In the blog post entitled Rapleaf to Challenge eBay Feedback Mike Arrington talks about newly formed Rapleaf which aims to build a competitor to eBay's feedback system. This idea shows a lot of insight on the part of the founders. The value that eBay provides to sellers and buyers is primarily the reputation system and not as a venue for auctions. The network effects inherent in eBay's reputation system make it the ultimate kind of lock-in. No power seller or buyer will look at alternatives even if they are free (like Yahoo! Auctions) because they don't want to start from scratch with the reputation they've built or trust trading with people whose reputations haven't been built. However it isn't a slam dunk that Rapleaf will be a successful idea. 

In his post entitled Rapleaf's Fatal Flaws Ian McAllister of Windows Live Shopping writes

Flaw #1 - Transaction Unaware
Rapleaf is not in the middle of transactions. They have no way to determine if a transaction between two parties actually took place. Co-founder Auren Hoffman claims that their sophisticated human and machine-based fraud detection will be able to detect fraud but to me this seems like complete hand-waving...The success of eBay's feedback system rests completely on the fact that they attach feedback only to completed transactions where eBay collects money via commission.
 
Flaw #2 - Cold Start
Every new startup has a cold start problem and must build users, customers, partners, etc. from the ground up but Rapleaf has the mother of all cold start problems. The post mentioned nothing about how they plan to build mindshare in the market and I think they'll be dead in the water if they expect users to start going to www.rapleaf.com in droves all of a sudden and being keen to trust one of the 342 Rapleaf trusted sellers based on 2 items of feedback not attached to any verified transaction.

Flaw #2 was something I'd considered but Flaw #1 didn't even occur to me. Now that I consider it, I can't see how they can be successful as a competitor of companies like eBay since they aren't part of the transaction. It would seem to make more sense for them to be a partner of eBay except that there is no incentive for eBay to partner with them and thus provide an avenue out of the lock-in of eBay's feedback system.

Does this mean Rapleaf is DOA?


 

Wednesday, April 26, 2006 4:50:05 AM (GMT Daylight Time, UTC+01:00)
Hmm, you're probably not aware of it, but shopping.live.com isn't accessible from the 'outside' world yet ;)
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