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March 25, 2005

Credit card fraud and online payment processors

A few years back I was running a little ecommerce service as part of my Magic: The Gathering trading card site Back when I was in the thick of things playing the game I used to win a lot of cards and did a hell of a lot of trading and selling at every tournament. More often I enjoyed the trading and selling more than the tournament itself.

Once my site became huge and I realised that there really wasn’t a good online card shop for Australians I decided to try and be that card shop. I had the audience and that’s usually the hard part. I managed to locate some wholesalers and went to work creating what I called MTGParadise Mail Order. I listed a lot of my personal collection which I had built up over the years from winning, buying and selling. I also listed sealed new product which was sold in boxes and booster packs which I located from the wholesalers. Because I had no wish to expose myself to too much stock investment I would almost “drop ship” before drop shipping became common for the public to do, in the sense that I would buy sealed product as sales came through rather than maintain a new stock inventory. Unfortunately it wasn’t real drop shipping since I had to still order the products, have them shipped to me, and then ship them out to the client which slowed things down.

The service did reasonably well. It was a horribly manual process because I would have to update card lists and inventory counts all by hand and I spent a lot of time running to the post office. I didn’t plan the service to be a proper business so I wasn’t considering systematising my inventory and having an online shopping cart like overseas card stores (which I would for sure do now, manual updates are a pain!). Another problem was that card selling has tiny margins and if it wasn’t for the fact that I managed to win cards I don’t think I would have made much profit. I did enjoy it for the most part though so I kept it going for a good year or so while studying at university.

One day I got a query from a person in Thailand wanting to buy boxes of cards. The profit wouldn’t be much because of the aforementioned tiny margins, but it would be significant enough that I was very keen to get his business.

He wanted to pay with credit card.

I asked my father about taking credit cards since he did for his business. My dad offered use of his “click-clack” manual credit card processor for the order. The customer emailed his credit card number and details and we checked the number against the ‘reported stolen’ list and it was fine. I processed the order, shipped the cards and was pleased with my first big sale.

Over the next few months I continued to have increasingly significant orders from this client which I carefully processed through my father’s credit card processor. Since I was doing such a regular amount I decided to get my own merchant account and after some looking around a bank was willing to provide me with the account. I then started to process orders through my own account.

One day many months after the first Thailand order I got a call from my father’s wife about a chargeback that had been initiated on the first credit card order I had processed from this customer in Thailand. I was worried, but not too worried because I thought that since we had verified the card for every purchase and it checked out that it just must be a mistake. I emailed the client and he told me it was just a mistake at his end so I relaxed a bit.

Unfortunately it wasn’t, the customer was a credit card fraudster and I had been very stupid. Over the next few weeks I came to grips with the fact that many thousands of dollars of sales would be ‘bouncing’. Initially I was angry with the banks that they didn’t offer more protection but as I slowly investigated the whole merchant account system I realised that the merchant is usually always the one taking the risk and that when no signature from the customer is present, which for web based orders is not really feasible, then the customer has all the power. I also read over the communications from the months of dealing with this client and realised that there were plenty of warning signs that I just refused to take notice of. I was caught up in the ‘business’ of it all and being very naive.

It was a lesson learnt. I learnt about credit card fraud, merchant accounts and the risk involved with selling over the Internet. I learnt to be more cautious and not jump with eagerness at every significant order that comes through. Call me paranoid, but it’s from experience. Note that I am complaining from the point of view of a merchant but there are instances where the customer has problems too.

When I then went on to setup credit card payment options for my clients at I was very careful. By this time I had discovered paypal and later I would also learn about Paymate, an Australian version of Paypal. These services were reasonably good solutions to provide online payment options and to this day BetterEdit processes many transactions online through them.

I have not had one problem with credit card fraud for any Betteredit essay editing service order (touch wood) but on many occasions I have been contacted by the staff at Paymate regarding suspect orders. After my experiences I really appreciate the extra layer of protection provided by Paymate. They protect you before an order is processed and offer personalised protection. As an Australian running an Australian based business I can recommend Paymate as one of the safest ways to accept credit cards and I don’t mind paying the fees for that extra level of security. Sure there are features I’d like to see and things I’d like changed at Paymate, but for the moment they offer the best option available.

