Less Hassle, By Half

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It all began when Josh Kopelman went online to find a copy of John Grisham's The Testament. He was about to spend $20 to buy it new on Amazon, but he decided to see if there were any copies listed on eBay. There were 12 up for auction, starting for as low as $1. And nobody was bidding on them.

It occurred to Kopelman--a twenty-something University of Pennsylvania grad and high-tech entrepreneur--that online auctions had a flaw. They didn't work well for mass-produced items whose value was certain. So he decided to create an e-tailing site called "ebazon." Like eBay, it would connect individual buyers and sellers to trade low-cost, used goods. Like Amazon, it would offer simplicity of use and fixed prices.

Based in suburban Philadelphia, the site launched last January with the more euphonic name Half.com. (Derived from the rule, since abandoned, that an item could cost no more than half its list price.) The drill is simple. Half www.half.com) lets sellers list used books, CDs, videos and computer games for nothing. If they're bought, Half takes 15% of the price. To list an item, a seller just types in its ISBN or UPC. With a book's ISBN, Half can create a listing with the title, author, a picture of the book jacket and blurbs. UPCs enable a similar reference for videos and CDs.

Half got a jump-start from one of the greatest publicity coups in dotcom history. Its marketing guru talked Halfway, Ore. (pop. 345), into renaming itself Half.com, Ore., in exchange for $75,000 and 22 computers. The move made national headlines and landed Kopelman on NBC's Today Show with Katie Couric. Traffic and sales soared, and by June, Half was the 18th largest e-commerce site, with 250,000 registered users. That month eBay plunked down more than $300 million in stock to buy the company.

A major reason for Half's success--in November it hit No. 3 in the e-commerce rankings--is that Kopelman has replicated eBay's strengths. It is a "many-to-many" site, hooking up millions of users to buy and sell, which means it offers millions more trading (and profit) possibilities than Amazon or eToys, for instance. And like eBay, it is a "virtual" site. It doesn't have to shoulder the cost of acquiring, storing or shipping goods.

But just as impressive is the way in which Half's business model is different. Kopelman saw something the folks at eBay were slow to appreciate--just how much demand there was for fixed-price deals. "There are people who love the thrill of bidding and winning," says Kopelman. "But there are other people who don't want to win an auction, they just want the CD." Kopelman's goal was to make it easier to sell an item than to throw it away. He's not there yet--garbage still doesn't need to be bubble-wrapped or taken to the post office. But closing a deal at Half.com requires a fraction of the number of keystrokes that an eBay listing demands.

Half has also done an end-run around the fraud issues eBay has never been able to fully shake. The company bills the buyer and pays the seller, which means there's no danger that a seller will have to grapple with a bounced check. What's more, Half offers a buyer-protection guarantee on all sales. "You might be buying it from Bob in Des Moines, but you're also buying it from Half," says Kopelman.

To become seriously profitable, Half needs to emulate eBay further by selling more high-priced items. Kopelman's plan is to move into consumer electronics. That could be a hard sell, however, because consumers who buy used books over the Internet may not be as willing to take a chance on a used Palm Pilot.

But for now, eBay is clearly delighted with its new acquisition. Management is allowing Half to remain unusually autonomous, with Kopelman firmly in charge and its corporate offices still in Philadelphia. And eBay CEO Meg Whitman recently paid the site the ultimate compliment. She quietly began selling her old Princeton textbooks--at prices ranging from$3 to $17--on Half.