eBay: Growth at the Right Bid

eBay (EBAY) is a truly great American success story. According to eBay's March 2009 Three-Year Roadmap for Growth:

"We are positioning this company to compete and win across a range of profitable ecommerce platforms focused on connecting buyers and sellers across the platform of their choice."

Founded in San Jose, California on September 3, 1995, eBay has carved out a unique position in the retail space based on e-commerce. Earnings growth has averaged an incredible compounded 48% per year (See purple circle in Figure 1 below).

Fig. 1. EBAY 13yr EPS and Price Correlation

click to enlarge

In many ways, eBay (EBAY) has become a victim of its own success. eBay first set the bar high with its IPO on September 24, 1998. Within only a few months its stock value peaked at close to a thirty-fold increase and earnings were doubling almost every year and sometimes more than doubling. (See red arrow and red circle on Figure 1).

After eBay’s stock price peaked at just under $32 per split adjusted share in 2000, its value was almost cut in half throughout 2001-2002.

However, from the period 2001-2004 eBay established itself as a growth stock extraordinaire. Earnings grew by 80% during the recession of 2001 and averaged over 85% per year compounded through 2001-2004. Even though eBay’s (EBAY) shares started out overvalued with a PE ratio of roughly 135 times earnings (orange circle) at the beginning of 2001, shareholders enjoyed an incredible return of 48.6% per annum (See purple circle in Figure 2 below) for the four-year period. This exeplary performance occurred during one of the worst bear markets on record.

Fig. 2. EBAY 2001-2004 EPS History Plus Price Performance

When contrasted to the performance of the S&P 500 over the same time frame, it’s clear that eBay’s results were astonishing. See Figure 3 below.

Fig. 3. S&P 500 2001-2004 EPS History Plus Price Performance

The point we are striving to make is that eBay (EBAY) created a new and unique category of retail selling that it had all to itself for the better part of a decade. Therefore, explosive growth was easily achieved. Common sense says that those glory growth days are forever gone, however, that does not mean that attractive above-average growth for eBay is over. In Figure 4 below, we plot the consensus five-year growth forecast of 18% (15-20% as we see it) for eBay by 20 leading analysts reporting to Zacks. This depicts what we mean by “growth at the right bid”. In other words, we see eBay as very attractively valued today based on realistic assumptions for achievable future growth.

Fig. 4. EBAY EPS 5yr Forecast

The thesis for eBay’s (EBAY) growth is admittedly somewhat cloudy, but not without plenty of opportunity. Legitimate questions remain as their business model transitions from pure auction to a blend of auction and fixed pricing. Due to competition for auction from formidable competitors with cost advantages, developing a successful fixed business is important. After struggling for several quarters due to the recession, recent sales indications for their fixed-pricing business models appear promising.

The current desire to sell Skype is being challenged by its founders. Frankly, we are ambivalent towards the transaction. On the one hand eBay can focus more on core strategies sans Skype. While on the other hand, Skype offers strong growth potential in our view. Therefore, keeping Skype would not be all that bad, especially since eBay does not need the cash. eBay’s enormous free cash flow generation, strong cash hoard and healthy balance sheet puts them in the catbird seat. eBay enjoys the luxury of not needing to tap credit markets to fund its growth. See Figure 5 below which plots eBay’s free cash flow over earnings. (Orange shaded area with “F”).

Fig. 5. EBAY 13yr EPS with Free Cash Flow

We believe the real growth story today for eBay (EBAY) is PayPal. As online shopping continues to proliferate and expand worldwide, the need and world-wide potential for PayPal appears limitless. eBay certainly possesses the financial resources and we believe business acumen to exploit this opportunity.

At the end of the day, eBay (EBAY) is an extraordinary company with enormous resources at their disposal. This allows them to explore numerous avenues of future growth. Promising business lines such as StubHub, Kijiji, Shopping.com, Half.com, ProStores, Rent.com, and many others are merely scratching the surface of what’s possible for eBay. They may not all pan out as hoped, but odds are that enough will to generate the growth that validates today’s attractive valuation.

eBay (EBAY) is a fast growing company whose tentacles reach into 30 countries worldwide. Consequently, we believe eBay is a sound investment for prudent long-term investors seeking growth of capital. Although its future growth will likely not be as fast as its past, it should, in our view, remain an above-average grower currently selling at an attractive entry point.

Full Disclosure: Long EBAY at time of writing.

Comments

[Bob C:]

Just another analyst sipping from eBay's kool-aid cup.

Look under the hood, and kick the tires before buying this vehicle!