I would also like to say I feel secure with Paypal but to be honest I do not. I’ve heard a lot of horror stories from other Paypal users. I’ve read through the chargeback policies at Paypal and while they do have a ‘department’ to deal with fraud, they make every effort to argue the case on behalf of their sellers and have an ‘industry leading’ low fraud rate I don’t feel 100% confident. They seem very reactive rather than proactive when dealing with credit card fraud. Their system doesn’t talk much about how they protect you from first taking fraudulent credit card orders, rather they help you to argue your case after a chargeback occurs. I know from experience that for online orders the merchant has little hope because the credit card company almost always is in favour of the cardholder.

The Paypal website seems designed to make it difficult to contact a person. I’ve tried to contact them over the phone and spent an annoyingly long time waiting and trying to navigate a phone system clearly designed so they don’t have to employ too many phone staff. Their web support is much the same. Their whole system tries to avoid providing any personal support. They point you to look for an answer online via their FAQs which is great for the easy questions but often leads to a wild goose chase if you want to find answer to your very particular question. Even just timely and helpful customer service email support would be good but I always seem to find myself waiting a few days for a response that only half answers my question. Paymate on the other hand has a simple ‘Contact’ link which pops up an email that goes direct to a real live person that responds within 24 hours with a good answer. What more could you ask for.

All the problems at Paypal seem symptomatic of a business that got too big too quickly and I hope over time their customer support will improve as it ‘catches up’. All in all though I should note that Paypal has been good for my business and since it is the market leader in online payment processing it will most likely remain as a payment option at

Yaro Starak
BetterEdit Manager

Filed under: Uncategorized — admin @ 3:29 AM

March 21, 2005

A Yaz! Update

It’s the weekend here in Canada so I allowed myself to indulge in a hobby site I’m working on called Yaz! which is an Australian student community and trading site. I’m calling the site a hobby because a) I don’t intend to make any money from it and b) I don’t want to distract myself away from business projects too much. I love running these community forum style sites but sometimes I can pour so much time and energy into them that I forget that I do have to work sometimes on business,

So far things are growing nice and steadily over at Yaz!. We had our first columnist sign up to write articles on a weekly basis which really goes a long way to legitimise the site as an entertainment source. Unfortunately at this stage most of the users are lurkers or one time sales posters, listing their textbook for sale (etc.) and then running away. Hopefully we can establish a few regulars soon so the place will be a bit more lively.

In the meantime, drawing on my experiences growing MTGParadise, I’m adding new content whenever possible so the place doesn’t die down. Yaz! has started to get enough members that it’s starting to look like it might make it to critical mass but for the moment we are still in that precarious point of having a very quiet looking forum.

I spent some time yesterday expanding the main content pages to a larger width. I originally launched the site with a 640 resolution so it would fit in even the oldest and smallest monitors however I always had intentions to expand it to an 800 pixel size. Having the extra space allowed me to increase the amount of content included on the front page and the site is really starting to take shape as a media content portal for students. I also changed some of the code to utlise PHP includes rather than SSI since PHP runs more efficiently. Load times are significantly quicker on the front page now.

I often lament my inability to code software as I surf around and see a lot of web software features, such as, that would be perfect for Yaz. Also more dedicated textbook exchange tools, tutoring databases and trading software could all enhance the usability of Yaz!.

A friend pointed out a project called php college exchange which looks like a PHPNuke style open source content management portal site. It looks very promising but it’s a work in progress. A lot of the features I’d like are not yet developed. I contacted the lead developer about perhaps doing some custom work for me but he was a student too busy at school.

I then went on a typical entrepreneur style idea trip, taking the college portal concept and turning it into a start-up business. I went even as far as thinking about getting venture funding and hiring a team of software developers, marketing the software to universities and schools and establishing it as the pre-eminent college portal software. After going for a walk however I thought some more over it and while I think it’s a good idea and there is a need for it, I’m in no position to chase it as a start-up business AND more importantly I reminded myself that the same challenges that I face now with Yaz! (growing user numbers and content) I would still face regardless of how feature rich the software was.

