Could Network Analysis Help eBay Battle Fraud Problem?

from the no-minimum-bid dept

Tue, Dec 5th 2006 8:22am — Joseph Weisenthal

One of the big challenges auction site eBay has to contend with is fraud. It's one thing that could really damage the company were it to worsen; the scores of commenters who complain about problems on the side, every time we post on the issue, back up the idea that the problem is serious. Of course, if there were an easy way to put an end to it, it would've obviously been done by now. In an interview, one researcher discusses an approach to combating fraud using network analysis. The basic idea is that the average eBay user will do business with a random range of buyers and sellers, whereas fraudsters will do a lot of business with each other, conducting phony transactions, in a bid to boost their seller ratings. From this information, one can start to paint a picture of who is likely to be conducting fraud using the site. We've seen attempts before to apply network theory to deal with problems like terrorism, but for the most part, the execution sounded less than impressive. Often the attempts suffer from an overabundance of data (too much noise), or the network connections were only visible after the fact. But for eBay, and other similar services that need a way to scale up fraud detection efforts, it sounds like the technique could be of some value.

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23 Comments

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Anonymous Coward, 5 Dec 2006 @ 8:36am

this sounds like the plan to use computers to "search for murders" ala Minority Report.

once again, it's statistics. and just because one customer does a lot of business with another customers, doesn't mean theya re commiting fraud. yes they should be looked at, but who is to judge that call?

is this differend than the criminals to be murders thing?
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James, 5 Dec 2006 @ 9:15am

I'm glad they are at least trying...
Yes #1 they need to use a big dose of common sense when executing but at least they are attempting to do something.

Oddly, I don't find fraud to be the problem on Ebay as much as people just willing to pay too much for something. If I can buy it NEW from a trusted retailer why would I buy it from someone I don't know at the same price or more??

Here's a great example.. I want a pair of Bose Quiet Comfort 2 headphones, they sell for $299 retail from Bose.

Do a search on Ebay and you find people paying within $30 - $50 of that price for USED ones... WTF?? I refuse to buy anything on Ebay unless I'm getting a deal otherwise I'll just pay full price and get it from a place I really trust.
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Anonymous Coward, 5 Dec 2006 @ 9:30am

i find some practices on eBay quite confusing. why pay for used, when you can buy something new for the same ammount? the bose headphones are a great example. that confuses me.

paying 2500 for a ps3, that's scary. however someone thinks that not having to wait in line, and get a new ps3 3 days after launch is work the extra 1900 bucks....well that's economy for you. (stupid, mes-ah thinks)

and i've had my fair share of "ripoff" ebay purchases. DVD's that were burned, not the real thing. stuff not showing up. broken stuff. none of which the seller would replace (if i could even get ahold of them). so whad do you do? leave neg. feedback. guess what? they come back with neg. to you, even you did your honest part. you'll say you were right, they'll say they were. it gets nowhere.

i do have a question, does this ebay track the ip addy's or just the seller accounts? because i think there are 4 ebay accounts in my house (one for each member) so, my ip address is the same, although there are different people. plus, how many static ip users are there? since dial up is still the majority, (and you can use ebay with dial up) the user account has a range of ip addy's associated with it.
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Uh Oh, 5 Dec 2006 @ 9:34am

WHo?
Who is to judge that call? eBay of course. It is their business operation and they, just as brick and mortor retailers, need to work harder at protecting their customers.

Why? To start, it make good business sense. Happy customers means more repeat business.
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Joe Smith, 5 Dec 2006 @ 9:35am

Netflix
If you look over at Netflix they are having a datamining contest. To win you have to improve the accuracy of the movie recommender system by at least 10%.

You can see how hard datamining is from the facts that:

the recommender system works with a huge body of data (the sample data for the contest has 100 Million entries):

the customers have no reason to lie about their preferences;

all you have to do is predict a movie rating on a scale of 1 to 5;

the best that Netflix has been able to do is a RMS error of about .95;

the current leader is at .89;

the benchmark for winning is .856
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Angel, 5 Dec 2006 @ 9:36am

Re: I'm glad they are at least trying...
i must disagree with you... i am an ebay seller and to be honest with you... ebay is a buyers market. nearly everything is cheaper on ebay. Specially electronics.. i would think that most people would have the common sense to check prices at their local retail store before buying on ebay. yes there are exception where items are more expensive on ebay...but this is typically due to high demand such as a playstation 3
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Tom, 5 Dec 2006 @ 9:54am

ID system
the big fraud is sellers who disappear. They can set up acounts. typically pretend to sell something. you buy it. and it never arrives.