Oct 15 10:35 AM

[Leftfield:]

Microsoft was on fire a long time ago also. Like them, Ebay's extraordinary growth period is over, and an article that spends it's first half on past glory is suspect.
It is a great business, a cash cow, whose problems are infinitely preferable to a dying business. But, CEO Donohoe is finding ways to lamely imitate competitors, away from core strength, and cause Ebay's first DECLINES ever.
Amazon, #1 in online fixed price selling, has so many intelligently-conceived aspects to their execution that utterly elude Ebay management, it brings to mind an ape looking at a supercomputer. Amazon's technology seeks to aid a buyer; Ebay's confuses. The viewer sees the "best match" default for their item search which puts Ebay's favored large sellers with 26 days to go, ahead of regular sellers with a minute to go in their auctions. There are countless other ways Ebay's site is unhelpful and practically shouts "ripoff."
Ebay management favors large sellers of Chinese dreck over small sellers of unique items so they can cut their labor costs and pay themselves a bonus. The article fails to mention the SHRINKAGE of Ebay's business in the last year, during a time when their site should be a mecca small buyers and sellers raising cash and finding unique bargains. Pathetic.

Oct 15 12:45 PM

[markfl:]

The WSJ wrote, "EBay has been working for more than a year to restructure is core marketplace business, which has struggled amid the recession and intensifying competition from Internet retailers such as Amazon.com Inc. (AMZN)."

I think what it comes down to is that in the era of diminished consumer expectations, there's only room for the best of the best online merchants, and AMZN is the more competitive.

online.wsj.com/article...

Oct 15 01:11 PM

[longoil:]

The bottom line that is eBay's lack of customer service will kill it in the end. Sellers do not like paying ever increasing exorbitant fees and get zero customer service and get their rights striped away (i.e. no seller feedback mechanism).

Ever try to contact Ebay customer service? They make it so excruciating painful that most people give up. When you do find the link, and your service request you will never get an answer.

Contrast this with Amazon. On several occasion where I wanted to make changes to existing orders, I sent and received responses (and completed actions) within 2 hrs. My expectation was 24 to 48 hrs reply time.

Oct 15 02:52 PM

[Steve Alexa...:]

eBay will continue to grow, but most investors missed the boat on this one when it was sitting at just over $14 at this time last year. That was a ridiculous valuation for such high margins, cash flow, growth potential, and balance sheet. Now its about fairly valued, maybe slightly overvalued. No word on valuation in the article, although the business analysis is solid, IMO.

Steve

Oct 15 05:07 PM

[fatseal:]

I won't buy ebay stock because I don't shop much on ebay, not like I used to. Why? Because I can't find what I want on ebay. The unique, the one of a kind, the out of print book, I shop on Amazon, Etsy or other alternative sites. Instead of screwing with ebay's convoluted search, I use Google to find exactly what I want, or if I want to browse cool things, there is Bonanzle, Etsy or dozens of great independent sites, to look for high quality, well priced items, whether it's glass, jewelry or anything else my heart desires, I detest slogging through pages of the same junk, Chinese made fake jewelry, dozens of duplicate items, and that's if the pages load or the descriptions and pictures show up! Ebay has improved itself into irrelevance for me. If I want the same Ipod, Cole Haan shoes or Gymboree clothes, I can go to the store and get it. And usually I can get it cheaper somewhere else. What ever it is I want, I can't find "it" on ebay anymore. And if I do, my computer times out before the descriptionless page loads!

Oct 15 05:56 PM

[Patricia013:]

Hey Chuck - what flavor Kool Aid did Donahoe give you? I used to like the strawberry myself. This is pure Ebay-speak and not worth the time it took to read it!

Oct 15 10:02 PM

[Patricia013:]

@Leftfield: BRAVO! You should have written an article - one from the inside looking out - instead of the author's article from the outside trying to see in - trying (and failing) to surmise! You know firsthand the problems inherent in Ebay today. They've just about killed off the truly unique and wonderful niche they had in favor of trying to imitate other business models. They had a solid monopoly in that market - one that was ironbound and invincible. They've killed it all by themselves and out of pure greed - because they never really understood what the draw was to Ebay - what the pull was for those buyers. Most came to Ebay NOT for the new leftover lots and the chinese junk being pushed at them by Donahoe....they came for the rare, the unique, the different type of merchandise they could FIND NOWHERE ELSE! Donahoe is so totally oblivious to that that he continues to believe simply in the Ebay name and to believe (fatally) that Ebay is the only game in town! Ebay is DYING SLOWLY from the inside out. When their quarterly report comes out and analysts look deeply at it they will see yet another decline in that all important core that is the HEART and SOUL of Ebay! It will never live up the Amazon or even Walmart - it is killing off its own golden goose our of pure greed and deserves the slow death it is getting!