So I decided to write the idea down in my little textpad with all the other ideas I have for possible future implementation. I reminded myself that Yaz! can take off just using the forum software as the means for trade. It doesn’t need the bells and whistles, it needs users. When Yaz! gets large enough then I can consider adding the software and have a thriving community to help develop the features they want, rather than me guess what they want.

By the way, we have some interesting sex, dating and relationships topics over at Yaz! Forum which you might be interested in. Feel free to register and participate :)

Yaro Starak
Yaz! Community Leader

Filed under: Blogroll — admin @ 2:14 AM

March 20, 2005

A new pricing structure

I’ve been discussing with our editor team at BetterEdit about a new pricing structure. I believe we have lost some clients due to our current prices. I would like to increase sales conversion rates and I think changing pricing may be the solution.

Currently there are many clients that prefer a quick fix solution and do not really utilise our critiquing service especially if their deadlines are tight, in which case it’s usually a print and hand in situation. My initial idea is to segment the pricing structure to offer a premium service which includes the critique and an opportunity to have interaction with the editor. We will also offer a basic edit service for those in a hurry or price conscious. I’m still collecting feedback from our editing team regarding whether they are willing to test the new system.

The potential problem I see with this system is that the premium service will not sell and students will expect miracles from the basic edit service where they really need the feedback and guidance as provided by the premium service. We can try to force students by stating that their writing needs extensive help, but this may just turn them away.

In the end it is about testing the market to see what happens.

Yaro Starak
BetterEdit Manager

Filed under: Blogroll — admin @ 2:47 AM

March 18, 2005

Lucky or smart?

Ahh…books are good. Chapters, borders, indigo, barnes and noble and all bookshops are good. too. Heck, even eBay is a good bookshop sometimes (I have to drop ebay into every blog entry I make :).

Yesterday before and after meeting up with a friend in downtown Toronto I went to the Chapters in the eaton centre shopping mall. I like going to the super bookshops for two reasons – they usually have a Starbucks, and they allow people to just sit around and read books they haven’t bought. It’s sort of like a library for new books except you can’t leave with them (that would be stealing). With Starbucks there too it’s just the perfect place for a person like me to read, sit in front of a laptop and look busy while watching people, just chill and basically loiter around. Nice.

I usually head to the business books section and see if I can find a few neat entrepreneur or business biography books. I’m more into the anecdotal story type books, not the boring textbooks on sales, marketing, donald trump…etc etc. Sometimes I stumble across a book small enough that I can finish it in an hour or two. The less-than-hundred-pages-but-I’d-never-spend-$20-on type books. I read ‘who moved my cheese‘ in a couple of hours at Borders in Brisbane City once.

This time I picked up a new book, ‘Lucky or Smart? : Secrets to an Entrepreneurial Life‘ by Bo Peabody. Bo started Tripod, one of the first services I ever used on the Internet when I first went looking to build a website. For those that don’t know, Tripod offers website hosting and a web site building tool for people that don’t know HTML. At least that’s what they did back in 99 when I looked them up. I actually ended going with one of their rivals, GeoCities (which later was purchased by Yahoo!) to host and build my first ever website. Needless to say Bo became quite rich when Tripod was purchased by Lycos.

Bo’s book was an interesting read. Very light but it had a few noteworthy lessons for entrepreneurs that are worth recounting here.

1. Beware the EGO. Watch your own ego and learn to work with other egos. In other words, don’t take things personally.

2. Be courteous in all business dealings, even if other people are being bastards. You never know when courteous actions will come back to benefit you in the future.

3. Don’t believe the hype. Don’t over digest news and media about the industry you are interested in. Focus on what you do and don’t change it to try and catch on to the latest thing as reported in the press. The press is two months old anyway.

And his main point – be smart enough to know when you are lucky rather than smart. Often your friends, family, peer groups, the media and everyone around you will call you a genius when something you do is successful. The reality could be that you just happened to do something at the right time and right place. A good entrepreneur knows how to take action to create opportunities to become lucky. Then when luck strikes he uses that awareness to build on it.

