eBay Is a Winning Bid - Barron's 32 comments
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eBay (EBAY) is evolving and becoming more profitable, and its PayPal and Skype units make the company look even better. Barron's Michael Santoli says investors should bet on eBay's continued growth.
eBay could be worth 30% more than its recent $21.25 as the company's turnaround efforts in its online-auction business begin to show results (including a 2.7% increase in items sold vs. a 1.6% decrease in the previous quarter). The company has a generous cash flow and it looks like a bargain compared to pricier e-commerce stocks like Amazon (AMZN). The company's margins are good too; last year it earned $1.8B on $8.5B of revenue, as compared to Amazon's $645M on $19.2B of sales. eBay plans to build its revenue to $10-12B by 2011, along with mid-single-digit percentage gains in earnings, and an aggregate $6-7B of free cash flow.
Its PayPal and Skype units are growing quickly and hold much potential. Last year, PayPal accounted for 28% of revenue and 16% of income. PayPal is used in 64.4% of eBay transactions, up from 56.5% over the past year. Skype contributed less than 10% of revenue but is growing by more than 420% a year and has 481M registered users. Even if eBay spins off Skype, as planned, the move could highlight Skype's value and simplify eBay's business.
Non-U.S. revenue continues to grow, contributing 54% of Q2 sales.
eBay is focusing on accommodating large sellers of merchandise, increasing the proportion of fixed-price merchandise as compared to auctioned products. Though eBay will face competition from Amazon and other e-commerce sites, this is an important transition, since the growth rate of the auction business has been falling since Q4 2008.
Santoli writes that "eBay has gone from overhyped and overvalued to underloved and underpriced," and investors don't fully appreciate the "global, multifaceted and increasingly profitable company" eBay has become. The stock could see a pullback to $20, but this could be a good buying opportunity for a careful investor as eBay could climb back to the high 20s in the next year or so.
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- eBay recently announced a series of changes to its core marketplaces, including an updated search algorithm favoring new products and a limit on communication between buyers and sellers, as part of its effort to accommodate larger sellers.
- eBay: Q2 EPS of $0.37 beats by $0.01. Revenue of $2.1B (-4%) vs. $2B. Sees Q3 EPS of $0.34-0.36 vs. $0.35. Sees Q3 revenue of $2.05B-2.15B vs. $2B. Marketplaces revenue in Q2 $1.26B, down 14% Y/Y. Skype revenue $170M, up 25% Y/Y. (PR)
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In case you missed the synopsis of my lengthy detailed criticism of eBay at
www.auctionbytes.com/f...
here it is, and if you would like to respond to any of the facts that I present or the conclusions that I draw therefrom, feel free:
very little of the auction system security, that eBay claims to offer buyers, exists in fact;
contrary to their claim, it can be demonstrated that eBay has no “sophisticated” nor “proactive” system in place for the detection of undisclosed vendor (“shill”) bidding and indeed appears to do nothing about such criminal activity except as a reaction to a user’s report of suspicious bidding activity;
eBay appears to have no effective matter-of-course verification of users; unscrupulous users can apparently have as many user IDs as they may have email addresses;
many of eBay’s “rules”, concerning the retraction of bids, cancellation of auctions, etc, are nominal only and are no bar to the machinations of the unscrupulous seller;
as a result, eBay’s “proxy” bidding system is so open to abuse by such unscrupulous sellers that to use it, as eBay intends it to be used, can be an invitation to pay your maximum;
the lack of any such effectual security effectively “aids and abets” unscrupulous shill-bidding sellers to defraud naïve buyers;
the masking of user IDs with non-unique, absolutely anonymous, bidding aliases serves little other purpose than to obscure such shill bidding;
the quarterly changing of even these non-unique, absolutely anonymous, bidding aliases serves absolutely no other purpose than to stop experienced eBay users from tracking suspicious bidding activity over time;
the anonymous, individual bidder Bid History Detail pages, supposedly supplied to offset the absolute masking of bidding IDs, can present an ambiguous view and are therefore of dubious value;
anyone naïve enough to “nibble” bid on a seller-elected “private” auction (ie, “User ID kept private”), on the balance of probability, is going to be defrauded;
when suspected fraud is reported, and is found by eBay to be proved to their satisfaction, eBay will conceal that fact from the victim of the fraud; this then is the concealing of a crime after the fact, surely, a crime in itself;
eBay will never acknowledge to a victim that a fraud has been perpetrated, nor indeed will they acknowledge that such fraud is even a problem on eBay; eBay therefore sees no reason to provide any mechanism to aid in the recovery of any monies so defrauded;
if eBay did have any truly sophisticated and proactive system in place for the detection and control of shill bidding, we undoubtedly would not now be having this debate; and
for those buyers (and honest sellers) who embrace eBay believing that eBay acts as an “honest broker” between buyer and seller, I can only say that there are fairies at the bottom of your garden too.