Oct 15 10:20 PM

[User 500782:]

I agree with all of the above trashing of eBay. Just 'one' of many more reasons I very seldom use eBay. If buyer and seller are in the same country other that the US, both have pay high exchange rates to and from US $. As a Canadian eBay/PayPal won't even accept my US credit card. GREEDY, GREEDY, GREEDY!

Oct 15 11:05 PM

[aja8888:]

EBay is turning into another AOL.

I used to shop on ebay, but now it's just another Chinese junk retailer.

Oct 16 08:19 AM

[Pozzdonn:]

"The current desire to sell Skype is being challenged by its founders. Frankly, we are ambivalent towards the transaction." When was this dribble written? Back in the summer? The Skype sale was over at the end of August. eBay held onto 35% - god knows why. Boy, old Meg really cost eBay a pretty penny with that boondoggle!

eBay cannot decide on whether it wants to be an online flea market or another Amazon. It will never be an Amazon, with or without Shopping.com or Buy.com. It will always be a fee-based Craigslist.

eBay's time is past, and PayPal is just a little padding for their failing market share.

Oct 16 08:25 AM

[Mike from NYC:]

I thought this puffery was illegal :)

It's obvious that the author hasn't read much outside his own little world. eBay has been criticized on the web by many for its haughty policies and that of Paypal as well.

eBay is on the decline and has been so for quite a while - that has been widely reported from a variety of sources - Doesn't the author read?

And Skype? If what I read is true, that the developers own the code, then Skype is finished and won't bring eBay any money. What kind of brain trust buys a software program without buying the code along with it?

Oct 16 08:39 AM

[smiley:]

No one can deny that ebay WAS the best thing happened to when it came to online trading. Unfortunately, so much has changed now compare to what it used to be, it is hard to believe that it is the same organization. We all know that the times change and we accept that. But, core values and principles that made a company successful in the past should never change. That's where the problems are and it is too late to fix it.

Now there is a new international online patform to allow average sellers to trade for free forever. At auctions8.com sellers can Register, List, Relist and Sell for free for life and have free Stores.
The site is growing on basic community values and excellent customer support.

Take a look, you will not be disappointed.

Oct 16 08:55 AM

[MexCom:]

I've commented on E-bay's demise years ago on my commentary on Clearstation.com.

The basic problem as others here have mentioned is their not standby their retail purchasing customer. A buyer who is bilked by a fraudulent seller has no recourse. Once stong, the buyer never comes back.

Competition is increasing in the Internet retail space.

Oct 16 10:00 AM

[cordwainer:]

The other commenters, particularly leftfield, are quite right. The author of the article, unfortunately, has failed to observe one of the primary rules for judging whether or not one should invest in a company, and that is: how happy are the customers? In the case of eBay, both buyers and sellers are increasingly frustrated, and the future looks no better.

Let's take a look at a few fundamental and severe problems that exist today, which were not a huge problem with the "old" eBay, but are out of control currently to the point of driving buyers and sellers away in droves.

One of the worst issues is policy violations. eBay asks users to report listings and sellers who violate eBay rules. However, thousands upon thousands of violations go uncorrected, regardless of how many times they are reported. In addition, the mechanism for reporting is cumbersome and fairly useless. One can only report individual listings, only 10 at a time, and there is no good way simply to report a seller who is repeatedly and blatantly violating policy. So, for example, if an established Power Seller with tens of thousands of positive feedbacks and hundreds of listings is breaking the rules, you can expect the rule-breaking will continue indefinitely.

Why? Because eBay obviously (and provably) does not consistently or effectively police its own site. As a result, buyers are becoming fed up with wading through hundreds of irrelevant search results trying, often without success, to find the item they actually want. Looking for an inexpensive used but working laptop, for example? Good luck picking out a low-priced one from among the parts, components, dead units for repair, manuals, software disks, theme clocks, stickers, and bags listed for sale in the "Laptops" category, in blatant violation of eBay policies forbidding miscategorization, keyword spamming, and search-and-browse manipulation. On NO other auction retail site will you ever find this problem to such an egregious extent, not even on Craigslist which - last I read - still had something like 4 employees at most. But then, Craigslist makes it easy to flag a listing, Craigslist makes follow-up a priority, and Craigslist cares about enforcing its rules.

Even more infuriating: eBay will warn a seller or even suspend their account based on an unsubstantiated claim from, for example, a software publisher that a user is selling software in violation of the publisher's End User License Agreement. But even when the seller can prove the item is offered in accordance with the license agreement and properly transferred - often using the publisher's own license transfer form - eBay consistently fails to restore the user's account to its previous status. This is only one way in which sellers receive black marks on their record in error...and eBay doesn't particularly care. The odds of getting any eBay mistake corrected are slim to none. The big companies know this, and will often ask eBay to remove what they know are perfectly legal listings just to eliminate competition.