Yaro Starak
Young Entrepreneur

Filed under: Uncategorized — admin @ 7:42 AM

March 12, 2005

The desire for success…what is success?

I only have a few weeks left now in Canada. I’ll be sad to leave my family but happy to return to Brisbane to see my parents and friends and get on with business projects. Walking the streets of downtown Toronto today made me realise that I’ve only just started my relationship with this city. When I next return it’s going to be for a longer stay and I’m going to live downtown and try and set up an independent life. Brisbane will always be home but I want Toronto to also be home.

To set up two homes in cities on either side of the world from eachother is not easy, the main reason being financial restrictions. You can’t take $2000 trips across the ocean whenever you feel like it if that’s more than your monthly income total. Luckily, and unlike a lot of working people, my current work lifestyle means that I could probably make a living in either city and be comfortable enough by my standards. I don’t consume much. I’m not tied to a career at a company and I don’t need to apply for holiday leave to go overseas.

It would be easier if I were rich. Not stinking rich, but above average, enough that I can fly when I want to, how I want to and have a place to live in at each city. To do this requires significant financial freedom. I’ve always had goals, many of which I impose on myself because I want to prove firstly to myself but also to my parents, my friends, everyone, that I can achieve significant success. In today’s society generally that equates to financial success. True I remind myself that money doesn’t buy happiness, maybe just to make sure I don’t fall too hard if I don’t become wealthy, or maybe because it’s a good philosophy to have – you are as happy as your needs, and if your needs are simple, you’re simply happy.

My business goals have always been, and still are, to create something that brings me financial freedom and to prove that I can do it on my own. The apartment in Toronto, the house in Brisbane and the first class tickets between each country are currently pipedreams. I can pay for my day-to-day necessities on my own. I’m financially independent. I can do what I do now and live contented enough with good food, shelter, and enough left over for entertainment. The basics are covered. That makes me happy. I feel secure.

But it’s not enough.

Often I am impatient. I want super success yesterday. I know true value comes from working for it and patience and consistency pays off in the long run. Great original ideas are few and far between and only a rare few people start something that turns them into millionaires. It’s a conflicting struggle. You remind yourself that working smart and consistently will lead to success and keep using the big picture, the big goals, as motivation. But you also remind yourself that if super success doesn’t occur it doesn’t matter anyway, you have already achieved something worthwhile and can be considered a success.

The balance between realistic motivation, a healthy philosophy on life, day-to-day work, grand plans and patience all intermingle, each taking a turn to be in focus.

In the end though, happiness is true success, so why should it matter if you can’t fly first-class Brisbane to Toronto and back?

Yaro Starak
BetterEdit Manager

PS. I’m interested to hear from others what they consider to be success in their lives? Are you rich? Do you want to be? What motivates you to work at whatever you work on now? Do you consider yourself already successful, in which case, what do you work towards now? Please use the comments function to respond.

Filed under: Uncategorized — admin @ 3:16 PM

March 8, 2005

Not first to market? Provide a support service instead!

Were you a little too slow to get your idea out there? Perhaps you thought of something great but someone else thought of it too and executed it just that little bit better than you did. Whatever the reason if at first you don’t succeed try and use another person’s success to make your own!

I may sound like a broken record, but again I mention ‘the perfect store‘ by Adam Cohen, the story of ebay. In the book there were a lot of little side stories about events not directly part of eBay but influenced by the online auction site. These little side stories provided some of the most interesting content of the book and help to illustrate my point for this blog entry.

What do, AuctionWatch and the Online Traders Web Alliance (OTWA) have in common? They are all enterprises that were created as a result of eBay. was started by your normal everyday eBay trader after realising that auctioning shipping supplies was highly profitable. How did they find out – they did an auction for shipping supplies after buying too much for their other auctions. They sold a stupid amount of supplies and decided to focus on that area instead. They opened a warehouse and eventually the whole family got involved. If you take a look at the website too you will notice that in this case, simplicity seems to be working!

The other two sites I mentioned are auction sub-communities that developed as a result of needing third-party locations to discuss online auctions, in particular eBay, without eBay being able to control the conversation like they can in their own community. Eventually these community sites grew real big and hey presto you have enough people for a web business (and to crash your servers too!). You can read more about the story behind these projects in the book.

