Keeping eBay at bay

Keeping eBay at bay

TradeMe enjoys a near monopoly in online auctions in New Zealand and is so distracting some employers ban it in the workplace. But for technology manager Jon Macdonald, working at the behemoth is sometimes akin to that of Indiana Jones constantly fending off challenges from a raft of competitors.

Recognised as one of New Zealand's fastest-growing companies, TradeMe expects further growth this year, with founder Sam Morgan predicting his site will host a million auctions a week by December - up 50 per cent on current levels. Already, TradeMe is the country's most visited website, receiving more than two million visitors a month - equivalent to half of the New Zealand population, making it more popular than the Microsoft-based XtraMSN portal.

Such is the allure of the site, that employers like Carter Holt Harvey and TelstraClear have blocked access for their employees to the site, claiming TradeMe is too much of an unproductive distraction.

Wellington-based TradeMe started in 1999, when Morgan wanted a second-hand heater for a draughty Wellington flat. He looked online and found the Trade & Exchange website, which featured week-old ads, whose heaters had naturally been sold out. Thus, the Deloitte's consultant saw a gap in the market and created TradeMe.

Nurturing a giant

Growth was initially slow, with Morgan promoting the site by touring the capital in an old lime green Holden. But a helping hand from his family, including his dad, the economist Gareth Morgan as a shareholder and sister Jessi as first employee, helped the business eventually take off.

By March 2000, TradeMe staged 6000 auctions a month, reaching 250,000 auctions a month by March 2003 and a million auctions a month in 2005. Now, Morgan expects TradeMe to stage some 35 million auctions in 2006.

Growth has been fuelled by new features such as the FindSomeone dating service, the Oldfriends reconnection site, TradeMe Motors and a flat-hunting site. EBay's neglect of New Zealand, though setting up in Australia, has also helped.

However, attracted by the success of TradeMe, competition is growing from local sources. Telecom New Zealand created prior to Christmas, newspaper publisher APN launched and Fairfax's own Waikato Times and The Press (Christchurch) launched and and ACP launched


Sitting in a rather homely looking central Wellington office, TradeMe technology manager Jon Macdonald is unfazed by the upstarts seeking a piece of TradeMe's near-monopoly.

"The others, Telecom, ACP, etc, are all very large and successful companies," says Macdonald, who admits the company did not have much funding for capital investment.

"We do take their competition seriously but we are very much aware of the 19-year-old coding away in the bedroom who could come up with the next wonderful idea. Our competitive strategy is to do what we do as best we can."

He admits TradeMe's success may have attracted these imitators. "It could be that they see potential here. We have succeeded as we are conscious of our community. We try and keep the site fun and easy to use. Certainly there are potentially interesting times ahead - Skype and disruptive technologies for the telecoms market.

It is inspiring that companies like Telecom are looking further afield from their core business," he continues. But recalling the chequered history of e-commerce in New Zealand, he adds: "However, people compare Ferrit to Flying Pig."

Macdonald joined TradeMe two years ago after working as a project manager for a London investment bank. The University of Canterbury engineering graduate from Palmerston North had known Morgan while working for Deloitte in Wellington and has always been attracted to a career in IT.

"I just enjoyed building things. The shift to IT was it was new at the time, interesting with a lot of challenges," he says.

TradeMe's growth is central to that challenge. "Balancing the need for us to have great structure and processes so that we can continue to be effective and people understand their responsibilities and remit," Macdonald continues.

TradeMe has increased staff numbers from 38 to 50 in the past year. Growth tends to be lumpy as new peaks tend to be scaled just after Christmas as people sell unwanted presents. The company looks for "stars" - people who are "very competent and have the ability to learn quickly, are fundamentally optimistic and receptive to change".

TradeMe's culture and values are very focused but still make sure staff have fun.<p/>"We have a lot of energy. We are light on bureaucracy. We still have a small company feel. Hopefully, we won't become corporate as we grow."

Indeed, details and structure remains something TradeMe is still "getting our head around". Building structure is a growing part of his role as the company grows, along with people-focused tasks such as supporting his team leaders.

The company is split into three areas - with technology as a focus employing 15 to 20 staff, which includes building its own technology solutions. Some 20 others are employed in customer service and the rest are in marketing and promotion.