I could go on and on about eBay's abuses of its own terms and conditions, failing to live up to its part of the contract with users, punishing lesser sellers for minor infractions while overlooking long-term multiple-policy violations by companies who - in many people's opinion - should never have been allowed to sell on eBay at all. It is no longer an auction site predominantly, or a site for individuals or small companies selling low-priced items. It has become a host for everyone from wholesalers to retail stores.

Take a company like CSN, for example. I quote from their website at csnstores.com: "CSN Stores LLC began in 2002 and has grown rapidly into a Top 3 online U.S. retailer of home and office goods with 400+ employees. See our Facts at a Glance and Industry Associations"

The question is: given eBay's policies and guidelines for sellers, why is this company allowed to sell on eBay at all? Why is a company with an established web presence, a corporation with 400+ employees shown on eBay's site as an eBay storefront?
eBay was supposed to be a site where individuals could become power sellers and build stores that existed only on eBay.

And eBay sellers are not allowed to list their non-eBay web page if it offers items for sale. But mega-retailers such as CSN are free to include on their information page the URL of their main retail web site, so buyers can connect to that site if they wish, and could buy there instead of on eBay.

This is a huge wound contributing to what will eventually be the death of eBay unless eBay makes drastic corrections fast: the double standard. One rule for "sellers," another rule for gigantic retailers who are allowed to be listed as alleged "eBay Stores."

As you'll see in a minute, the double standard issue results in some even worse abuses, one of them a case of eBay seemingly intentionally trying to trick sellers into paying higher fees under the guise of helping them. But first...

I could write an entire related article about how eBay prices are no longer particularly competitive. In fact, others already have. I've read two articles to date that have analyzed prices in certain categories from eBay, Amazon, and various retailers, and both noted that eBay was no longer less expensive than any other web retailer, and was in many cases overpriced. In addition to the problem of huge retail sellers being allowed a presence, there is also the ballooning emphasis on drop-shipped overseas-manufactured products - departing from the original eBay model of individuals selling the items they had available, not re-selling wholesale goods. Likewise, eBay is experiencing a huge increase in product duplication as more and more new sellers fall for the wholesale, drop-shipping, "get rich quick" hype. Most of them use the same sources, consequently they sell the same products at similar prices.

eBay has done an incredible number of other stupid things that make the buying AND selling experience more and more unsatisfactory. One of the worst, to continue with the double standard discussion, especially nasty: their self-serving hypocrisy in offering supposedly "helpful" marketing suggestions to sellers: suggestions that actually hurt the sellers and benefit eBay.

For example, sellers are now being strongly encouraged to offer free shipping to attract buyers, which admittedly does work in a lot of cases. eBay then advises that if the seller can't afford simply to ship for free, they should they add enough to the price of the item to cover their shipping and handling costs. Think about that for a minute, in light of these facts: Sellers are charged a final fee that is a percentage of the selling price; and Sellers are not charged a fee for shipping and handling. These two facts have always been true.

They are true on every auction and sale site. The item price is where one's profit comes from, consequently what eBay's commission is based on. Whereas shipping and handling are necessary costs of doing business.

The real hypocrisy in that suggestion (where in my opinion eBay may be verging on breach of contract or even attempted fraud) becomes clearer when you note that eBay also has a policy forbidding "fee avoidance," one form of which is charging excessive shipping and handling and lowering the actual item price so the final value fee assessed will be less.

But suddenly eBay is actively touting Free Shipping, telling sellers what a great idea it is, how it will attract buyers, get your ad noticed, make your listing stand out, etc., etc. In other words: eBAY IS ESSENTIALLY TRYING TO CONVINCE SELLERS TO CHEAT THEMSELVES.

In other words, while on the one hand eBay is quick to question and even suspend sellers who charge what it feels is "excessive" shipping and handling, on the other hand it is trying to convince sellers to pay fees on shipping and handling by counseling them to include those costs in the item price!!!! And I apologize for the exclamation points, knowing they are normally a sign of poor writing skills, but for eBay to promote a practice that it KNOWS results in payment of unnecessary fees just skyrockets my blood pressure and makes me sputter.

That alone says all you need to know about how buyers and sellers are treated by the "new" eBay, and how low eBay's formerly high standards have fallen.

The "old" eBay was a marvelous idea that created a win-win situation for buyers and sellers. Get rid of what you don't need! Make some money! Advertise to everyone in the world! Find things you thought you'd never find again! Buy something unique without paying a fortune! Post feedback so everyone will know who the good sellers and buyers are, and so the community can help warn each other about potential bad risks before someone loses money. It was brilliant. Everyone loved it. They bought stuff. They made money. eBay made money. Lots of money. It was simple and fair. It worked. Those few things that didn't work well enough, eBay did its best to fix.

