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Getting with the Program on eBay

By Sarah Lacy Mom-and-pop shops doing business online have long struggled with the fact that they look just like the diminutive outfits they are. Now software giant Macromedia (MACR) is setting its sights on small businesses, with a new partnership designed to provide a quick-and-easy way for Web entrepreneurs to dress up their store windows.

Online marketplace eBay (EBAY) has helped create hundreds of thousands of small businesses by offering huge audiences, a trusted interface, easy payment options, and even benefits like health insurance. But those eBay Store sites? None too sexy. Most have a stock cartoon of a typical eBay collectible in the top left corner, with a welcome message next to it, and a list of items underneath.

STANDING OUT. San Francisco-based Macromedia, whose technology has helped make much of the Web prettier, is set to offer a cheap, user-friendly makeover. The company is expected to unveil a new deal with eBay on Nov. 1 that will see the online auctioneer market modified copies of Macromedia's basic Web publishing program, Contribute, to eBay Stores for $99, about $50 less than the usual price.

Small-business users are already finding that Contribute helps them stand out in the crowd. Consider Shane Oswald, an eBay Store owner who sells customized computers from his home in Elkhorn, Wis., about 30 minutes south of Milwaukee. A Contribute test customer for the past several months, he has run with his brother-in-law an eBay Store, Accelerate Electronics, since last April.

The duo likes building computers, thinks a good one should go for around $450, and typically sells between 20 and 75 units a month "without trying very hard," as Oswald puts it. They set up on eBay because "everyone knows it's a good place to find thousands of items that may interest you," he says. It also helps Oswald in his role as a stay-at-home dad to his 18-month-old son.

SIMPLE GUIDES. Being a hardware guy with no great fluency in HTML, Oswald faced big problems getting the unique eBay Web page he wanted. Contribute has been the answer. He says he had no problems with the program, which guides users with a set template but also allows those with a little more tech savvy to craft their own designs. "It helps distinguish your store so people can remember you by what they see," he says.

Retailers will be able to configure their sites with colors, photos, and different layouts. Contribute also allows them to design their own home pages outside of, but linked to, their eBay sites. So when small-business users enter inventory on sites they may run independent of eBay, that information also shows up on their eBay sites. And when a customer makes a purchase from either site, it shows up on both, with all payments going through eBay.

The program has limits, but the big plus is that it's as easy to master as Microsoft Word. Up until now, Macromedia has targeted businesses, offering an easy way for, say, human resources managers who need to update their company intranet. "It helps keep people coloring inside the lines," says Erik Larson, director of product management at Macromedia. Contribute has sold 250,000 copies in the last two years, mostly to bigger businesses, universities, and government.

"PERFECT TOOL." This deal will expose Macromedia to 200,000 or so small and midsize businesses, with eBay handling all the marketing. Contribute is one of three new business lines that Macromedia is counting on for growth, though less well-known than Flash, Dreamweaver, and the other ubiquitous Web tools Macromedia makes. By itself, Contribute is expected to generate up to $25 million in revenue this year, an 80% increase over last year. Widespread adoption could double sales of Contribute in just a few years, says a company spokesman.

But analysts say eBay and its small-business clients may benefit even more. Web entrepreneurs get an easy and cheap way to build a more compelling Web site, push certain items, and even begin building a brand. Hiring someone to code HTML can cost thousands of dollars, notes Eric Peterson, analyst at JupiterResearch in New York. Because of this hesitancy to spend time and money, "You see these poorly assembled pages with lousy uses of fonts," Peterson says. "These are not attractive sites."

The trade-off for Contribute's ease of use is a limit on how flashy the site can be. Much like QuickBooks, the popular financial-management software, some small businesses may soon graduate from Contribute, wanting tools to build a more sophisticated site. But analysts note that those aren't the businesses Macromedia is targeting. "It's the perfect tool for what they're shooting for," says Andrew Warzecha, senior vice-president at Meta Group, a research firm in Stamford, Conn.

TECHNOPHOBIC? And eBay is constantly looking to make life easier for these stores, especially as some sellers move off to competitors like (AMZN). Aside from sheer retention, the better these mom-and-pop sites look, the more they stand to sell.

And if more small businesses use Contribute to build a site outside eBay, it still extends the auction giant's transaction earning power because the transactions are processed back through eBay. Right now, 430,000 individuals make their primary living there, and several hundred thousand have eBay stores. eBay declined to disclose how much revenue it generates from either group.

Whether Macromedia, eBay, and its small-business users maximize the potential for this deal depends largely on the auctioneer, which will be doing the marketing. Easy as Contribute is, the real challenge may be convincing technophobic entrepreneurs to try it. Jupiter's Peterson expects penetration of about 10% within existing eBay Stores in the first year.

Over time, if the marketing and support is there, Contribute could become a standard tool for eBay stores, contributing to both Macromedia and eBay's bottom lines. Now it's up to small-business owners to sign on for a makeover. Lacy is a reporter for BusinessWeek Online in the Silicon Valley bureau

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