In uBid We Trust

When I was a wee lad on Chicago’s great West Side, the huge neon sign at the Sunbeam plant became visible during rainy days and all through the night. Along what became the Congress (later Eisenhower) Expressway corridor, it was one of several neon giants together with Magikist carpet cleaners and the Ferrara Candy Company.

Most of the parents of my classmates – those who didn’t own a restaurant – worked at these plants as well as at the Zenith, Cracker Jack and Brach Candies locations. Nearly all of these companies fell on hard times throughout the 1970s and 1980s. Some moved. Some closed.

Tom Petters, who is Minnesota’s “latest quiet billionaire,” has improved the business landscape (and rescued my childhood memories) by working with old-school industry leaders such as Sunbeam (which Petters Group Worldwide licenses to produce appliances and vacuum cleaners), acquiring past-and-future technology pioneers such as Polaroid (yes, that Polaroid) and uBid, which is located on Chicago’s far northwest corner.

Characterizing uBid as a “former pioneer” would be a misnomer. The company’s best days are clearly yet to come. After a series of ownership shifts and legal battles, uBid is finally coming on strong. Technologically, uBid has always been the savvier No. 2 in its space alongside bumbling leviathan eBay.

Just as Apple’s technology far outweighed IBM’s and Sony’s Beta was a superior approach to the VHS standard, uBid’s secure platform has outlasted the rigors of fraud that have caused countless users to abandon eBay.

If only for that reason, uBid is fast becoming the serious buyer’s online auction site of choice. Amid the endless offers of “free” $1,500 gift certificates, falsely directed “reminders” from PayPal’s troll-like e-commerce division and hogging ISP home pages, eBay has begun to get its comeuppance.

Tucked neatly within its July 4 “edimercial” on CNBC commemorating the company’s tenth anniversary, eBay CEO Meg Whitman was asked about the increasing incidences of fraud and what she planned to do about it.

With typical aplomb, Whitman uttered a response that would have been completely forgettable were it not for the implication that such a solution would be difficult, costly and might enable fraud “from the other side”. At this point, it becomes difficult to take eBay’s concern for the consumer seriously.

Having weathered a series of ups and down over the last decade that would make a rodeo bull rider nauseous, uBid is fast becoming the jewel in the Petters crown. A July 13 article by Pete Barlas in Investor’s Business Daily quotes uBid CEO Bob Tomlinson as follows:

“We plan to grow aggressively,” Tomlinson said. “Our goal is to become the dominant player in the excess and overstock market.”

Starting this month, uBid is beginning to sell jewelry. In the last year, it has also added collectibles, home decor, clothing and travel services. Tomlinson added: “We are becoming a generalist because our customers are looking for more variety.”

Founded in 1997 in Torrence, Calif. as PC Mall, the company raised $26 million from a public offering in 1998. It then moved to Chicago. With the help of Merrill Lynch and William Blair, its market capitalization hit $1.89 billion. uBid spun off from PC Mall in 1999 and completed a secondary offering of $44 million.

Internet holding company CMGI bought uBid in 2000 but got caught at ground zero when the dot-bomb hit. Its stock price plummeted from $129 at the end of February 2000 to less than $4. Tomlinson, who joined uBid in 2002 as CFO (after working in that same position at Forbes.com), helped lead a management buyout of uBid.

He took over as CEO and has been tweaking uBid’s business model ever since.

Petters Group Worldwide ultimately acquired uBid in April 2003. The redirection has done uBid great good. The company is going after eBay with a vengeance as the solid business-to-consumer alternative. Also, uBid has maximized its relationships with the Petters family of companies by bolstering its position as a specialty site that moves large quantities of “B stock” (excess and recycled inventory) from about 3,000 suppliers.

Half of uBid’s sales (approximately $200 million in 2004) reportedly came from refurbished housewares, home electronics and computer equipment. Added Timothy Takesue, an executive vice president at uBid: “The appetite is huge for this type of merchandise so long as consumers know they’re getting a warranty directly from the manufacturer.”

The distinctions between eBay and uBid are significant: uBid gives sellers a choice of two plans. They can sell their goods to uBid and let uBid handle the auction or use uBid’s auction service to sell directly to consumers. As an alternative to the stereotypical caffeinated eBay junkie, uBid has introduced an auction service designed to help companies sell products in 20 minutes.

More to the point, uBid is championing the war against Internet auction fraud. Companies wanting to sell products directly to customers must pass uBid’s certification program whereby uBid conducts a series of background checks to make sure resellers are reliable. Tomlinson added: “Certifying sellers helps ease the concerns of buyers. It allows buyers to be confident about a transaction that’s 100 percent fraud free.”

Consumers must provide a credit card number as part of the registration process before they can bid on anything. This, Tomlinson says, ensures that they are serious. To further bolster uBid’s momentum, the U.S. Court of Appeals in March 2005 strengthened uBid’s position in its decision regarding the appeal of the MercExchange v. eBay and Half.com in a patent lawsuit.

In 2003, a jury declared that eBay had willfully infringed upon MercExchange’s fixed-price and software search-agent patents, which are key to uBid’s technology platform. A judge later denied eBay’s motion for a new trial in the MercExchange patent lawsuit and ruled for eBay to pay MercExchange $29.5 million in damages for patent infringement.

A jury has awarded damages of $35 million.

To date, though, MercExchange has yet to see a dime. MercExchange President Tom Woolston (who licenses uBid patents and is a significant partner in the company’s technology platform) added: “It’s a great day for the small company and a great day for uBid. uBid is the No. 2 online auction site. It certifies its online sellers, has no fraud and is building a better community.”

This should not be a difficult task. eBay does not screen sellers and buyers. Instead, it offers “a special rating for companies willing to provide details about their businesses” and lets buyers post merchant feedback ratings. Both systems can easily be manipulated.

The slothful giant’s lackadaisical attitude toward online auction fraud promises to be uBid’s gain. According to the Internet Fraud Complaint Center (IFCC), online auction fraud constituted 71.2 percent of all Internet fraud last year with non-delivery of merchandise adding up to another 15.8 percent.

Given uBid’s policies and lack of incident, this means that eBay pretty well owns the “fraud market”. In turns, this means that uBid stands to win over some consumers, according to Jupiter Research analyst Patti Freeman Evans. Still, she added: “It will take uBid a while to build up a perception among customers and sellers as being a trusted player.”

To help drive that perception, uBid has created a list of seven tips for avoiding online auction fraud. Those wishing to receive this list as well as the various criteria constituting Internet auction fraud may contact yours truly.

About uBid, Inc.
uBid is a leading brand name auction marketplace that offers consumers and businesses manufacturers merchandise at below wholesale prices. Founded in 1997, uBid has swiftly emerged as a major force in the e-commerce world. Formerly owned by CMGi, today uBid is a member of Petters Group Worldwide, uBid specializes in providing customers with savings on items from leading brands. In addition to uBid's own product listings, uBid features uBid Certified Merchant listings in which consumers will find items listed by uBid approved businesses. With more than 5 million registered users, uBid is committed to providing its valued customers with the highest quality experience on the Internet and offers manufacturer warranties on products. For more information, visit the company's web site at www.ubid.com.

About Petters Group Worldwide
Petters Group Worldwide^TM is a recognized leader in creating, developing and investing in companies that manufacture, procure and market merchandising solutions for key growth markets. Petters' core portfolio includes a growing list of retail and wholesale companies operating in the United States, Brazil, China, Japan, Korea, Mexico, and Spain. For additional information visit www.pettersgroup.com.

CONTACT:
Tony Priore
773.272.5000
anthonyp@ubid.com