As technology manager, Macdonald is a member of the management team dealing with "everything from HR to strategy" and is answerable to founder and general manager Sam Morgan.

"It means I have an opinion on product. Unfortunately I don't get my hands dirty like I used to. Sometimes I do wonder why I do this management stuff rather than hands-on technology. I get my kicks in building things but there's only so much you can build by yourself," he continues.

Macdonald notes the increasing number of TradeMe products from property sales to wholesaling cars for the motor trade, which means a focus on executing these goals.

"Some people keep the (main) site up, keep it fast, give us capacity to grow, essentially the capacity to innovate. If we come up with these business ideas, you want the ability to convert them. As we grow larger it becomes a higher stakes game. We want to focus on mitigating the technology risk," he continues.

These risks include making the technology more complex as TradeMe increases its 'products'.

"We are conscious of our dependence on key people and that is something we are putting attention on," Macdonald explains.

A million members

TradeMe has a community of a million members and several hundred even make an income by regularly selling goods online- effectively using TradeMe as their sales channel. The site estimates around 40 per cent of goods sold online are now new, compared to a quarter a year ago.

"At times we feel like we are Indiana Jones running in front of the big stone ball. That pace just keeps on growing. We keep the site going. That keeps the stress growing."

Macdonald's IT department has a team of eight to 10 looking after the platform and database, with him recruiting developers.

From an infrastructure view, little has changed, other than capacity, giving the Trade Me site a consistent look and feel.

"We have put in quite unique architecture, in particularly we have managed to scale horizontally. We have three blade server enclosures and we have another 30 servers to be fitted in the next three to six months. The database servers run on five separate physical machines.

"We generally use Microsoft platforms, no Linux, using HP blade servers. We will probably stick with Microsoft. Sam built the original infrastricture with the tools he was using at the time, which happened to be Microsoft. That's where our skills lie and when used efficiently, it's cost effective and we have found it to be a scalable solution," explains Macdonald.

Last year, Macdonald implemented a couple of SANs for data storage and added another server for the web database. Such changes were 'incremental' but growth can be fuelled by new ideas, adding the company is always open to them.

"Often there will be opportunities that present themselves that are reasonably time sensitive. We make sure we are capable of taking on these opportunities as they arise," he says.

Late last year, this included linking to cash converters for sales and launching a closed wholesale cars section for the motor trade - a move that this year made Turners car auctions announce its own online internet sales.

"It's an area with an inefficient market in terms of transaction cost. It fits quite well with the model that we do and this was an untapped opportunity. When dealers buy cars, they are a commodity item so it fits an auction model. Dealers can buy from their office rather than go to a car yard," he says.

"From a technology perspective, it's not a particularly large piece of work. We have the auction functionality. It was a matter of making sure we had a private marketplace, where only a certain number of people can be invited to it. This was a matter of taking extra functionality onto our core product."

Naturally, for a business dependent on the internet, TradeMe is now speaking up for better broadband. Macdonald recently spoke at a Digital Cities conference and the company is becoming "a little more reactive in terms of relationships with government departments".

TradeMe also faces security risks from phishing and anti-virus attacks, claiming its site hasn't been hacked and the point of vulnerability is with the end user.

Members are warned not to give out password and bank details, the website contains security advice and the company uses the latest Trend Micro AV software and "appropriate security" from Foundry Networks for network infrastructure. TradeMe also has its own 'trust and security team and its 'community' of customers also warns the company of potential security risks.

Such is the close relationship with its community, the latter also influences what TradeMe sells online. Thus, while it remains legal to sell Nazi memorabilia in New Zealand, TradeMe canvassed its community and the feedback was that selling these products were inappropriate.

Having a working week of 50 to 60 hours, Macdonald now fills his spare time renovating a recently-purchased 100 year-old house. He used to enjoy kickboxing with Morgan until he dislocated his shoulder.

Currently, he sees plenty of new challenges at TradeMe for the foreseeable future - something that attracted him to join the company in the first place.

"I was working for a large company overseas and it was difficult to get things done because of the sheer mass of the organisation. TradeMe was small so I felt I could make a difference. As a small, nimble company, there's lot of exciting things going on. I can take something on, it means exposure to technology and gaining expertise at a business and management level as well."

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