Alternatively if your idea happens to have already been implemented by multiple online businesses, perhaps consider creating a piece of aggregating software. CheapFlights is a website that allows you to search many websites at once for discount travel. Rather than compete and offer the flights they simply collect all the data and present it to surfers in once place. People can then find the cheapest flights without having to visit multiple websites. CheapFlights makes revenue on a commission or per visitor basis that they send to the travel agents and airline sites.

There is no reason you can’t apply this principle to many other niche industries that may presently have a lot of competitors. Electronics? Beauty supplies? Hotel Accommodation? Used Cars? You can also go for a niche to suit your own marketplace or interests. Again, if you don’t have the skills to build the technology there are plenty of freelancers out there that can build it for you – think Elance.

So the moral of the story is – if there is a community you belong to or a service or product you use or you know of a very successful business and you can’t niche your market to compete then perhaps consider working to take advantage of their success. Think about what their customers purchase and try and establish a support service or product to meet their needs.

Yaro Starak
BetterEdit Manager

Filed under: Uncategorized — admin @ 7:21 AM

February 25, 2005

State of the union…BetterEdit update.

Well it’s about time I did an update on where I am at with BetterEdit. If you read my entry titled ‘mind of a human entrepreneur‘ you would realise I’ve been awash with options, at least within my head anyway!

I’m still in Canada. I can though happily say I have made a decision regarding how BetterEdit is going to continue growing it’s Canadian user base.

I found a lost message on my cell phone voicemail asking about BetterEdit. I had no idea how long it was sitting there but I called back and it turned out to be Zunaid, a fellow that runs a business putting up posters in Toronto. He had seen my posters popping up and gave me a call to ask about helping with distribution.

I met with Zunaid and he turned out to be what I was looking for in a poster distributor. He made an effort to get my business which was more than I could say about any of the other poster distributing operations. He was upfront, honest and serious, all characteristics I appreciate in a business relationship. We discussed my needs and nutted out an arrangement and I hope to have a long term relationship with him. As long as I get reasonable results for my investment I will continue to distribute posters in Toronto, and if that proves successful Zunaid can also help me with some of the large universities in the surrounding area. It’s not going to be the cheapest, but Zunaid has certainly been fair with his pricing. I’m treating him in a sense like an advertising manager – get me results and I’ll give you a bigger budget.

Zunaid has already taken over most of my runs here which left me personally, in an unusual situation. I’ve been a bit lost for things to do. There are always countless little things I can do for BetterEdit and I keep at that list most days but they aren’t a specific focus, more an ongoing chore list. I came to Canada with two objectives regarding BetterEdit – test the market using posters and find someone to take over postering (done!) and to complete and launch of the BetterEdit Student Library (also done! – but will continue to grow of course).

So I needed a new major objective. Thanks to reading all the Internet business biographies I’ve been mentioning in this blog, especially the eBay book, I’ve had all these ideas churning over in my head. At some point during my readings, in fact at about 3am one morning it hit me that I could combine a lot of my ideas into one website and even launch it now myself. Most of my ideas I had been shelving for after my return to Brisbane and after I hire a web dev guru to build all my ideas because they were technically beyond me. But on this night I realised there was no reason why I couldn’t do it, in some way, by myself right now. I already had the skills and experience from building and I figured I could try and make lightning strike twice with this new project.

Okay, you are probably a bit lost – what the hell is this guy talking about right?!?

I’ve had many ideas for projects to do with the student marketplace, which seems to interest me the most, because I’m exposed to it a lot when running BetterEdit. The synergy of this new project with BetterEdit and with me personally is perfect. I can’t really describe in words how relevant this idea is, so instead I’ll show you.

A few days ago I launched a new site called Yaz! You can find the site at You can also find a good explanation I wrote describing how I came up with the concept. For those really keen, you can read my news post at MTGParadise telling my old friends about the new site (and also an interesting discussion about the legalities of trading essays on Yaz!). If you read all that you will have a pretty good understanding of what Yaz! is all about.

