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"eBay effect" spurs auction sites higher

Call it the eBay effect: An Internet retailer shows interest in an online auction, and Wall Street bids its stock price up 20 percent.

Call it the eBay effect: An Internet retailer shows interest in an online auction, and Wall Street promptly bids its stock price up 20 percent.

eBay, the wildly successful person-to-person auction site, has seen its shares trade as high as 321 after going public at 18 on September 24. Like other rising Net stocks, its generally upward trend comes with plenty of price volatility.

But eBay is profitable--unlike most e-tailers and virtually all Net auction stocks--and that fact hasn't been lost on the market.

The most recent beneficiaries of the eBay effect are online retailer Sharper Image and newly public Ticketmaster Online-CitySearch.

On Monday, Sharper Image's stock jumped 8.25 to close at 20.625 after the company, which earlier reported strong holiday sales online, said it will add an auction component next month.

Ticketmaster's news was more concrete--Monday it bought local auction CityAuction for $54 million in stock. Its shares rose 10.625 on Monday, then gained 3.625 yesterday to close at 71.1250.

Even staid old Sotheby's Holdings has seen its shares more than double in the last 90 days, on speculation the world's No. 2 auction house will ramp up Internet auctions. It has already conducted several auctions online.

"All you have to do is mention auction, and poof goes the stock price," said Fiona Swerdlow, digital commerce analyst at Jupiter Communications. "I'll let others debate how rational or irrational Wall Street is."

But it's not just the exuberance of stock traders. Netizens are taking to auctions too.

"There is a tremendous amount of interest in and excitement about auctions and their potential," Swerdlow added.

Despite sporadic problems with its site going offline for hours at a time several times last month, eBay has astutely managed the attention. The company garnered tremendous press attention for taking part in the recent auctioning of baseballs hit for home runs by record-setting sluggers Mark McGwire and Sammy Sosa during the memorable 1998 season.

One measure of the online auctions' appeal is the case of Internet Shopping Network, one of the oldest computer stores on the Net. In June 1997, ISN launched its First Auction site. Two months ago, it sold the computer store's customer list to Cyberian Outpost and made First Auction its principal online business.

ISN is owned by Barry Diller's USA Networks, which also owns 61 percent of Ticketmaster Online-CitySearch.

"I have long believed auctions to be an effective interactive experience on the Internet," Diller said in a statement this week.

uBid is another beneficiary. The computer products auction, spun off by parent Creative Computers, went public in December at 15 and closed yesterday at 100.3750. Its share have been volatile, however, trading between 30 and 189 since it went public.

Creative Computers, which still owns about 80 percent of uBid, has gone along for the ride too, with its shares climbing after uBid went public. It traded under 10 for most of last year but closed at 39.25 yesterday.

Even the granddaddy of Internet auction stocks, Onsale, has gained from the eBay effect, closing yesterday at 54.875 after barely breaking 20 for most of 1998.

Onsale CEO Jerry Kaplan thinks part of eBay's appeal is its broad base of users. eBay boasts 1.8 million registered users, and Kaplan figures some of them are buying eBay shares too, pushing its stock higher.

Will the eBay effect last?

"We have some concerns about eBay's valuation," said industry analyst Evie Black Dykema of Forrester Research. "We are somewhere concerned about the hype."

eBay closed yesterday at 240.50, off 51 or 17 percent.