Can't a system be made where you have to register your mac address and tie that to your account info? I know this may have to go back to some sort of other verification system, maybe some bizwiz makes a company to create this verrification system, or maybe the credit card companies themselves, but the system would be one that you have to use your home phone to dial a number with your computer. it records the number (caller ID) and the mac address (also any other data, such as networkhub mac address for broadband users). Then that info is tied to a credit card. all that would create 3 types of logged ID. then with that info you get a new ID to allow either purchaing or selling on anywhere.

Paypal has had a great syste where they deposit some random amount from a penny to a dollar into your account, ad then once you receive it you log back in to verify by repeating the amount to them. that way they have a positive ID to you.

Also, a similar system is already used when you activate a new credit card. you have to call from the accounts listed home phone to register.

imho all sites need to improve how they identify who the actuall person really is. a combination of technology can verify this. there is no need to hve access "right now" you should have to signup in advance and be verified.

ciao
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Anonymous Freak, 5 Dec 2006 @ 10:24am

I can agree with you Tom on enforcing a more strict identification process for sellers.

Not sure I like the idea of utilizing MAC addresses though. It could be done in manner that would require less of a security risk.

If you want to be a power seller - I would say incorporate an Ebay Seller's License. They could set up a system that would involve verifying identity.. mail responders and so on.

If someone wants to be a legit power seller, going through such a system wouldn't bother them that much. Since a ton of the current power sellers own store fronts, it should be a breeze.

I myself never bid.. I ownly "Buy it now" and I do it from widely known and used sellers.
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Anonymous Coward, 5 Dec 2006 @ 10:25am

they have something to protect buyer and seller. i forget, but basically, the buyer, pays some company for the item, shipping and possibly the holding fee, the seller gets notification of payment, the seller ships, the buyer notifies of reciept of item, holder releases money to seller, minus fee.

sure, the buyer can claim they never got the item, but if the seller has proof of shipment, and proof of reciept (via. package tracking/delivery confirmation) they can prove that the item was shipped.

also, ebay's "customers" are the sellers. it costs nothing to bid/buy on ebay (less your email account) and last i recall, there aren't adds on ebay (or none that i detect). the profit comes from the money generated by winning auctions. and well, if a frauderster generates 10k winning auctions, that nets ebay how much money? how hard would they be to "stop" this?
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James, 5 Dec 2006 @ 10:44am

Re: Re: I'm glad they are at least trying...
Well I certainly wasn't suggesting all of Ebay is like this, and deals can be found. But, that is one MAJOR thing I dislike about it, either those are shill bids (headphones example) or people are just stupid (or both).

The PS3 example is excepted since people WILL pay more for something brand new in limited supply.

I also dislike that ebay doesn't separate individuals like who me who might sell something to clean out a closet from people who try to run a shop. Ooops sorry this isn't the ebay gripe board ;-)
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Dam, 5 Dec 2006 @ 10:51am

Re:
You're thinking about the escrow services. Those are fine when you're buying a car but are too costly when buying less expensive items. The services take a percentage of the value, so even if you saved money on the purchase, you'd spend it on the escrow.
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Anonymous Coward, 5 Dec 2006 @ 11:06am

escrow. thanx.

but yeah, it is quite cumbersom for a 3 dollar DVD
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Anonymous Coward, 5 Dec 2006 @ 11:39am

When Fraud isn't ...
Just last week my girlfriend bid on an item that was being sold by her mother. BOTH of their PayPal accounts were disabled for a week - with neither of them being able to refute the penalty or explain what happened.

It was a perfectly innocent first-time business transaction. E-bay will need to be very careful (and perhaps a little more lenient) if implementing a system like this.
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ehrichweiss, 5 Dec 2006 @ 12:13pm

Re: When Fraud isn't ...
I was thinking about something along those lines myself. I have done repeat business with several people on Ebay repeatedly including bidding on items that a friend was selling(cause I wanted them, not cause I was trying to shill) and if I ever took a penalty from ebay or PayPal for them they'd have some serious questions to answer. Of course I don't keep ANY money in my PayPal accnt because of the horror stories I've read about so even if I sold something and Paypal said I was at fault for damage or whatever and that I had to refund money(I've seen it more than once), they still aren't gonna get my actual $$$ even if they SAY I owe them money because they can't actually withdraw from your bank account without your permission(check it out if you didn't already know this).
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Mike, 5 Dec 2006 @ 1:13pm

Fraud at eBay
eBay and Paypal really suck. You aren't safe being the seller. You can sell something on eBay, get paid through Paypal and think all is well. Except, the person who made the purchase can easily fight it within 60 days with their credit card company and your out the money from paypal and the item you shipped them, even though you did nothing wrong.
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John Hawklyn, 5 Dec 2006 @ 2:43pm

Fraud patterns
- I never buy from relatively new sellers on big ticket items.
- Also I check the sellers history.

