eBay Enters Hosting As Tool to Retain Power Sellers

eBay has expanded into web hosting in a bid to retain power sellers, who increasingly are looking to expand beyond the borders of eBay's massive online marketplace. The auction giant's new ProStores service offers e-commerce hosting accounts ranging from $6.95 to $249 a month, letting merchants choose from a wide variety of features.

eBay watchers had been anticipating its move into hosting since the company's January acquisition of Kurant, a developer of e-commerce systems. eBay is using Kurant software to allow sellers to link web sites hosted at third-party providers with eBay's sales databases. "This enables an eBay seller to say 'I'd also like to have an outward-facing web site with the same back end," eBay CEO Meg Whitman said in a May 25 presentation at a Goldman Sachs conference. "You can push the same products to either store. I think it gives our sellers the ability to have a web-based storefront, in addition to an eBay storefront."

eBay's enormous growth has spawned an ecosystem of third-party providers catering to auction power sellers. Services such as Andale, Marketworks, Vendio and Zoovy offer storefronts that improve on the functionality of eBay Stores, allowing sellers to benefit from Bay's marketplace and traffic while building awareness of their own brands. But many of these third-party providers also equip merchants to sell through competing services such as Overstock.com, Amazon or Froogle (Google's shopping portal), which could cut into eBay's fees.

The stakes are significant, as evidenced by the growth of the Professional eBay Sellers Alliance, whose 700 members generate more than 70 million transactions and $1 billion in sales annually for eBay. With Kurant, eBay hopes to retain control of the backend, offering a way for power sellers to create an their own online identity without having to port their product database to another provider or storefront management system. For some power sellers, the move to diversify is at least partially driven by grievances with eBay, especially over increases in fees.

ProStores offers eBay a competitive service that may keep some of that revenue in-house. eBay is not hosting the service itself, however, but running ProStores as a private-label service managed by Florida-based web hoster Affinity Internet.