And, lo, we looked upon the finished product, and it was good.

Anyone not see a metaphorical serpent sneakily slithering toward our innocent Buyer and Seller about right now?

The "new" eBay is a lose-lose proposition. eBay makes suggestions to try to collect fees to which it isn't entitled, slapping the sellers in the face. eBay allows multi-million dollar retail companies to call themselves eBay Stores, slapping the buyers in the face. eBay is riddled with errors, blunders, unconcern, unpleasantness, idiocy, obstructiveness, omissions, indecision, mal-decision, and miscellaneous cruft. Buying gets a little more annoying and difficult each month. Selling is close to becoming the top sport for modern masochists.

Think it can't get worse? Let me end with a little story. A friend of mine, an eBay seller with a 500+ 100% positive feedback rating, just received an e-mail from eBay, questioning why he charged more for shipping the second time he sold the "same" item (not an identical item, mind you, but the same part for a musical instrument; instrument repair/customization is his livelihood). Well, he replied honestly, because eBay suggested offering free shipping, and he saw some merit in it. But, as he went on to tell them, he concluded later that paying the postage himself on a regular basis was not cost-effective, and he had realized that include shipping in the price meant he was paying a final value fee on shipping charges. "So unfortunately," he wrote, "I can't afford to offer free shipping, especially if it means putting it in the price means I'm paying a fee on postage that I shouldn't have to pay."

Did eBay say, "Oh. That makes sense. No problem."? Did they say, "Oops, we didn't think of that when we had the Free Shipping idea. We better change that so sellers won't lose money."? Ha, ha, I laugh. Don't be ridiculous.

What they did was reply with a boilerplate message warning him that in future he needed to make his shipping charges consistent or he might have his account suspended for fee avoidance! Yep, now if he actually tries to charge even the SAME shipping cost for that item, or any other item for which he previously offered free shipping or lower shipping, eBay may take punitive action.

To add insult to injury, his 100% rating has dropped to 65% over the past two months, and he cannot get an answer from eBay as to why. He has negative feedback. Not even a neutral rating. He has called them, e-mailed them, and written them via snail mail. He has received nothing but automatically generated generic e-mail responses.

In other words, eBay has threatened to suspend a seller for adhering to eBay's policies and guidelines, and expecting eBay to do the same. And his story is not unique.

This is one reason Amazon is stealing sellers away from eBay rapidly, as are other auction and storefront alternatives. Amazon controls most of the experience, including shipping charges. The majority of sellers can not set their own shipping charges, even if they want to. The amount is based on shipping weight and a reasonable handling estimate. Amazon makes certain sellers are treated fairly, and that buyers understand that shipping is a legitimate, non-negotiable, fixed (by the shipping company) cost. Plus, even though there is no auction option, listings are good for 6 months, and there are no fees for re-listing them indefinitely. Amazon's commission seems higher at first glance - averaging around 17% - but various people have done the calculations to compare that single fee with eBay's category-based fee structure, plus the listing fees, plus fees for extra "goodies" such as larger photographs, subtitles, layouts, charitable contributions, PayPal fees, etc. Once one takes Amazon's mandatory shipping/handling charges into account, ease of listing, no need to take photos, minimal to no description needed beyond the existing product page, etc., etc., Amazon often turns out to be the better deal.

Surprisingly, I've been finding that the Amazon prices for hundreds of items are lower - often much lower - than the lowest price on eBay. The dropshippers and others have had the effect of driving prices in some categories up quite a bit. Then there are other products where sellers can get a fairer, higher price on Amazon. And let's face it; there are a lot of people out there who will never be comfortable buying on eBay because they can't get over the perception that it's risky.

My prediction for eBay? If they continue as they are now, even the fee reductions will not come anywhere close to halting the exodus. Sellers who were at first excited about the changes can now see the net result is really no better. The much trumpeted fee reductions, applying to listing fees only, appear to have been mostly offset by subtle increases in final value fees, implemented without any fanfare, of course.

Greed...disquieting signs of a seeming willingness to cheat their own customers, buyers and sellers alike...appalling customer service (combined with PayPal's equally appalling customer service)...inequitable treatment of sellers...inconsistent interpretation of policy...unwillingness and consequent near-total failure to enforce many of their own guidelines...

All of these will sink them in the end, unless they make a real commitment to tossing out the garbage that has piled up in every corner of their business, and unless they return to a viable and genuinely needed business model. No one is looking for another retail store, another Overstock, another source of the same products they can find a hundred different places. If that's the sort of business model eBay is planning to emulate, then no one will any longer need eBay.

