Start-up targets eBay deadbeats

Anyone who has marketed more than a handful of items on eBay or other auction sites has likely run into the type. This is the person who bids twice what you expected to garner for your used CD collection, only to admit after winning that he or she never had enough dough to pay for it.

Since its earliest days, eBay has warned its users to beware of deadbeat bidders but has largely left the process of weeding out troublemakers to the community-oriented environment for which the company is known. eBay relies almost completely on its users looking at feedback-rating pages, where people offer praise or criticism of their fellow eBay members, and judging for themselves who the real buyers and sellers are versus the unsavory pretenders.

Despite the success of eBay and its feedback system, at least one company believes the unscrupulous-bidding trend is a big enough problem to fuel a full-time business. DeadBeater, a 6-month-old start-up, is offering a subscription-based service that augments eBay's user-rating system.

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"As eBay has grown, the need for this sort of service has grown with it," said Bob Susskind, managing director and co-founder of DeadBeater. "(eBay) is founded on the idea that a user's bid is essentially a contract, but they're not enforcing that rule."

DeadBeater's service, which costs $5.95 per month, is aimed at eBay's many high-volume traders--people attempting to run a business over the site. The online system analyzes the user feedback available through eBay, gathers more detailed information on the people bidding on items, and can even block buyers who have spotty track records. The company declined to say how it gathers additional information.

"If you're trying to run 30 auctions at the same time, it's hard to do this sort of work, weeding out the problem bidders manually," Susskind said. "We're going to help people running businesses on eBay save time and increase their profits."

In addition to assigning a rating to each eBay member, DeadBeater, which is based in Incline Village, Nev., also provides an online forum for subscribers to share information about troublesome customers.

The company's service can be set up to automatically e-mail a subscriber when a bid has been placed on an item he is selling by a user with a low rating. The service can also inform a potential buyer with a less-than-stellar bidding history to contact a product's seller before being allowed to place a bid.

I'd say about 25% of the sellers I buy from have the worst communication skills on the planet, are unable to meet a commitment and yet, somehow, consistently get positive feedback. What is up with that?
--A M

Hani Durzy, a spokesman for San Jose, Calif.-based eBay, declined to comment directly on the DeadBeater service, but he said his company encourages vendors building tools for use with its site to join eBay's developer program, of which DeadBeater is not a member. Durzy said eBay remains confident that its own user-protection tools are still working.

"eBay was founded and grew on the concept that people are typically good, and a vast majority of transactions are completed problem-free," Durzy said. "We're constantly looking at ways to make people comfortable to do business, but we feel the system is safer than ever."

Durzy pointed out that eBay recently announced an update to its bid-history pages, which now offer its sellers additional information on how much is being bid for their items, or why someone has been allowed to retract a bid. The company has also added the capability for sellers to block bids from users who have negative feedback scores or who are responsible for multiple unpaid items. Both eBay and DeadBeater offer tools for blocking bidders based on their home country.

At least one industry watcher feels that DeadBeater could strike a chord with the auction giant's customers. Bruce Cundiff, an analyst at New York-based Jupiter Research, believes that as eBay continues to grow, so will the number of businesses looking to derive profits from its success.

"There is not a lot of concentration on services for eBay sellers, and if (DeadBeater) can build a better mousetrap, they just might attract users," Cundiff said. "It's almost like extending the same sort of protection services used by credit card companies to small merchants, which could be a viable opportunity."

Cundiff believes that the larger story remains the growing number of companies looking to make a profit off eBay-related business models, such as the pick-up and drop-off stores that offer to manage your entire auction process for a fee. He believes this trend will only serve to increase eBay's popularity and solidify the company's future by arming it with proven acquisition candidates, as was the case with PayPal, the online transaction service the auctioneer bought in 2002.

"eBay has to love the fact that entire cottage industries are being created around its business model," Cundiff said. "It would be hard to find a better indicator for the company's continued relevance."