Web 2.0 marks the decline of Ebay and Amazon March 26, 2007Posted by ravimhatre in Consumer internet, Ecommerce, Internet, Lead gen, Search, start-up, web 2.0.
Om Malik is on to an important trend in his recent post regarding the marginalization of Ebay, Amazon and other legacy ecommerce marketplaces with the advent of e-commerce 2.0. Given the emergence of new and better merchandising technologies, more intuitive and comprehensive product search services, and the proliferation of contextual and performance-based advertising channels, small and mid-sized merchants are able to establish rapidly growing web outlets more easily than ever before.
In the first generation of ecommerce, marketplaces with recognizable consumer brands (like Ebay and Amazon) could offer small and mid-sized merchants access to large pools of customers. However, there was a significant premium charged for this access – usually 10 or more percent of the transaction price. Bear in mind that the typical merchant will have total gross margins of no more than 20-30 percent.
Like many net-based ecosystems we’re now witnessing the emergence of an open environment to replace first generation “closed” marketplaces or communities. Instead of listing on Ebay or Amazon and relying on their brand to attract customers and their standardized merchandising and search to drive purchases, a merchant can now easily build a product website that will drive organic traffic from vertical and horizontal search engines picking up their unique product content and also utilize a variety of performance based advertising channels including comparision shopping lead-gen sites (the top 10 sites delivered over 100 Million shopping leads to merchants in January 2007) as well as search engine keyword marketing to acquire new customers. These channels are less expensive and drive significantly more customers and purchases at higher margins than legacy marketplaces.
From a VC perspective, we believe a key requirement to making this work is the emergence of next-generation product search services that tame the Internet’s infinite shelf-space and provide consumers with truly comprehensive product search results through an interface that is highly intuitive and digestable. Several start-ups are intensely working to solve this problem such as TheFind (LSVP portfolio company) Become, and ShopWiki. Let us know what you think of their services.