Amazon vs. eBay: 2 Charts Say It All 19 comments
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James Mitchell at a little firm called Goldman Sachs, put out an interesting report Monday that seemed to address concerns around pressure that video game console declining sales put on Amazon (AMZN) for Q2. In there he looks at some of the 'heartbeat' metrics of the business and compares them to eBay as a comp.
They say a picture is worth a thousand words and I thought in this case I'd put two out there for a nice 2k word message. The bottom line is that while eBay (EBAY) definitely is stabilizing, they aren't out of the woods yet and let's not forget they face a competitor unlike any foe they have ever faced.
Figure 1: Amazon vs. eBay User growth since 2006
Figure 2: Amazon vs. eBay Y/Y unit growth rates (unit = items sold via the respective site)
Disclosure: I am long Amazon and Google. eBay is an investor in ChannelAdvisor.
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This article has 19 comments:
eBay
Gross Profit (ttm): 6.31B
Profit Margin (ttm): 18.66%
Operating Margin (ttm): 22.90%
Amzn
Gross Profit (ttm): 4.27B
Profit Margin (ttm): 3.23%
Operating Margin (ttm): 3.78%
Vansak nailed it on the head with his (her?) comment.
I'd rather skim 18.66% off of 100s of millions units sold for the next several years than to skim 3.23% off of millions (or even 10s of millions) of units sold for those same years or even for more years thereafter.
Yeah, eBay needs to improve and it looks like they are getting there. I think they have slighted the sellers a bit but I also think many of those sellers were not true business people prepared for the eventual maturation of a new market channel (such as online auction) or should I say their (the sellers) ONLY market channel. I am sure many feeling burned were "eBay only" businesses that did not expand their horizons.
Whoever said Ebay is treating sellers with disdain is putting it mildly. Ebay has created a hellish environment for most sellers - an environment that provides smaller and smaller profits while forcing sellers to adhere to more and more outrageous policies. It seems with these policies that Ebay is "thinning" its herd of sellers. Unfortunately for them, at the same time Ebay is providing a confusing site for buyers - buyers who can no longer find their favorite sellers or what they are even looking for! I see the whole site as being in a kind of turmoil.
Perhaps Ebay's goal is to end up with only diamond sellers - offering them free listing and garnering all those tasty final value fees without any problem of theft, fraud or all the petty little problems the small sellers have. In the process I believe Donahoe knows full well that the change will cost Ebay dearly for years. Maybe that is their goal, but if they feel they want to go toe to toe with Amazon they best get a set of brains at the top that can qualify to do so - just being Ebay won't do it!
Last and perhaps most important, the one thing Ebay is ignoring are the thousands of small sellers put out of business by Donahoe's disruptive innovation. They are all out there talking, posting, telling the truth about a company and tarnishing Ebay's reputation. Word of mouth is a very powerful thing and in the end that alone...and NOT Amazon may be their undoing ;-)
If Iowly little me can give the big brained Donahoe a bit of advice it would be "remember the Edsel". A very good car made by Ford that for some reason became a joke. It faded away to nothingness.
Amzn Profit Margin (ttm): 3.23% -- as a result of actual growth
eBay Profit Margin (ttm): 18.66% -- as a result of increased fees to its customers, amid negative growth
One has potential for sustainability; the other comes from a finite source. An ever-decreasing, bled-out source.
Because the economy is in the crapper, I have no choice but to continue to be ebay's prostitute, but I can ASSURE you that, if someone like Google began an auction site, I'd be there in a heartbeat. I believe MOST sellers would leave ebay in a heartbeat, if there was an alternative that had a chance of getting traffic.
THAT is what ebay and it's investors better watch out for. As long as ebay has no real competition, they have a monopoly, and, as such, can continue to be "successful" while they treat their "customers" (SELLERS) like prostitutes. But, watch out, if someone ever offers some REAL competition...I say ebay will quickly go the way of the dodo.
On Aug 04 11:43 AM Carousel wrote:
> Measuring user growth, which I am guessing is based on U.S. figures
> (?), for large sites such as eBay and Amazon is mostly meaningless
> considering the number of internet users who need a service as such
> and who shop online. A more meaningful user metric would be active
> users and we all know how hard that figure is to compute. So let
> us stick with the dollar figures.
>
> Vansak nailed it on the head with his (her?) comment.
>
> I'd rather skim 18.66% off of 100s of millions units sold for the
> next several years than to skim 3.23% off of millions (or even 10s
> of millions) of units sold for those same years or even for more
> years thereafter.