"Cheerlead all you want... ;) "
Same applies to you my friend.
If you really want to know what is going on with eBay just carefully reviews the total registered users and active registered users.
In 2006 41% of their users were actively trading (buying,selling listing items on the site in a 12 month period. Now that number is like 18%. There is incredible user churn. When I noticed active user growth was going to turn negative they actually took the numbers you needed to see this churn OUT of the quarterly reports. They just returned this quarter.
This company can do extremely well once they get a course which does the following..
1- Actively addresses the "Local" markets which can be a whole new reason to "Ebay" .
2- Really opens the global marketplace not hides items from country to country
3- Brings its users (buyers and sellers) into wanting to trade here as opposed to elsewhere through effective advertising auto-affiliating active users to have them participate in the growth of the site.
4- Stop tinkering with trying to show people what they want to buy and ruining the broad nature of the "find everything" marketplace they created.
One example, on a local site for Ebay all Ebays properties could benefit, rent.com, tickets through ebay tickets or stubhub, real estate , new service areas, restaurant certificates etc AND whole new areas of trading like larger harder to ship items like furniture and other heavy things.
Also by auto-affiliation here is what I mean. Many users are turned off by ads plastered all over the site, even on users own listings. Make sellers part of the team by cutting them in an ad revenue for ads on their listings, on content they create to showcase their items and on cross-sales of other customers items found through their items AND on new users that sign up from seeing their item.
This would make Ebay the only place where sellers could benefit from sales of items, content ads, cross-sales, and new users. It would make each item placed on the site more valuable.
There are amazing people working at Ebay. There are great people active in the ebay community. But most people I know with a good understanding of the site feel the same way I do. And its not an "Ebay hater" thing, its a concern for a great place going in the wrong direction.
Experience...
Seller on Ebay since 2004
Trading assistant on Ebay (sell for others)
Owned Ebay store since 2005
Wife was an Ebay Teacher (Educational specialist)
Member of focus group for Ebay
Sold over 7,000 items on the site, feedback over 5000 100% positive.
Leader of one of the best seller groups on Ebay
Featured in a few books on Ebay
Winner of 2007 Ebay Hall of Fame Award
Bought hundreds of items on the site.
Introduced hundreds of people to ebay through classes and friendship
Marty
I havent med John Donahoe so I cant comment on him. Id love to meet him and combine what he is doing with what needs to be done for the community. JD can reach me at clhct1@aol.com LOL
Marty
JD ain't gonna call. You're not a Diamond seller, and therefore just another peon.
it's drivel, not "dribble"
Typos I can live with, poor diction is another matter.
But please keep posting though, it lets readers see the intellect of the pro eBay side.
You associate spelling with intellect? This isn't the 1960's Bob, please move into the 21st century. Like many things in life you need to look beyond letters.
LOL
"If you really want to know what is going on with eBay just carefully reviews the total registered users and active registered users."
Well, I count as 4 registered users since I have four IDs' (two of which are selling ID's). That's how useful that yardstick is....I know others with at least 20 IDs!!!
Hey, "eBay+++", eBay actually read my "dribble" and responded to it, and I have recorded their responses is an appendix to my dribble. Of course, their several responses are nonsensical and an insult to any readers' intelligence; but you undoubtedly would appreciate their "spin" on the facts that were presented to them. Oh, sorry, I forgot, you aren't interested in facts; you prefer to look past those for the fairies at the bottom of the garden ...
This sort of user meltdown was apparent and the main cause for the demise of AOL which was once thought never to lose their lead just as Ebay was.
It becomes more and more expensive to grab new users when existing users become less active or leave the site.
It is critical that Ebay realize this and stop pissing into the wind.
They need to capture the buying community in ways only they can and let people know through creative marketing and ads what they can buy on eBay.
Sellers need to have a place which excel in service but also in opportunity.
