Blog » It's not 1999 any more
Lance Wiggs blogged yesterday on Air New Zealand auctioning themselves to the lowest bidder. I added my own thoughts in the comments, but I thought I'd take a moment to explain why I think Trade Me is wrong to assume they will continue to be the default venue of choice forever and ever amen.
Trade Me works for most people because it has the greatest number of buyers and sellers. If you want to sell something (e.g. a heater) you want to sell it in the marketplace with the greatest number of people looking to buy a second hand heater (Trade Me). If you're looking to buy a second hand heater, you want to shop in the marketplace with the greatest number of second hand heaters for sale (Trade Me). It's a "winner takes all" cycle that's difficult to break and it has allowed companies like Trade Me and eBay to remain dominant for over a decade despite their relative lack of innovation compared to would-be competitors.
But the thing about auctions, is that you only need two people to want it badly enough to achieve a fair market price (add a Buy Now, and you only need one). In the case of Air New Zealand auctioning international airfares for $1 reserve, there will be no shortage of people willing to suffer the pain of taking 30 seconds to sign up to a new site in order to place a bid. With Facebook Connect - you can now sign up to site with a single click. It's worth it, and Air NZ wouldn't be choosing alternative venues year after year if it wasn't working for them.
And this leads me to my second point. Trade Me is often considered the default venue for selling just because it has the highest volume of traffic. This is a lazy argument. It's qualified traffic that really matters. You don't need millions of visits a month to sell a handful of airfares at $1 reserve. Likewise you don't need millions of visits a month to be Mighty Ape and sell more copies of a new release videogame, DVD or Blu-ray than Trade Me or any other NZ retailer. People might not visit Mighty Ape to buy a second hand heater, but they'll visit by the truck load to buy a copy of Skyrim or Battlefield 3.
You just need to look at how specialist e-commerce platforms are destroying eBay's core business in the USA to realize that the world is different today than it was in 1999. Customers have billing relationships with multiple e-commerce providers, and finding them is just a click away thanks to Google and Facebook. In fact, the way Facebook allows e-commerce providers to leverage the social graph and instantly build trust is eroding the network effect advantage that eBay and Trade Me have enjoyed for over a decade. In 2010 you can build a new site and fill it with customers much more quickly than you could back in 2005 or 1999.
Trade Me may indeed still be a better fit for Air NZ, but it would be arrogant to assume that's because Trade Me has more traffic. Air NZ don't need Trade Me's natural traffic to run a successful auction, and that argument flows through to a growing number of vendors who are looking to start selling online.