EBay Bids on Small-Biz Auction Market

SAN FRANCISCO (03/15/2000) - Online auctioneer eBay Inc. took a small but serious step into the white-hot market for business-to-business auctions today, with a new site aimed at small businesses.

The site, dubbed eBay Business Exchange, is part of eBay's ongoing strategy to tap new markets to continue fueling the growth initially sparked by its popular consumer-to-consumer auctions. It caters to businesses with fewer than 100 workers.

During the past year, businesses sold an increasingly large percentage of merchandise on eBay -- sometimes to other businesses and sometimes to consumers. The new business unit is intended to capitalize on that trend and will highlight items aimed at business owners that are listed on eBay's main site. The Business Exchange already features 60,000 items in 34 categories ranging from computers and software to desks, vending machines and industrial equipment.

"We saw the need to elevate these items to a site where businesses have easy access to them," eBay Chief Executive Officer Brian Swette said during a conference call. Swette said the fragmented and fast-growing small-business market is ideally suited for a marketplace like the Business Exchange.

Business-to-business marketplaces are sprouting at a feverish pace, and eBay is certain to face competition from a slew of lesser-known companies that already target the small-business market. They include Business.com, a company hatched by Jake Winebaum's eCompanies Internet incubator; Microsoft Corp. -backed bCentral; and Internet Capital Group-backed Onvia, which is already headed for an IPO (initial public offering).

But by all accounts, the market for small businesses is big. Citing figures from the U.S. Small Business Administration, Swette said businesses with fewer than 100 employees generate 34 percent of goods and services and represent roughly 33 percent of total payroll expenses in the U.S. Businesses with fewer than 20 employees generated 78 percent of the new jobs created between 1994 and 1998, Swette said.

Swette declined to say how much of eBay's revenues are expected to come from the new site, but analysts briefed by the company said the Business Exchange is not likely to add to eBay's profits in the near term.

In recent months, eBay gradually has expanded its core businesses. Last year, the San Jose, California-based firm acquired high-end auctioneer Butterfield & Butterfield and vintage-car seller Kruse International. Earlier this month, eBay announced a deal with AutoTrader.com to create an auction marketplace for used cars. And eBay has expanded into payment systems with its acquisition of Billpoint. EBay also dipped its toe in business-to-business auctions with eBay Pro, a site it launched in November in Germany.

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