpressive that it never even won the mention in the company's quarterly financial statements
In 2012, an internal gift-giving service Facebook Gifts was launched. It would seem that this idea is a win-win for social platforms. The system reminded users of the upcoming birthday of a friend or other special date and offered to select and send a postcard for the occasion. However, if something went wrong, then at the first time after starting the service, the user could only send a postcard offline, which is why the original idea to pleasantly surprise the recipient with the same day’s message lost its meaning. A year later, Facebook abandoned real postcards in favor of virtual ones, but by that time the moment had already been lost. As a result, in 2014 the service was closed.
In the fall of 2016, Facebook decided to try its luck once again by launching the service, which received the nickname “a more friendly version of Craiglist” from the press. It was an online market where everyone could directly sell an unnecessary item, whether it be clothes, collectibles, toys, tickets. And even retailers could, if desired, sell there. In general, everything is just like on Craiglist.
Well, or on eBay.
Perfect by the standards of online commerce union?
Last week, Facebook and eBay announced a partnership, in which daily eBay promotions will now receive a separate tab in the Facebook Marketplace. As part of this experiment, lucrative offers will be visible to Facebook users, but when they are selected, they will be sent to eBay to complete the purchase. A few days after this announcement, Facebook announced that Marketplace will now be available in 17 new European countries. Residents of most of these countries also have access to eBay special offers that fall under the partnership agreement.
In general, commerce has long been for Facebook something of a mirage in the desert, because despite all the attempts of the company to enter this sphere, customers still refuse to go to the social network for shopping. In addition, our own research data shows that users do not see the Mark Zuckerberg platform as the main place for online shopping. Obviously, the idea of buying goods, and, therefore, storing credit card data on social networks in close proximity with their real names and surnames does not fit in the minds of consumers.
However, this situation has never bothered Facebook, since the social network has never sought to become a major tycoon of e-commerce. Instead, she perfectly managed to turn into an advertising platform and very quickly at the same time master the transition to mobile platforms. According to eMarketer
, Facebook’s advertising revenue will be $ 34 billion. Together with Google, both companies this year will cover about half of the total budget circulating in the advertising market ...
But Facebook and analysts are worried about the coming recession of the company's advertising activity: there will soon be no space for advertising on Facebook. As for Messenger, an application that until recently was considered something of a prodigy in the field of commerce and chatbot, it, in fact, did not strengthen the commercial potential of Facebook. Even Mark Zuckerberg himself has already informed investors that the rate of monetization of Messenger is very small and possible only in the long term.
This means that Facebook will have to look for new ways to monetize its user base and diversify risks. And in this sense, commerce may well become one of the areas, the development of which the company will take seriously. It is possible to effectively use all the advantages of their social network to build an ecosystem based on the Marketplace - one of the activities that the company should pay attention to.
And if you consider her past experience as a prologue, then the road to the top will be difficult.
But partnership with eBay could be useful, because it allows you to solve the problems of attracting first-class merchants and the consumer audience in order to make them stay on it for a long time.
Two billion unique monthly and 1.3 billion daily visitors to the social platform Facebook could increase the chances of success: eBay sellers will be intrigued by the opportunity to advertise their products to one of the largest online audiences on the web. And the point here is not that eBay has stopped growing and attracting new users. The fact is that this organic growth has become very slow and in recent years only slowed down due to the ever-growing competition.
A partnership agreement with Facebook could change this equation, reducing the size of some marketing and product investments and thus increasing operational profitability. And besides, we should not forget about the growing ticket business eBay, available worldwide - Stubhub. Last year, he acquired Ticketbis
along with its entire international base of buyers and sellers. The partnership with eBay has another plus: access to a variety of tools for merchants working on the basis of the PayPal portfolio of tools, including payment mechanisms, raising working capital, delivery and returns.
A company with a market capitalization of 37.2 billion
could be a valid Facebook ticket to the world of online commerce. Of course, this option can not be called ideal, if only because of the above disadvantages. This is not to say that the deal with eBay will simplify everything. This is not so, since attempts to combine assets struggling for survival with a business that has not yet manifested itself cannot be called a simple task.
Still, it’s highly likely that trying to “push off” from eBay’s assets, reputation and customer base will cost Facebook much less than trying to continue to build its own commercial capacity on a global scale. And, of course, this option is cheaper than buying Amazon, the cost of which is estimated at about 440 billion. For eBay, such a union can also be called a success, because the company is now more than ever in need of fresh blood, and the partnership with Facebook will allow it to get access to huge international user base.
Of course, everything described above is nothing more than my vision of the situation in the light of the facts stated. Many players become partners, but never make a merger deal. , , .
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