Right now I'm looking for a 'new' computer. One seller has been online for nearly a year selling penny-ante items, socks, jeans etc. Suddenly they're selling a bunch of expensive Dell computers. They've never sold them before, and they don't accept Paypal.

I'm not bidding on their items! I'll be watching to see if their current 100% satisfaction rate drops through the floor after their current wave of computers have been sold.

Given they haven't listed any new items in a while, I'm pretty suspicious.

So, another data-mining technique might be to search for sellers of historically low ticket items, that don't use a verifiable payment mechanism, and suddenly offer multiple big ticket items....
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Wizard Prang, 5 Dec 2006 @ 3:01pm

Don't use MAC addresses
1) They can be spoofed
2) Some of us have/use more than one computer
3) Network cards have been known to die.

Certainly they could be used in a tracking/recordkeeping capacity (along with IP address), but don't make them a centerpiece of your security strategy.
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|333173|3|_||3, 5 Dec 2006 @ 4:02pm

What about special interest grouops, there would be a lot of trade between a few ppl interested in something unusual.
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Anonymous Coward, 5 Dec 2006 @ 4:31pm

Re: ID system
Why would they use a MAC address for identification? People don't have MAC addresses, network interfaces do.
MAC addresses are very easy to change/spoof, they aren't the most user-friendly piece of information for a novice computer user to find and they can't be detected automatically by the eBay server without some sort of applet the user has to install to report back.

I'm not saying you're wrong about eBay needing better identification systems, but MAC addresses shouldn't even be mentioned.
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Firemeg, 7 Dec 2006 @ 5:20am

Not so hard to fix
eBay could fix the problem if they wanted. It isn't that hard. But, the issue is that if eBay wanted to fix things, they'd have to make some drastic changes that would probably result in some lost revenue. The bigger issue would be that changes that need to be made would require eBay to explain them, and that would mean they would have to publicly admit to widespread fraud in order to justify the changes. It's a catch-22 for eBay. Damned by the fraudsters if they do nothing, damned by the media, users and Wall Street if they enact the required changes.
The truth is that in many cases it is just profitable for the site to keep the scammers. Many scammers pay some type of listing fees - sure they stick eBay with some, but they will pay some. eBay has seen that they can do nothing about fraud and get away with it, so why change now?
So you're waiting for the simple fix? Require every member to be ID verified by credit card or bank account. The user ID of the seller/buyer must match the address and name of that on the bank account or credit card. Make every transaction transparent by showing the contact info of the sellers and buyers. Most ecommerce sites that sell on the same sale as small to mid-sized eBay sellers have this contact available on their own websites, so it shouldn't be a major issue to require it on eBay. Require sellers to pre-pay for auctions. Require bidders to have credit card on file to be charged a fee if they back out of sales. It is, after all by eBay's policy, a legal contract that is entered into upon placement of bids.
Currently eBay is relying on tips from members of the "community" in order to spot fraud. A system like the one mentioned in this article would require eBay to write or pay for more code, hire more employees or sub-contract the work out. eBay has a long history of not wanting excess expenitures for anything of this nature that might be construed as customer service. They'd rather save their pennies to buy internet capital, like Skype.
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Anonymous Coward, 8 Dec 2006 @ 7:59pm

ebay is a cesspool of fraud.

Paypal is an unsafe and dangerous payment system.

They both suck.
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Jerry Brown, 14 Jan 2007 @ 8:58am

Re: Not so hard to fix
Right On!!!!!!!
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abdullah arbabi, 6 Mar 2007 @ 10:37pm

i am ebay member My id is abdullah1348 I have a question if possible please answer to me .I won 5 item on ebay and did not pay for the items long time and right now ebay they closed my accont because unpaid items i do not have the sellers id no more can you help me to remove the strike from my accont and I will pay you for you time thanks .
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