If you pay even slight attention to business and tech new, skim one or two related websites, you can't help but notice that in forums all over the Internet people are looking for, writing about, sharing information on, rating, and claiming to be, alternatives to eBay. More to the point, a growing number of eBayers and even non-eBayers are creating and searching diligently for sites that ARE NOW what eBay USED to be.

It is a dismal and damning indictment of eBay's management and business planners that the only entity deaf to the increasingly desperate requests of its customers...the only one blind to the millions of words of anger on thousands of web sites including its own...is eBay.

Oct 16 01:03 PM

[Philip Cohen:]

On the surface this may sound like a reasonable analysis, but as others have pointed out, what about what’s going on under the hood? What about the continuing “clumsiness” of the whole eBay organisation?

eBay has had it’s phenomenal success on its auction platform, a platform that can now be demonstrated to be insecure in the extreme for buyers; every eBay “device” now seems to favour the unscrupulous seller. We buyers really appreciate that.

For those who would expect more “service” from eBay I would suggest that there is no way that more service can be provided, even if eBay had any desire to so provide, while the Ho is cutting staff to try to offset the effect of a continuing reduction in revenue. What are those 15,000 remaining people doing anyway?

I would agree that the only future for eBay under the “Ho Ho Ho” and his crew is further down the toilet. And my reasoning for that assumption, from a buyer’s point of view, is detailed at www.auctionbytes.com/f...

Oct 16 05:40 PM

[755:]

Glad to hear that I am not the only one appalled by what has happened to eBay.The management is totally clueless.

Business must be terrible.

I have been trying to sell a lot of very desirable stuff for the last 3 months. There are no buyers. They have obliviously gone somewhere else.
This stock is a huge short.

Oct 16 05:56 PM

[Hester:]

ok, I will come to the defense of ebay. Yes they have had their problems recently, and the fact that the author of this article began by touting ebay's past stock performance and didn't stop until halfway through the article is a little troubling. That was a mistake, just because a stock and a company had great performance and growth for years means nothing for the future, look at wal-mart. So, I'm not even sure that was brought up.

However, based on valuation, ebay is still cheap compared to amazon or nearly any other competitor. Pay pal is expanding and the skype deal was the best of both worlds. They turned a profit on it and kept enough of it so that they do not have to focus much of their attention to it, but get to retain some of skype's future profits.

Also, do not forget ebay's brand. Everybody knows ebay. If you walk into any random house in america and ask them what they want to do with some of their old junk in the basement, most will say, "maybe I'll put it on ebay." They don't say, "maybe I'll put it on Etsle." Their brand is not going to disappear anytime soon. It is still a great business model as well, and that will not change. Of the billions of transactions that occur on ebay, they never have to deal with any of the actual physical goods.

Yes, they haved ticked some buyers and sellers off, but that is going to happen and that sort of thing waxes and wanes. If a serious internet seller wants access to hundreds of millions of customers, ebay is still the best place to go.

Oct 16 09:47 PM

[Bob C:]

"If you walk into any random house in america and ask them what they want to do with some of their old junk in the basement, most will say, "maybe I'll put it on ebay." (quote @ Hester)

This statement is just not true any more. That bloom is off the rose, and has been for a couple of years now.

Garage, estate, and live auction sales are fun again, since the crowds have died out. Why? Because former eBay sellers have given up.
Antique stores/malls, re-sale shops, and flea markets are starting to boom since sellers are filling them again with items formerly sold on eBay.

Any buzz about eBay these days is negative, from thousands of former buyers and sellers.

Oct 17 08:12 AM

[NYM Arts:]

Ebay WAS truly a Great American success story.
Ebay's 3 year "Road Map for growth" is nothing more than a Wish List.
"We are positioning this company to compete and win across a range of profitable
ecommerce platforms focused on connecting buyers and sellers across
the platform of their choice."
They took a Winning Business and trashed it.
Ebay had no competition.
Ebay Chart shows it's not even worth Half of what it was.
When Donahoe became CEO everything went down hill.
The point :
eBay (EBAY) created a new and unique category of retail selling that "it had all to itself"
for the better part of a decade. Thanks ENTIRELY to the Tireless efforts of dedicated
Americans All Across the Country, explosive growth was easily achieved. Idiot Morons
believe that those glory growth days are gone forever .
Returning to the strategy of 1999 will restore above-average growth for eBay.
We see eBay as EXTREMELY Over valued today based on realistic assumptions for
achievable future growth under present mangement.
They believe the real growth story today for eBay (EBAY) is PayPal because they realize
Donahoe has done IRREPAIRABLE DAMAGE to the Ebay Brand.
Thank God for PayPal otherwise they'd be out of a job.
eBay still possesses the financial resources to exploit this opportunity. They're not finished killing it yet.
At the end of the day, eBay (EBAY) will no longer have these resources at their disposal.
All avenues of future growth and promising business lines such as StubHub,
Kijiji, Shopping.com, Half.com, ProStores, Rent.com, and many others are merely distractions
away from eBay Auctions. They may not all pan out as hoped, but, if you're a gambler, odds are that they will
generate the growth to validate today’s OVER valuation.
eBay (EBAY) is a growing company whose tentacles reach into millions of bank accounts
and people's personal information worldwide.
Consequently, we believe eBay is not a sound investment for prudent long-term investors seeking growth
of capital. Its future growth will likely fall off to nothing, so it should, in our view, remain an
unattractive entry point.