Back in 2006, Bill Cobb then President of Ebay North America, announced "store inventory would be going into Core search, in Jan of that year" . That quarter, which was awesome for sellers, saw and increase in Gross merchandise volume (sales of all sellers) and it even beat the holiday quarter that preceeded it. Sales exploded and new inventory was swamping the site. More hits for items newly searcable was pulling millions of store item up through google rankings and it was feeding on itself
A few months later, Ebay citing non-existant (in my view) "buyer confusion" realized that if it sold too much too quickly ,they would lose tons of money from people listing items over and over that DID NOT SELL. Yes, revenue from items that do not sell was declining as people could list cheaply and get found and sell. Our sales shot up from $1500 a month to $4500 like nothing.
Ebay reversed their "experiment" then slammed their own sellers by saying "store inventory was "slower , less desirable" etc etc.
Combined with fee increases, this change started the process of a migration to Amazon. New Amazon sellers took root, found success and then more followed. Ebay handed them this business.
Within a few years of its Start, Ebay Stores grew to be the largest web based merchant mall in the world, perhaps the biggest internet web success story ever.
But within months, they were talking about it like an old shoe, because the revenue model was such that the relisting of items that didnt sell over and over was so profitable that they couldnt forgo the revenue.
I begged for them to keep the system and change the fee structure as things were firing on all cylinders then. Instead they kept marching down that path, angering many of their best users, reversing a major decision then belittling their items.
Now they see GMV in decline, a user base went from 41% active to 18% active. Non-existant advertising and marketing campaigns, a 10% cut in their workforce (mainly good community orientated people), and despite plowing 4 billion into stock buybacks at prices way above where the stock is today the stock is still down 50%.
People who really know Ebay know what is going wrong. No one will listen though. It isnt that its a bad company, its that its losing the interest of the buying public and unwinding in much the same fashion as it wound up, and much like AOL unwound. The tipping point may have been reached but I am an eternal optimist and hopeful that sensability will return to management.
The employees at Ebay , when energized would return like horses to water in the desert. They are thirsty for a business model that reinvigorates this company just as users like I am . I have spoken to manhy of them and they feel the same but sometimes differ in their approach.
I wish them luck of course, but right now the same people that cash out on companies (BAIN CAPITAL) are running the show and Id look carefully at how they do things to see Ebay's future.
Marty
I continued to buy, until I realized that I could no longer find anything I was looking for on Best Match. Plus, prices for unique items, when anything was actually available, went up in response to the fees loaded onto the small sellers. So I no longer buy.
I realize I'm just "noise", and my small-time opinion doesn't matter. But to those of you who are still enamored of eBay and waiting for it to burst anew onto the online market and take back its pre-eminent position, know this: eBay's core is gone. I know dozens - hundreds - of small sellers with stories just like mine.
And guess what? Even though I've had no dealings, either buying ore selling, with eBay in over a year, I'm still listed as a "registered" member. In fact, all five of my ID's are still listed as such.
So don't bank on what eBay says. Just watch what eBay does. And it's not doing a thing that's encouraging people like me to return or even check them out any more.
Sadly, eBay is a dead issue for me. I miss the fun and the excitement of making a sale or of finding just that perfect "IT" to buy. All of that is gone, rooted out and trashed by John Donohoe and his fancy ideas of how to run a business.
My email is clhct1@aol.com keep in touch!
Marty
There will be periods of recovery in the Ebay core marketplace but the ship is sinking. Stock pundits sieze the lifebelt when the numbers go down and then cheer hooray when the numbers start rising again. Business analysts can't offer any hope of Ebay getting out of its death vortex because the problem exists at a level of detail so far below GAAP they can't quantify it, or even see that it's there.
The loss of small sellers will cause, amongst other things, the basic price of goods to rise. Say there were a 100 buggy whip sellers before, and there are only 50 now. Twice as many people are after buggy whips, so the price on auction rises to meet demand, and the price on BIN rises to match the demand shown on auction.
Ebay is getting more expensive than it used to be. The one stop shop for the cheapest price is now Google Shopping. And sellers selling direct are getting more and better business.
Ebay used to be good. It's a shame things have gone the way they have. It's the stockholders I feel sorry for.
I found this page (Blog) by punching in "Donahoe Ruining Ebay".
I can't imagine it getting any worse.
The Good Ole Days on Ebay........a Very Fond Memory......We had Good Times.....Met alot of Wonderful people.
I just can't believe it's All Gone.
How could they have let this happen ?