Graded Cards Added to eBay’s Trading Card Authentication Program
This week, eBay announced a new partnership with PSA to expand its trading card authentication program to include graded cards over $2,000. Going forward any graded trading card sold for over $2,000 on eBay’s platform will first go to PSA for authentication before ending up in the buyer’s hands. This has big implications for the sports card ecosystem.
A little background
In case you missed it, eBay launched an authentication program for single, raw (ungraded) cards valued $750 or more in partnership with Certified Collectibles Group (CSG) back in January. What this means is that any qualifying card sold on eBay will first go to CSG who will authenticate the card before being sent on to the buyer. They look over the card to make sure it’s not a fake and that the card and condition match what was described in the eBay listing. The program is not optional. Every card that qualifies must go through the authentication process.
The program is meant to protect both the buyer and seller making transacting on eBay safer. If there is an issue, the sale is cancelled and the card is returned to the seller. If the card is authenticated and matches the listing description and if the seller has a no return policy, the buyer will not be able to back out the transaction. If the seller does have a return policy, in case of a return, the card will be sent back to CSG and they will ensure the exact same card is returned to the seller. Since the program was announced in January, the value threshold for raw cards dropped to $350 in late March and now every raw single card $250 and higher goes to CSG.
The big news now is that the program has expanded to higher value graded cards and its new partner is PSA. It’s not just PSA cards that they will authenticate. PSA will see cards from all the grading companies. From eBay’s FAQ:
For graded cards, this involves inspecting the sealed plastic holder for signs of tampering and verifying that the case and label are authentic to the grader. Then they confirm the item is consistent with the listing title, images, and listing description. Finally, the card will be packaged in custom packaging with a tamper-proof sticker seal. The card also receives a QR code sticker detailing the process. Scan it with your mobile device to learn more about your card’s authentication details.
As long as things go smoothly logistically and the delivery process isn’t slowed down too much, this should be a net positive for eBay buyers and sellers. Buyers get an extra level of assurance that the slab is authentic. Looking closer though, this could have big implications for the hobby and further entrench PSA’s role.
So what I do mean?
This partnership offers a number of opportunities for PSA to expand the moat around their business. I will start with some of the obvious revenue implications and then move on to some of the strategic benefits.
New Revenue
Although right now the service is free to both buyers and sellers, eBay is probably already paying a fee to PSA for this service. Once eBay starts charging, surely PSA will get a cut of it. eBay says the service is free “for a limited time”.
PSA’s grading and authentication business has a lot of fixed costs (large facilities, graders salaries, etc.). Right now their capacity is fully utilized with the huge backlog of cards to be graded, but their business model dependent on a continuous flow of cards going through their system. Operating leverage is gained by fully utilizing their space and employees.
Beyond the authentication fee paid by eBay, there are a lot of upgrade options PSA could offer in the future.
Reholder Service — It’s easy to imagine this add on service. PSA is authenticating a PSA card. For a small fee they can reholder the card in a new PSA slab.
Crossover Service — If the card is not in a PSA slab, for a small fee, PSA can crack the slab, grade the card and put in a PSA slab. Take market share from their competitors.
Review Service — A buyer may see the eBay pictures and think the card deserves a higher grade. For a small fee, PSA will review the card and possibly give it a higher grade. Worst case the card keeps the same grade. Not a lot of buyers will probably do this, but if you got a bargain price for the slab, a buyer may be willing to roll the dice and pay a small fee to PSA for the optionality of a higher grade.
Now for some of the more strategic implications
eBay is the leading marketplace for trading cards. A lot of cards go through eBay’s platform which means a lot of graded cards will go through PSA’s hands. This means PSA will have the opportunity to collect a lot of data which could be used to enhance PSA’s position in the hobby. Right now this eBay program is only for graded cards worth more than $2,000, but according to eBay “Over time, this service will expand to any graded card sold for $250+.”
Knowing who owns these cards
After PSA authenticates these cards, they mail them off to the buyer. Therefore they will know who owns these cards. This gives them some strategic advantages. This list of graded card owners makes a great mailing list. (I don’t know if PSA will have access to email addresses in addition to physical addresses.) Seems like a highly valuable database to market trading card services.
In addition to grading services, any other service PSA currently provides or wants to get into can be marketed to this list. Remember that PSA’s parent company bought Goldin Auctions back in July 2021. This is a great target audience for Goldin to market their auction services. Also, by knowing the owners of particular cards match help their customers find cards they are looking for. (Heritage Auctions is beta testing a “Register Your Ownership” service so owners can get anonymous offers on their items.) Another example is PSA’s upcoming vault service can be targeted to these buyers. How about card show promoters advertising upcoming shows?
Pop Report
A big strategic advantage that PSA has over other grading companies is its population report (pop report). You can go to PSA’s website and know exactly how many cards PSA has graded by grade. This is valuable information for collectors/investors to know how rare their card is and how many higher graded cards exist. PSA also has a set registry where collectors compare/compete to see who have the best sets. Other grading companies have their own pop reports, but PSA is by far the market leader due to its market share.
One holy grail in the hobby is a comprehensive pop report across grading companies. Grading companies don’t have an incentive to make this data available in an easily exportable format. With this eBay program, PSA can augment their market leading pop report with accurate information (grade, serial number, and sales price) from all the other grading companies. While this data may be able to be collected by scraping other grading companies websites or marketplaces like eBay, COMC, and PWCC, this data quality is higher since PSA will physically see each card and make sure it’s authentic. Eventually, PSA may be able to publish a comprehensive pop report across grading companies.
Another acquisition PSA made was Genamint. They use Genamint technology to “fingerprint” cards. By building this database, they will be able to tell if they’ve seen a card before so they’ll know whether the owner is trying to re-grade a card. I don’t know if Genamint technology can be used through a slab, but if so, seeing all these cards will expand their database of cards.
Competitive data about other various grading companies
All these cards flowing thru PSA’s office will them a lot of valuable competitive data. They will see how well other graders grade cards, what mistakes they make, what type of cards they get, etc.
Vaulting service
PSA has announced that they are planning to offer a vault service for trading cards. eBay has also announced a vault service. eBay surely won’t allow these cards to go to PSA’s vault, but with these cards going through PSA’s hands they can track all the cards that go into eBay’s upcoming vault. Again more data.
As you can see the real value in this eBay/PSA partnership may not be so much the extra revenue but the data that PSA can collect. To be fair, I haven’t investigated eBay or PSA’s privacy policies to know what they can and can’t do with this data, but there is the potential for PSA to collect a lot of data that could be highly beneficial for their business.
Assuming everything goes well operationally, the Authenticity Guarantee program should make buying/selling cards on eBay safer and expand eBay’s lead as a marketplace, but there are a lot of second order strategic implications to consider.
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