Overstock.com's new auction marketplace jumped from 25,000 listings to 165,000 listings in 1 day when it offered sellers free listings the day before Thanksgiving.

"We can't attract too many sellers without traffic," said Overstock Auctions vice-president Holly MacDonald-Korth, but without sellers' listings, it's difficult to attract traffic. She said starting an auction site is a classic "chicken and egg" dilemma.

With last week's Free Listing Day boosting the number of items on the site, MacDonald-Korth said they are turning up the marketing efforts to drive traffic to the auction site.

Overstock.com's main home page offers a $15 discount to customers who buy an item on the Auction site. The offer was also mailed out to millions of customers in Overstock.com's marketing emails, and through its affiliate program. The site is running radio spots to promote the auction site and ramped up keyword buys on Internet search engines.

"The sell-through rate is still lower than I would like to see," MacDonald-Korth said, "But we consistently have traffic, and some sellers are waiting for us to mature a little and work the kinks out." She said sell-through rate before last week's promotion was in the low 30s.

The auction site is improving its listing tool. It is also working with established auction-management companies like ChannelAdvisor and Infopia to help them enable their tools to port listings to Overstock Auctions.

The quantity and quality of the product will increase when larger established sellers can use their auction-management programs to list on Overstock Auctions, according to MacDonald-Korth. "Getting integrated with third parties is key to our success."

Overstock Auctions is not immune to problems involving technology and fraud. The auction site had "hiccups" on Tuesday, giving some visitors a message to try back in 5 minutes. A message on the Announcement Board stated Overstock Auctions would extend current active auctions by 24 hours at no additional charge in accordance with the User Ageement down-time policy (http://auctions.overstock.com/cgi-bin/msgboard.cgi?PAGE=POSTS&ForumID=41&TopicID=2922).

The problem of fraud is significant, according to MacDonald-Korth. Fraudsters are constantly trying to defeat the barriers the site puts in place to prevent them. "We just keep putting up more barriers," she said.

A new initiative will be rolled out in December called "Pay for Play." The optional feature will allow sellers to require bidders to pay a deposit before bidding on their items and is geared toward high-value items. The deposit is refunded to losing bidders, and applied toward the auction payment for winning bidders. Fees and details are still being worked out.

Overstock Auctions recognizes the challenges of running an auction marketplace and seems to be taking a long-term view. MacDonald-Korth did not sound worried about maintaining seller interest while developing the site.

"We don't have to have a ton of gimmicks," she said. "The market is ripe for a competitor."