The Amoral Mr. Smith

215 years later, Adam Smith is having his last laugh again. Here we go again, arguing on the seemingly incompatibility of business and humanity. Is web 2.0 really so different from previous incarnations of business models, opportunities, and organizations that once again we hold our hand together and declare . . . “this time, the rules have changed!!!” Wasn’t it just a short 5 years ago we declared the same thing with the last new economy revolution.

Can the peer economy find a business model? Does the peer economy deserve a business model?

Yes, Mr. Carr, web 2.0 is amoral . . . so is all businesses. . . and sometimes it can be immoral like some businesses. And its very amorality is what helps the aggregate “be moral.” No delusion of grandeur here.

Like Om said, the conundrum does exist and that many times eBay gets skewered for being the first web 2.0 (kinda of, close enough, web 1.5 atleast?) company to grow-up, make some money, and make some hard decisions. . . be it business or moral ones. (remember how eBay banned handguns on the site and got skewered? Freedom of speech or moral responsibility? Not an easy answer!)

Too many web 2.0 startups hide behind the mantra of openness as well as the lack financial downside (due to lack of scale and community critical mass) by simply spending VC’s money in search of a business model that might or might not exist. Even worse, they delay decision making on their “moral” responsibility on how best to manage and share value with their community and user contributed content until someone else figures it out.

Peter Rip & Alec Sauders is right, that web 2.0 needs a business model to be sustainable . . . whatever good these companies want to do for the world, it needs money to pay for the sky high mortgage payments in the Bay Area and kid’s college tuitions of the people that work there to be sustainable.

Here at eBay we walk the tight rope every day, sometime we argue endlessly amongst ourselves. We also know that if we don’t make some decisions, there is no one we can “copy” from. As the first “web 2.0” company (please forgive me for the audacity of the claim), I think eBay does have a lot to offer on striking the balance between morality and immorality – ie amorality.

Peter and Alec’s post is directly related to what happened with Oodle and Craigslist (and Om’s question on whether the community deserves to profit from their contribution). Be it webservice API’s, crawling, or scraping. . . the underlying technology does not matter. . . the question is how do you share value and make money when the atomization of value contribution is distributed and hidden behind the end user experience – be it another website, web service, or an another user.

eBay does have a model. . . not THE model or even a model that applies to anyone but eBay . . . but it does have one. . . For making a platform/marketplace (check out the # of employees eBay have in the 10K, its not such a hands off business as many might think) eBay take a portion of the value. Sellers make their margin as well (if they don’t, they wont come back and eBay will slowly die). Buyer gets a better deal than they would have from another site (so they would come back too).

Finally, direct to Peter’s point, on the API side of eBay. Furthermore, in some cases the API calls are free other times not. And in many cases, eBay actually PAY our partners who drive traffic (and transactions) to the site using the API’s. In short, based on the value creation equation and use case, money (and value) flows all different ways not just towards eBay. eBay have TRIED to strike a balance between openness and monetization. It works for now, and it can work better. As mashups become more popular, I’m sure more issues will arise. But eBay will be sticking our neck out trying to make it work.

BTW, the usual disclaimers apply. Everything in this blog is my own opinion. I do not represent eBay nor does it represent me. I am not directly involved in the many decisions made mentioned above nor work at the business divisions mentioned above. None of the data/information is proprietary. Think of me simply as a biased observer.