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Is eBay's evolving business model being eclipsed by local competition?

When eBay, Inc. (NASDAQ: EBAY) recently began focusing on being more of a retail storefront than an online auction site, many saw it as the nail in the coffin of what was once an internet darling. Higher fees, angry sellers and a multitude of changes at eBay in recent years have many writing the company off as progress peaked in 2004 and has been falling ever since. Even former CEO Meg Whitman did not waste a chance on going over her self-imposed 10-year stint as the company's leader, having now left the company as of last year.

To add insult to injury, free classified listings are popping up all over the web to take over for what made eBay so powerful: connecting buyers and sellers for a transaction outside of the normal retail landscape. This grassroots commerce is what made eBay what it is. Its customers -- buyers and sellers -- did not want a normal retail transaction; they wanted a flea market and that is what eBay became. Except, that "flea" became an 800-pound gorilla.

Free classified providers like Oodle are winning business all over the web for niche audiences like those at MySpace.com and Walmart.com, two of Oodle's larger customers. Even localized free classified websites like Oklahoma City's OK4Free.com are getting in on the action. These are free websites to list items on -- unlike eBay. And they could be eating eBay's lunch soon if not already. To some who think eBay is turning into an also-ran in the online classified business, the welcome (albeit, smaller) competition is a good thing. Now, if someone could build a directory of all these free classified sites, customer defection from eBay could be quite a bit more rapid.

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Last updated: February 11, 2012: 08:04 AM

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