I put Yaz! together in a few days using the existing BetterEdit forum, a few custom modifications and by combining some old templates I built for the BetterEdit and MTGParadise early days. Of course it’s very early days still for Yaz! and I expect it will be months of ongoing promotion before the site reaches a good number of users and posts (critical mass) and I hope word of mouth will start to take over. It’s not a new idea, the student portal concept, but I’m in a very good position to make it work and most of all I’m having fun with the site so I’ll continue to pour energy into it. However it doesn’t actually take much time to promote it because most of my current channels of promotion for BetterEdit, can be replicated for Yaz! (there is no reason why I can’t put up Yaz! posters at the same time as BetterEdit posters, for example).

You may be wondering what my revenue model is for the site – well guess what, I don’t have one at this stage. I do, if the site takes off, have loose ideas to generate revenue from advertising, possibly subscription based services, but I’d be reinvesting a lot of that back into enhancing the technology behind the site. The forums are not the ideal trading platform for a super large community, but they are perfect to test an idea like this. Forums are good in that they are open, easy to join and allow a natural progression of a concept. However, they don’t provide all the tools I’d like to see. The great thing is, usually a site like this grows so organically that the community itself defines it’s needs so I’m very much going to let this project define it’s own boundaries and see what works. I’ll keep throwing ideas and features at users, but it will be the community that makes the final decision simply by doing what they want to do (if you read the eBay book you will see this is a very eBayasian concept).

So my plans now are – I’m going to head back to Brisbane soon enough. Canada is taken care of for now and I don’t want to spend any more time or money then I have already budgeted for this area. I will turn my focus back on to Australia and start to develop my grand plan. The combination of three ideas into one network – BetterEdit, Yaz! and – and they will feed and grow off each other.

At least, that’s what I am thinking right now…but I do change my mind easily 😉

Yaro Starak
BetterEdit Manager

Filed under: Blogroll — admin @ 1:48 PM

February 18, 2005

Beating the trend and riding the technology wave.

“…(he) showed the company the immense traffic Nullsoft was getting to its site as people were downloading Winamp…(He) returned to Frankel (the creator of Winamp) with a six-month advertising contract…and a check for $300,000.”

I’m reading another Internet business book at the moment (yes I read a lot of entrepreneur books), ‘all the rave – The Rise and Fall of Shawn Fanning’s Napster‘ by Joseph Menn. The paraphrased quote above comes from a brief section in the book about Winamp, the extremely popular shareware MP3 player. Frankel, the fellow that built the software and distributed it on his website didn’t want to run it as a business but a mate came to him suggesting he should. He told his friend to go see what he could do and he came back with a cheque for advertising worth $300,000. Nice. That would make for a good day.

From there on Winamp went on to be a succesful business and is still the leading MP3 player on the market today. This story demonstrates the amazing opportunity there is on the Internet, even if you aren’t looking for it. At the time MP3 was a technology that was taking over the world. Winamp was a geek’s little piece of software that he gave away to others for free because he could. The software was simple and met a rising need, word spread, traffic skyrocketed and a $300k cheque came in out of the blue.

The best bit about this story is that anyone can replicate it if they determine (or guess) a trend for a mass market need before it happens. The Internet, and Internet technology, is going to continue to evolve. There will be another MP3 like revolution. In fact there will be many. Some will be huge (think about movies – when will there be a MP3-like encoding for movie files? – the 3MB full length film, I’d download that!) others will be in a smaller market niche. Some are happening right now and others are in development for tomorrow.

All you need to do is think of what will catch on, develop a piece of software or a website or even just register the .com ( anyone?) before the trend hits or anyone else does, and you could have a nice big cheque too!

Okay, easier said than done of course, otherwise everyone would be doing it. However it doesn’t hurt to stay abreast of trends in technology and keep your ear to the floor for the next big thing. And remember, if you can dream it, someone else out there can build it for you, so don’t let a lack of technological skills hold you back.

Yaro Starak
BetterEdit Manager

Filed under: Uncategorized — admin @ 4:01 AM

February 17, 2005

More insights from eBay…the community

I’m still reading ‘the perfect store‘ by Adam Cohen, which tells the story of eBay. I really must commend the author for his work on this book. It’s a very detailed, methodical book so far, and he doesn’t brush over anything. I hate it when a business biography glosses over important periods in the growth of a business. So far I’ve read up to the point investors were first brought in (and not because they needed cash, they needed the professionalism of a VC) however it’s the stages leading up to this point that have really interested me.