Oct 17 09:38 AM

[Patricia013:]

Some people refuse to believe it but the last two posts are absolutely true. Donahoe killed Ebay's business model out of greed and out of the wish to make it even more successful. In his lack of understanding he felt the Ebay name was everything and that the sellers were useless - he felt he had an unending supply of those sellers - in both instances he was wrong! His biggest error was in not turning the company around when he saw his efforts were failing! He still does NOT understand that Ebay's success all along was the very "noise" he has kicked around!

People do NOT speak kindly of Ebay these days. Either they don't know about the company anymore (when was the last time you even saw or heard an Ebay ad on TV or radio?) or they've heard its really bad to deal on there these days. For example, my gym instructor asked about selling on Ebay. She had accumulated a bunch of hobby projects and felt she could sell them on Ebay and make some cash. When I explained the fees, some of the policies, including holding her sale money for at least 21 days - she threw up her hands and said nevermind....I'll give them away for christmas presents! THAT is the truth about Ebay today. You get no break if you're not a coddled diamond seller...instead, you're put over a barrel and milked and in most cases the wares you are trying to sell are being hidden! These are all indications of FAILURE !

Oct 17 03:48 PM

[downwithebay:]

Chuck,
I encourage you to checkout Quantcast.com before putting much faith in Donahoe's thesis of projected earnings. Simply enter the name of any/all of Ebay own companies into quantcast's traffic search and you'll see for yourself just how dismall things have become for Ebay since Donahoe took over the helm as President and now CEO of Ebay. The numbers look pretty scary.

According to Quantcast,
Ebay.com site traffics has fallen from 95.5 million unique monthly visits in 03/07 down to 62.1 in Oct 09, and YoY traffic for Q3/09 is down slightly from Q3/08.

Shopping.com traffic has steadily fallen from 25 million monthly inn 04/07 down to 3.3 million in 09/09, and Q3/09 traffic stats are down from Q3/08.

Donahoe claims PayPal has been experiencing tremendous growth over past 12 months, yet traffic numbers for all 3 quarters have actually been down slightly compared to first 3 quarters of 08.

Half.com monthly traffic has plummeted from 220k unique visits in 04/07 down to 18k for each quarter in 09.

Q3/09 ProStore traffic is down roughly 20 percent compared to Q3/08

Rent.com monthly traffic has steadily declined from Q3/08 and YoY

Kijiji monthly traffic is down roughly 30% compared to Q3/08.

Stubhub monthly traffic is down measurably compared to Q3/08

Other facts:
Ebay loses $64mil in LVMH lawsuit in Q3/09 and opened the doors for many other trademark owners that feel Ebay is an active participant in the sale of counterfeit good.
Ebay currently dealing with 2 additional significant lawsuits (craigslist and Skype) that could prove to be quite costly depending on outcome.
As of 10/1/09, there were 36% less veteran sellers actively selling than there was in 02/08 many of whom no longer seller or BUY on ebay now.

Until fall 08, Ebay stores, ebay affiliates and ebay paid advertisements completely dominated top placement in google searches for pretty much every conceivable keyword search. For nearly 8 months now, ebay stores and other related traffic drivers have been completely non existent in google search resulting in a massive loss of traffic for most ebay stores.

Ebay and Channel Adviser tout how there has been sales growth on Ebay in recent months, but aside from a very narrow group of larger ebay businesses that is getting the bulk of traffic funneled directly to them, almost all other sellers appear to be experiencing 30-70% less sales compared to Q3/08.

Oct 18 01:21 PM

[Patricia013:]

@downwithebay - hey, thanks for that information. That is exactly what ebay's sellers have been feeling for the past year...drastic reductions in visitors and in buyers! Most sellers aren't even bothering to list on ebay anymore. We're all sitting back wondering when the fecal matter will hit the rotating wind device! Somehow Donahoe's smoke and mirrors are hiding the major part of Ebay's failures - but that doesn't mean they're not there! This company is rotting away from the inside out!

