Friday, March 28, 2008

eBay Suspends Digital Good Auction Format

eBay has announced that the Digital Delivery format listing flow will be disabled on March 31st. They cite abuse in the Seller Feedback system as the motivating factor for the change in policy. They can list their item as a Classified Ad at eBay still, but no transaction can take place there which defeats the purpose of the system.

They have good reason to look at the Feedback system manipulation caused by digital goods. I have seen many digital auctions at eBay priced as little as one penny ($0.01). This means a customer can buy an item, get feedback for themselves and the seller with very little cost. Their feedback scores will be artificially inflated because of having many, very low cost, transactions. Understandably, this is something eBay would like to avoid. The solution they propose however, is not in the best interest of anyone involved.

The first issue is that they do not explicitly prohibit Digital Goods from being sold in auction format. They are simply removing the Digital Delivery flow from the listing process. Sellers were able to sell and deliver their digital goods on eBay long before this flow ever existed and will likely just use those older processes to deliver their item. Our system has been servicing digital good delivery for years before their Digital Good flow. In fact, our own eBay Store (Power Seller with 99.9% positive feedback) does not even use the eBay Digital Delivery flow for handling our digital goods and we still achieve excellent results in terms of reliable delivery. The key is to match the digital good name, the auction title, and use PayPal's IPN to do a product lookup on auction payment and send the download to the customer in that way. Very straightforward and there are systems in place already to do it this way.

Another option is that sellers will be able to use a trick that has been known for some time for digital good sellers at PayPal. This trick was presented to me by a PayPal employee during one of the eBay Developer conferences held before eBay Live each year. You see, digital goods are not covered under PayPal's Seller Protection Policy because there is no reliable means to prove the item was delivered or not unlike physical goods which provide tracking information via a major carrier. The suggested solution was to sell a download via their website and then mail a small item to the customer using the major shipping carrier which would act as proof of delivery and be protected under the Seller Protection Policy. The seller could send a CD containing the files bought, but could simply send anything they chose, like a pencil. This obviously only make sense when selling larger value digital goods like software. However, using this principle, eBay sellers can list and sell digital goods in auction format and include a tangible, shipped item like: "Widget on CD- Plus Instant Download Delivery". Who knows if it will come to that though...

I think a better solution would be to put a minimum starting price point or Buy It Now price on any auction being listed via the Digital Delivery flow. As soon as the flow is invoked a simple trigger in the eBay system will require a Starting Price of say $5. This is the ideal solution. It will keep digital goods listed in their proper format instead of using the normal auction listing flow as mentioned above which will prevent the need for policing of auctions looking for digital goods under the new policy they currently are implementing. It will also keep eBay actively involved in the quickly growing digital good space. Otherwise, they will have to spend a considerable amount of resources tracking down sellers who list in the standard format. The Digital Delivery flow provides a centralized mechanism for eBay to track and manage this type of auction.

We have actually implemented a minimum price policy for Sellers on our system for listing their goods in our eBay Store. Sellers have two options in terms of listing digital goods when selling on our service. In their own auctions, and in the PayLoadz eBay Store. We do not enforce a price point when they list in their own auctions, but enforce a $1.00 minimum when listing in our own eBay Store. This is to ensure people are not simply flooding our store with worthless goods and to reduce the risk of negative feedback due to a seller configuration issue in their PayLoadz account (like not specifying a valid file for delivery). We'd rather not list an item that generates a negative feedback rating when the customer pays less than a dollar for the item.

Alternatively, eBay can look to a service provider, like PayLoadz who is a Certified Application on eBay, to enforce these policies for them and act as a single integration point for digital delivery. Just a thought ;)

Until eBay explicitly prohibits selling digital goods in auction format, then the old system (using our platform or another) will continue to work.

I hope someone is listening...