>
> Yeah, eBay needs to improve and it looks like they are getting there.
> I think they have slighted the sellers a bit but I also think many
> of those sellers were not true business people prepared for the eventual
> maturation of a new market channel (such as online auction) or should
> I say their (the sellers) ONLY market channel. I am sure many feeling
> burned were "eBay only" businesses that did not expand their horizons.
I'm not sure how Amzn treats it's sellers,but I know how eBay treats theirs.
Alot of the sellers I know left eBay over the past few yrs,and are re-building their businesses on other sites.......... this will take some time........but they are loath to come back to eBay.
It's important to note that many of these sellers were the "uniqueness" of eBay.
Many of these sellers are excellent business managers and not the misfits that eBay management would have you believe.....they spent years building their businesses,and had excellent feed back,with thousands of transactions.
Patricia013 says it all.
TonyP is right they are squeezing only these small sellers while they "compete "for the large sku types.
also let;s not forget about Skype,eBay overpaid and hasn't got the rights to use it the way they want to.
At some point eBay will either succeed or fail.
personally I no longer give a damn.
For anyone with an interest in watching eBay, a detailed case study of shill bidding and the abuse of eBay’s proxy bidding system—all exacerbated by eBay’s introduction of “hidden bidders”—plus a detailed general criticism of eBay’s “clunky” auction platform and policies, at
www.auctionbytes.com/f...
A synopsis thereof:
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.
Nobody ever said ebay wasn't profitable. Of course they have a higher profit margin...they gouge their customers. Is that something to be proud of?
On Aug 04 11:27 AM vansak wrote:
> Odd that this analyst would make such quick judgement based upon
> a couple of charts. I love most about Amazon's product and no question
> the site is leaps and bounds ahead of eBay's in terms of effectiveness,
> but it doesn't diminish the fact that eBay is by far the more profitable
> business, meaning growth in revenue on eBay is far more profitiable
> to an equal amount of growth upon Amazon. Just trying to bring some
> objectivity to the picture...
>
> eBay
> Gross Profit (ttm): 6.31B
> Profit Margin (ttm): 18.66%
> Operating Margin (ttm): 22.90%
>
> Amzn
> Gross Profit (ttm): 4.27B
> Profit Margin (ttm): 3.23%
> Operating Margin (ttm): 3.78%
Starting on August 31st, eBay is going to institute a new policy where photos you upload to any listing are put into a "catalog" of online images that any eBay user can then use for their own listings. The default setting for this is opt-in, which is a problem if you, like me, consider your photographs your property and want to control how they are used and by whom. A copyright notice is posted with a link to your user profile, but no additional information is given, and the link is quite small.
No expenditure for advertising! And their "reward" programs for current buyers doesn't count as marketing. Bribing former buyers to stick around, with coupons that have more exclusions and restrictions than a "free timeshare vacation", is not advertising.
I've seen more ShamWow commercials in the last month than all of the ebay commercials, ever. What, is an expenditure of $100K just too much for the mega-corp with $3 BILLION dollars? Sheesh!
I've even seen a Buy.COM commercial on cable network TV. Now, it wasn't much, mind you, but their name did flash onto the screen for about 10 seconds - white letters on a black background, with no sound. At least it was something!
Ebay is doing what it has always done, more or less. Resting on its laurels and riding the wave. That wave has hit a serious stretch of calm sea and ebay's lack of previous business acumen is the storehouse of knowledge upon which they now draw.
While they could have been learning about the ecommerce business, they were instead off Empire Building. If what they need to do now doesn't require a failed exploit overseas, acquiring an entity they themselves cannot develop or offering more *FREE* spots to other mega-sellers, then they have no clue.
That's what investors should really be concerned with - ebay mgmt blindly grasping at the fix du jour.
One would think that shill bidding would be easy enough for eBay to check and resolve.....and punish.
I liked it much better when the buyers could see who they were bidding against.
I am as much a buyer on eBay as a seller.
On Aug 05 01:27 PM Philip Cohen wrote:
> Sellers unhappy? What about the buyers?
>
> For anyone with an interest in watching eBay, a detailed case study
> of shill bidding and the abuse of eBay’s proxy bidding system—all
> exacerbated by eBay’s introduction of “hidden bidders”—plus a detailed
> general criticism of eBay’s “clunky” auction platform and policies,
> at
> www.auctionbytes.com/f...
>
> A synopsis thereof:
>
> 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;<br/>
>
> 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.