In eBay's recent "Do It eBay" TV commercial, the final lyrics of the ad's song make reference to eBay's feedback system: "The feedback shows, you won't get hosed...when you do it eBay!"

Early last year, a Michigan man selling "Wee Forest Folk" figurines on eBay disappeared with several hundred thousand dollars of his customers' money. His feedback, numbering in the thousands, was stellar. The dealer still has not been found, and his customers, unfortunately, were hosed.

The feedback system is eBay's method for establishing a user's reputation. Members rate their trading partners with a Positive, Negative or Neutral feedback, and have one line (80 characters) to explain why. eBay members may only give feedback once per transaction. They can check the feedback of other users to see if an excessive amount of negatives have been accumulated, which may be a warning sign that there is a problem with that member.

Over the years, eBay's feedback system has been a hotbed of controversy, from feedback padding to extortion. Some users refuse to leave negative feedback in case their trading partner retaliates by giving them a negative in return. Other sellers cite Retaliatory Feedback and Feedback Extortion as major problems with eBay's current feedback system. According to a survey conducted last month, 19% have received retaliatory feedback within the last 6 months, and 16% have been a victim of feedback extortion within the last 6 months.

Another perceived problem is members not leaving feedback for transaction partners at all. Although eBay does not disclose data regarding the feedback percentages on its site, anecdotal evidence suggests that the percentage of auctions where both buyer and seller leave feedback for each other lies somewhere between 50-70%.

So what, exactly does feedback tell us? How accurately does it reflect a user's honesty? How many people actually use the feedback system, and how often is feedback misused for retaliation or extortion? Recently, AuctionBytes, in cooperation with TIAS.com, conducted a survey to find out what users thought of eBay's feedback system.

Survey Says
In January, AuctionBytes conducted a survey of readers of two free email newsletters: AuctionBytes-Update newsletter (online-auction buyers and sellers) and TIAS.com's The Collector's Newsletter (collectors). 1,000 people responded. We learned that 29% of the respondents thought eBay's feedback system was fair or poor; 35% thought it was adequate; 29% felt the system was very good; and 7% rated it excellent.

Leaving feedback can turn into a parrying match, with many sellers reluctant to leave feedback for a buyer until they have received positive feedback, and vice versa.

According to the survey, the largest percentage of sellers (37%) leave feedback right after a payment has been received; 18% of the sellers taking the survey leave feedback when the customer lets them know that they have received the item; and 15% wait to leave feedback until after the buyer has left feedback for them.

"I consider a transaction finished when a buyer leaves feedback for me," one PowerSeller explained. "When they give me a positive, then I know they were satisfied with the item, and I will return the favor."

On the buying side, 84% of buyers surveyed said that they leave feedback after they have received the item; 8% said they leave feedback at their convenience, and 4% said they leave feedback for the seller after the seller leaves feedback for them.

So how big of a problem is Retaliatory Feedback? According to the survey, 39% of respondents felt that feedback retaliation was a very big problem; 21% rated it a minor problem; and 22% thought it was not a problem at all (18% did not know). As for Feedback Extortion, 26% of respondents felt that it was a very big problem, 28% thought it was a minor problem, and 29% of the respondents felt it was not a problem at all (17% did not know).

Does the quantity of a user's feedback play a role in deciding whether to do business with them? Interestingly, when asked if they would be LESS likely to transact business with a low-feedback user, 16% of respondents answered yes and 47% said it depends.

AuctionBytes advises that eBay users look beyond the raw numbers of feedback to look for possible warning signs. Yet many bidders fail to do in-depth research. When asked how they analyze a seller's feedback before bidding on an auction, here's what respondents said:

• 80% look at the number of negatives and neutrals
• 61% look at the total number of feedback points
• 47% look at whether the seller's past transactions were as a buyer or seller
• 32% look at the kinds of things the seller sold in the past
• 14% look at the dollar amounts of the seller's previous transactions
• 8% never look at someone's feedback before bidding.

It's not an easy task to look at feedback to examine all of these factors given the way the feedback is presented on eBay. There are tools from third-party vendors that can help eBayers to do so more easily, and 20% of respondents said they use such tools.

We asked eBay what they thought about their feedback system and whether any changes were forthcoming. "The biggest problem is making everybody happy," eBay spokesperson Kevin Pursglove said. "Within that subtext is the reality that we're just not going to make everybody happy."

Reports coming from last week's Consumer Electronics Show in Las Vegas, where eBay held a seller summit, indicate that eBay may be considering the following changes.

1) A user with a feedback rating of -1 would be allowed to place a bid on a single item. The limit might be extended up to five items if the user goes through ID Verify or provides credit card information to eBay. Users with a feedback rating of -2 or -3 would be limited to bid on 1 item. A -4 feedback rating would result in automatic suspension.

2) "In-depth" feedback totals (showing negatives or positive feedback percentage) would be much more prominent on the auction pages.

According to the same reports, there are currently no plans to limit Non Paying Bidders (NPBs) to keep them from leaving feedback. Yet, one of the most common responses to the final survey question, "How would you improve eBay's feedback system?" was to not allow "non-paying bidders" (or deadbeat bidders) to leave feedback for sellers. Another popular response was to allow the removal of retaliatory feedback.

Although he wouldn't be specific, eBay's Pursglove said he "wouldn't be surprised to see an announcement about changes to the feedback system in the next 2-5 weeks. Before the end of the quarter, anyway."

"We're always looking for ways to improve feedback," said Pursglove. "But when you weigh it overall, I think it's a very effective system."

Should members be allowed to retaliate against their trading partners unfairly? Are there any reasons for not making those changes? Should deadbeats be allowed to harm someone's reputation? Post your opinions on the AuctionBytes forum at http://www.auctionbytes.com/forum/phpBB/viewtopic.php?t=3065