Two weeks ago, the company shocked millions of users by radically rewriting the constitution of the democratic republic of Ebay, founded in 1995 not just as an auction site but also as a social experiment in online self-government. For most of those 13 years, Ebay has been run largely as a self-policed island, a place where order was preserved less by real world laws than by norms and customs and expectations and reputations that were almost entirely virtual.
Ebayers governed themselves by rating each transaction using the sites "feedback" system, where they could report crooks, not to the state but to each other. The theory was that, as in a medieval souk in which everyone knew everyone, everyone on Ebay would know who the crooks were by reading their feedback. Now the company has basically admitted that the cybersouk model does not work: buyers did not tell the truth about sellers, and sellers did not tell the truth about buyers. And in a market where traders lie, the trust that is so central to online commerce cannot flourish.
From now on, Ebayers will not be democratic equals and they will lose a lot of their autonomy: buyers will still be able to rate sellers, raising a red flag to warn others away from merchants who are fraudsters or just plain bad at their business. But sellers will no longer be able to leave negative feedback on buyers including those who do not pay. Instead, Ebay will step in to help protect honest sellers from dishonest buyers. But most sellers see this as a dramatic shift in the balance of power within Ebay society, and they are right. In future, the Ebay consumer will be king: buyers will easily be able to threaten sellers with negative feedback and sellers will find it much harder to strike back. Many sellers fear the new dictatorship of the consumer.
Ebay says the changes were crucial to boosting the confidence of buyers, too many of whom were intimidated into remaining silent about bad transactions because they feared retaliatory feedback from sellers. Unhappy buyers too often found that, if they complained about a transaction through feedback, the seller would retaliate by insulting them online, even if they had done nothing wrong. Most Ebay buyers take their feedback very seriously: I should know I have a perfect Ebay feedback rating and I am irrationally attached to it. I do not want anyone besmirching my good name online. So over the 10 years that I have been trading on Ebay, I have never left negative feedback even for the worst transaction. Even in the best of all possible online worlds, humankind eventually disappoints but I was too intimidated ever to say so.
So from a buyers point of view, the changes are welcome: as Ebay points out, other online merchants do not publicly badmouth their customers.
The whole point of feedback was to enable strangers to trade with each other online by establishing trust: Ebay is just trying to restore integrity to the system.
Chrysanthos Dellarocas, a University of Maryland expert on Ebay feedback, says: "Ebay has realised the limits of self-governance it is very difficult to induce people to tell the truth in such settings." His research finds that Ebay buyers are happy with a transaction about 80 per cent of the time but that 99 per cent of Ebay feedback is positive because users report positive experiences more than negative ones.
For those who were there from the start of this experiment in digitising utopia, including me, this is very disillusioning. Ann Wood, a prominent Ebay seller of luxury brands, reluctantly accepts that change is inevitable but points out that Ebay is about more than business. "This is a big cultural change for a place where both commerce and community matter. The often delightful relationships that buyers and sellers develop on Ebay will be strained by the tilt to almost complete buyer-power."
Feedback is about psychology, as much as economics. Only time will tell how changing the gestalt of the place will change the numbers. patti.waldmeir@ft.com