The founder of eBay, Pierre Omidyar, was a not a typical MBA educated, suit wearing, business entrepreneur. Sure, he was already a millionaire thanks to his share in another successful dot com, but eBay wasn’t developed with venture capital or any start up funding at all. Ebay’s growth was organic, natural, and was not given any advantages that a millionaire founder might be inclined to provide by using his own capital. It was the story of a hobby site gone crazy, and it was managed like that in the early days too.

Ebay’s culture was very relaxed. No suits, a small, messy office, not many systems (envelopes with auction fee payments were piling up in bags all over the place), one guy working the code on the website (which was crashing due too much load), another person handling customer support over email and forums, and another opening envelopes and recording payments. It was an absolute mess and they were buckling under the pressure of their own popularity.

A word of warning, if you are running an Internet business in the early stages (like me) and you are easily excited by thinking about your business, don’t read this book before going to bed. I cannot get to sleep if I read this book as I hit the sack. My mind clicks over, every paragraph inspires me and my mind launches into a overdrive of business thoughts and ideas. It’s not a bad thing mind you. This book in fact made me realise a very important idea regarding my own business, unfortunately I was so buzzed by the idea, that I was busy scribbling down notes at 3am in the morning and didn’t get a lot of sleep. Stick to fairy tales and counting sheep before bed if you want a good rest.

During the early stages eBay’s founders were always worried that a big Internet business like AOL would realise the potential for auctions and utilise their traffic and market power to compete eBay away. In fact they were so worried about it, their initial business plan focussed on a long term goal of selling online auction software and merely use eBay as a very good showcase tool. They figured that eBay wouldn’t enjoy it’s current growth or market dominance for much longer.

There were a few competitors at the time, however the only major rival, at least one that was receiving some reasonable press coverage, was a business that auctioned it’s own goods. A one-to-many principle if you remember from my last post. Basically they were a retailer that auctioned off products. On the books they had more significant revenues than eBay at the time, but that was because they recouped the total price of each item, and not just a small percentage fee as eBay did.

Regardless of competitors eBay had one clear advantage over every other auction site, and it was this advantage that really made the difference. Ebay had a community. A very loyal group of people were not just using eBay for auctions, everyday they actively participated and interacted on the eBay forums. Omidyar had originally instigated the forums for auction feedback purposes and also as a means for more experienced users to help out those new to eBay, again leveraging the many-to-many principle. Over time the forums grew to a huge social community which gave people a sense of belonging. Whenever new features were under development eBay staff always checked with the community for feedback. It was a very tight family.

Ebay had one thing I’m dying to replicate – outstanding word of mouth. Nowadays eBay uses all kinds of advertising methods like Google adwords, publicity, and other media advertising, but back then they didn’t advertise at all. They didn’t spend a dime – they were too busy trying to cope with how many people were already using the site – can you imagine that! The only advertising done, and it was free, was when Omidyar first launched his hand-coded hobby website (originally called ‘AuctionWeb’) – he made a few posts on newsgroups.

Then it hit me. My first real success online was a website I started much in the same manner as eBay, as a hobby. It’s called MTGParadise, or Magic: The Gathering Paradise []. I managed that site for seven years. I built it back in my early days at university, in 1998, as a place to write about my hobby, a collectable card game called Magic (it was my life back then). It started off as a local website, then a national website, it had name changes, URL changes, design changes and I spent countless hours working on it. For a long time it stayed a small hobby site. It never was huge because it was not interactive, mostly a collection of articles, card lists and news.

One day I installed a free forum. It didn’t get much use at first, but eventually people started to trade cards and just hang out on it. My niche was Australia. There were already a few very popular international Magic sites, but mine was the only significant Australian site. Adding that forum was the smartest thing I ever did. MTGParadise became THE place for Australians to trade cards, talk strategy and indulge in their hobby. By 2003 the site ballooned and was getting 1000-1500 unique visitors per day and 300,000 – 400,000 impressions per month.

