Following in Microsoft's Footsteps, eBay and Yahoo are Losing Talent to Smaller Internet Startups

Excerpt from our One Page Annotated Wall Street Journal Summary (receive it by email every morning by signing up here):

Web Start-Ups Lure Executives At eBay, Yahoo

• Summary: In an irony of the internet business, yesterday's 'it' companies, e-commerce portal eBay (EBAY) and search behemoth Yahoo! (YHOO) have seen their talent pools drained by smaller, newer internet companies. The trend of employees at some of today's most established and profitable internet companies voluntarily leaving to take jobs where they earn as little as a 10th of their previous paychecks but gain added responsibility has been accelerating of late. Yahoo! and eBay shares have recently dropped heavily, lowering the value of employee stock options and therefore the fiscal incentives for employees to stay put at the more established, publicly-traded internet companies.
• Comment on related stocks/ETFs: Yahoo! and eBay's current predicament is reminiscent of what Microsoft (MSFT) must have been facing during the dot com boom of the late 90's, when employees were jumping ship to find, newer, 'hip-er' companies such as Yahoo! and eBay. Read up on past Microsoft employees who abandoned the company for other, smaller internet companies in this Business Week piece from 1999 entitled Outta Here at Microsoft: The software giant is losing key talent to the Internet.

Comments

[Rick Williams:]

EBay and Customer Satisfaction:

The “analyst” hawking EBAY may want to read an excellent paper published in the Journal of Marketing Vol. 70 (January 2006) authored by Fornell, Mithas, Morgeson, and Krishnan: titled "Customer Satisfaction and Stock Prices: High Returns, Low Risk" (the link is to a “.pdf” version). Last year EBay held a relatively good customer satisfaction rating. This year, I suspect a significant drop in customer satisfaction coupled with other market forces will keep EBay well away from their 52 week high and relatively close to their low. To get an indication of the depth of customer consternation with EBay; type the following into a Google search bar "Beware of EBay and Paypal" or visit themwed.org and click the banner on the right of the page. Then for contrast type, “Beware of IBM” into another Google search, and compare the results.

Toward the end of Fornell’s paper is a graph (figure 5) displaying the performance of a portfolio based primarily on “customer satisfaction”. The results given are relative to the performance of the S&P and DJIA. Their findings are stunning. Click here to see EBay’s year to date performance relative to the S&P 500.

What is the point of this? Simple, Google is not EBay’s only problem. Until EBay openly and honestly addresses the issues of their dis-satisfied customers, their stock will likely continue as an under performer. Furthermore, their clients will continue to defect, like “Network Solutions” who no longer displays PayPal on their website.

Rick Williams
PS: Below are two of many examples.

“MSN Money Home>Message Boards>EBAYQuic... links

“If you are considering Ebay stock then go here to see how they treat their vendors as 2nd class citizens”

Posted by LosingMyBusiness2China on 07/24/06 11:56 PM
forums.ebay.com/db2/fo...

This is the pulse of the selling community. In it you'll see just how Greedbay or FEEbay devalues individual business owners. Since the announcement on July 19th, it has turned peoples lives upside down causing them to scramble to save their businesses. I don't think people realize just how patronizing and demeaning this company is to force sellers to pay higher fees while other sites get a free ride. To basically create this havoc while American jobs have to close because they cannot compete with China. Sometimes making money is not as important when it comes to the devastation of up to half a million stores globally

No one hears me or other ebayers. We are just crybabies. Crybabies that work very hard despite search manipulations and customer service that is worse than Dell's”

The following is from Seeking Alpha:

Postcards 4Sale wrote on Tue Aug 1st @ 6:06 pm
If the quantity of listings is the main indicator of strong growth, then eBay is more than happy to manipulate those figures for you. All it takes is a bit of 'selling strategy', coupled with what is already in place.
The entire Pacific Rim eBay community enjoys "NO Fee" Stores and Listings. That is NO FEE for what on every other site, requires considerable expense. To be fair, those Fee-Free Asian sites do pay a Final Value Fee (FVF), but don't expect that to bring in much revenue.
You see, those industrious sellers know how to manipulate their own financial gain! All it takes is to sell the item for 1-cent and charge a high shipping cost. The FVF is charged to only the selling price, not to the shipping cost. So, just what is the FVF on 1-cent? $0.01 X 0.05 = $0.00
Oh, a few side benefits of this type of "Market Flood" is that American buyers are duped, ebay.com is saturated with cheap goods and those Listing Quantities look GREAT!
Reply here

2006 Aug 02 10:16 AM