Oct 18 01:54 PM

[Joyful Alte...:]

eBay traffic for August and September was at a 5-year low: www.auctionbytes.com/c.... These times of recession and unemployment should be glorious for eBay, but they've made both selling and buying so difficult and unrewarding that eBay is sinking.
Friend 1 Googled an obscure item he needs. The only seller is on eBay only. Friend attempts to buy it and balks at having to sign up for PayPal with "too much personal information." "Why can't I just use my credit or debit card directly? Why can't I send a check or a money order?"
NB: PayPal now has competition from Google and Amazon.
Friend 2 is downsizing her empty nest, with piles of slightly used and semi-antique stuff to get rid of. She had used eBay in the past but now finds it too complex, confusing, and "weird" to list her excess for sale. She tried Craigslist and reports great success.
Everything about eBay is too bloated to function now, including its code (slow loads that shut out dial-up buyers and frustrate everyone else) and executive pay. There's just one item I buy on eBay now and only because I can't persuade the seller to list it elsewhere, and I have a shelf of unusual items I'd like to auction off online because I don't know what they're worth but it won't be on eBay.
It's hard to believe this author is so enthusiastic about eBay stock---obviously not a "value" investor.

Oct 19 10:25 AM

[User 333287:]

As I read this overly enthusiastic glowing report from Chuck, I couldn't help but wonder what kind of perks he was promised to tout eBay. This company passed their "growth" point years ago and should have shifted priorities away from growth and towards stabilization as a maturing company seeking a firm baseline of steady earnings. Instead, the lure of seemingly never-ending streams of growing cashflow infected the decision-makers for this company while their overblown egos allowed them to fool themselves into taking undeserved credit for the phenomenal success of it. What they recklessly squandered in their mad dash for the cash was the entire HUGE reserve of the priceless love and enthusiasm of the very people from whom their paychecks were ultimately drawn: their customers (the SELLERS) - as well as the people that bought from those customers. Even worse, from this observer's perspective, were the lengths taken to outright abuse that once loyal customer base and turn their buyers against them until they created, by default, an ever-growing list of EX-customers filled with a rabid hatred and overwhelming desire to see this company annihilated. Now that's what I call some legacy!

Either the guy calling the shots (Donahoe) is spectacularly stupid (I'm not buying it) or he has set out to deliberately destroy this company for reasons that can only be speculated about (far more likely, in my opinion). Regardless of motive or perceived intellectual deficiencies, I am certain it involves business practices that span the gamut from questionable all the way to prosecutable, ala Enron. It's just too bad that there is probably no chance in the hot place that justice would be served via the corrupted regulatory agencies tasked with investigating and prosecuting crimes of this nature; not while Greed continues to rule.

Still, hope springs eternal...

Oct 19 04:12 PM

[NYM Arts:]

Hey Folks !
I've Just been visited (my website) by Jack Donahoe (San Jose on a T1 connection), and Ebay Creator Pierre Omidyar out of his residence in Honolulu !
I'm surprised to see Jack is Actually consulting our writings to guide him along now. He will never admit how wrong his strategies are, but let me just say, UNLOADING all Ebay acquisitions was Not his idea ;o)
Now, if we can Just Get Pierre back in the Driver's Seat....
Or....Say Pierre....I've got a Valid "Driver's License" :o)

Oct 19 05:06 PM

[Bob C:]

On Oct 19 04:12 PM User 333287 wrote:

> As I read this overly enthusiastic glowing report from Chuck, I couldn't
> help but wonder what kind of perks he was promised to tout eBay.
> This company passed their "growth" point years ago and should have
> shifted priorities away from growth and towards stabilization as
> a maturing company seeking a firm baseline of steady earnings. Instead,
> the lure of seemingly never-ending streams of growing cashflow infected
> the decision-makers for this company while their overblown egos allowed
> them to fool themselves into taking undeserved credit for the phenomenal
> success of it."

This my friend is the most insightful statement about eBay that I have ever read!!!!
Two thumbs, way up, for your post!!!!!!!

Oct 19 08:17 PM

[755:]

Update:
The previous posts document why eBay has been declining for several years.
The day of reckoning may have already arrived.
Here's why:

I spend $3-$10K on eBay a month. I buy the kind of very high end designer stuff that has always sold well on eBay.

On average I follow 150 auctions

Periodically, I scroll through 100 or so completed auctions of items that I was interested in to see what was selling and what the prices were.
Historically (I have been on eBay for 13 years) I find that 75% of my tracked auctions find a buyer at a good price.

Tonight, I had some extra time, so I scrolled through and found that only 10% of the auctions found a buyer and that in all but one case, the sales price was ridiculously low.
Even worst, I was the buyer in 50% of the successful auctions.
Bottom line----Business at eBay must be terrible currently.

Oct 21 12:56 AM