During that time I did no paid advertising. I swapped links with other sites, posted in newsgroups and mailing lists but generally just kept the place going. It was a lot like running a business, managing staff, writers, moderators, generating new content and keeping technical things running smooth. The community was tangible. The word of mouth was golden. People would say “I traded on Paradise”.

My fascination with the card game disappeared but I kept the site going for many years after. Just last year I decided I should move on and pass the site on to people that were still actively involved with the game. I sold the site in 2004.

Why did that site succeed? Why did eBay succeed? The community. The stickiness, the sense of belonging each user experiences. Wrap that with an addictive feature (eBay: auctions, MTGParadise: trading cards) and you have a recipe for good word of mouth.

Now why haven’t I attempted to replicate this with my current business?

Yaro Starak
BetterEdit Manager

Filed under: Uncategorized — admin @ 3:57 AM

February 10, 2005

eBay and the advantages of a many-to-many business model

I’ve started to read ‘the perfect store‘ by Adam Cohen, which is the story of eBay. I’ve wanted to read this particular story for a long time. I LOVE the eBay business model. It’s such a perfect online business. So simple. So well targeted. It appeals to an aspect of human nature, our desire to trade, and makes a profit doing it. Brilliant. I wish I thought of it!

I enjoy reading stories that start with some geek, sitting at a computer, probably in a dark room like a parent’s basement or a dorm at university. He has an idea, has the geek skills to code a website for it and builds a hobby site. The website goes huge, a few months later it’s a multimillion dollar business (or in eBay’s case, multi-billion dollar) and bam, Internet folklore. Love it.

I like these stories because I want it to happen to me. I want to have a business story worth telling and I want to create wealth from something I built. Maybe not quite on eBay’s scale, that’s a very unique situation and a stupid amount of money, way beyond my targets, but it’s very inspiring nonetheless. I feel a sense of empathy with these geeks, heck I am pretty much a geek too (or is that nerd…what’s the difference again?), but without the amazing coding skills. I’d like a little glory with financial independence thrown in, wouldn’t you?

Often I look at my financial figures and I realise how much work equals how much revenue and profit. I start to think about being really rich. I’m very down-to-earth and I am capable of being happy with an average income, but like most people, I dream of more. I think of business models that really have the capacity to skyrocket profits. Something that if it caught on, could grow without my labour growing proportionally with it.

My current business model is good and lends it self to growth without the need for ongoing expensive infrastructure or staffing costs. At a certain point in the (hopefully) near future I can pay someone to do my role and just keeping adding more freelance staff to handle workloads. Right at the start of the eBay story however I read something that hit the nail on the head in terms of what Internet business model should be implemented to create something special. And eBay’s founder got this right (in fact it was his objective) from the word go.

He created an entity which brought suppliers and customers together and where demand and supply determined price. A perfect market…almost. To make a profit eBay scrapped a little money from each transaction. It’s the oldest story in the book – the middle man reaping profits off the supply chain. Throw in the scalability of the Internet, first mover advantage and you have a damn good business.

Ebay’s founder noted that business models that work on the many-to-many (eBay’s buyers and sellers) concept are much more powerful than the one-to-many concept (’s one online centralised store selling to many customers). This statement really hit me hard. It’s something I’ve been aiming towards when I think about new business ideas. It was written so simply in the book while I had cloudy ideas in my mind. It was nice to have the clarity. As usual simplicity works.

Elance is another good example of a successful many-to-many business. It links freelancers with clients. Both suppliers (freelancers) and customers interact in a web community. It can grow virtually infinitely with technology handling the service framework. People bring in more people.

Ebay and Elance have gone on to create a business within a business. Apparently more than 100,000 people now run eBay businesses to make a living. Just last night I saw an infomercial selling a course to learn how to start an eBay business. How good is that. That infomercial is creating more sellers and more buyers for eBay. That’s free TV advertising for eBay. Nice.

The challenge is to come up with the next many-to-many business and be an eBay too.

Yaro Starak
BetterEdit Manager

Filed under: Uncategorized — admin @ 7:52 AM
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