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eBay plans to spend big on marketing

With companies piling on to the Internet auction space, eBay will launch an aggressive customer-acquisition campaign.

eBay, the popular auction Web site, plans to spend heavily this year to draw in new users, CEO Meg Whitman said at an investment conference this morning. But higher spending on customer acquisition still will allow the person-to-person exchange to remain profitable.

Last quarter, eBay boosted marketing expenditures and ended the year with 2.1 million-plus registered users, up 72 percent from September.

"There's no question that we have a touched a nerve with consumers," Whitman told the Nationsbanc Montgomery Securities investment conference today. "EBay lets them do something they couldn't do another way."

eBay is running hard to stay ahead of numerous copycat competitors. Yahoo has a person-to-person auction like eBay's, except that Yahoo Auctions is free to users. EBay charges a listing fee of 25 cents to $2 per item plus a percentage of the sales price.

Yesterday Yahoo announced it will work with Butterfield & Butterfield to conduct simultaneous online and live auctions of movie memorabilia and O.J. Simpson possessions. EBay hosted live, online bidding last month with auction house Guernseys to sell Mark McGwire homerun balls.

New auctions coming online include Sotheby, Millionaire.com, and 2TheMarket.com.

eBay's strategy for staying ahead of the competition includes improving users' experiences, investing in infrastructure so the service can scale to even more users, and expanding internationally. Last week, eBay launched country-specific auctions in the United Kingdom and Canada, and Whitman says additional services like payments, shipping, and customs clearance are in the works.

To boost what she calls eBay's "fun factor," the company has begun publishing an online newsletter and added 18 chat areas devoted to specific interests.

Whitman also addressed growing concern about fraud in person-to-person auctions, an area where eBay has been stung recently. She gave details on measures the auction site is taking to protect the privacy and safety of users, including tougher rules for deadbeats and shills, clarification of policies on auctioning illegal items, and closer relationships with law enforcement.

In addition, eBay recently added a new icon, offered through Equifax, to verify the identity of users. Through Lloyds of London, the company also insures products worth $25 to $200 and offers access to escrow services.

Part of the spending this year will go to Netscape, which announced today that its Netcenter site will promote eBay.