John Donahoe, eBay's (EBAY) newly elected CEO and president, has yet to take his role, and yet has caused the largest rift between eBay and the eBay community ever.
eBay's position is strong, no arguing this point. But, the question is, has eBay peaked? Is there room for growth? Is it all downhill for eBay from here?
The answer to this question is being debated among investors. Personally, I cannot help but wonder how Donahoe's direction can strengthen its position with the choices they are making.
Donahoe has made it clear he wants to rid eBay of its "fleamarket" image, by eliminating those very people who made eBay the strongest online market place in the world. The idea is that by ridding itself of the low-priced items, they can concentrate on larger retailers, and boost revenues with higher end items.
Sounds great, right? On paper, yes. In reality, however, not a chance.
Donahoe has taken a huge risk here. By alienating your members, Donahoe loses those same people he needs to buy from his wealthier retailers.
Of course, that is the problem with any dictator. When you crush and defeat your community with iron fist dictatorship, your community falls apart. Unlike terrorized communities, however, eBay cannot force its community to stay. Therefore, defections are not only likely, but, a reality that will hurt eBay's image, and bottomline.
Let's look at the image of the new eBay, and ask yourself, is this the company and the image you want to invest your money into?
1. A man who's leadership has caused TWO planned boycotts within one year? (Feb. 18-25th, 2008, and an open-ended boycott slated for May 1st, coinciding with the new feedback policy changes).
2. A company who has people questioning eBay stock manipulation. (The question has been raised as to what is happening with eBay execs dumping stocks in huge numbers).
3. A man who's idea of great leadership is to hurt those people who have helped create the eBay corporation, by virtually pushing out families who depend on their main source of income. These include single parents (many with handicapped children), retirees, disabled persons who would rather not abuse the system, but, can still be productive members of society by working on a schedule that suits them, students and so many others.
4. A man who is willing to take unnecessary risks, with your money. Rather than pace and research the effects of his ideas, Donahoe is forcing ideas that could actually cripple the eBay name.
5. A man who spins and denies the truths. Donahoe had more spin in one week than eBay has had in all the previous years. Unfortunately for investors, his spin was based more in untruth than in reality.
He and his media consultants have said the week-long boycotta had little or no effect on its bottom-line.
Oh really? Is this why eBay's listings were by down 3-4 million listings, the week prior to the boycott? Let's understand the actual amounts of money we are talking here. The lowest insertion fee is .20 and is for items under $1.00. The typical user lists between 24.99-49.99 and $50.00-199.99 which was $1.20 and $2.40. Additionally, eBay has many "extras" that can be added to enhance the visibility of one's auctions. These include extra photos, at .15 per photo, and double category listings, which doubles all the fees including extras, which can double the highest listing fee of $4.80 to 9.60, and all the extra photos, gallery fees, highlight, or even bold lettering.
In other words, eBay can make more off all the extras than they do on just the listing fees. Based solely on a very conservative 3 million auctions, and the 1.20 listing fee as an average, NO extras, and not including their commission fees, starting at 5.25% eBay's losses are incredible: $3.6 million PER DAY! Now imagine all the extras and you can see how much damage Donahoe has caused eBay already. Oh, yeah, and let's not forget, he hasn't even taken office yet. Yet, his plans are already costing investors money!
And then comes round two.
Donahoe thinks that the worst has passed. Not according to www.myspace.com/boycottebay which announced this week that eBay will be faced with a boycott far worse than the young company has ever seen. According to said website, this past boycott has enabled eBay members to unite, and become a strong force, like never before. And while those involved with "spreading the word" none of the "leaders" of that boycott planned it. Yet, they have become the loudest and most vocal boycott chapters. And, their sister site on DelphiForums is boasting message views of over 10,000 a day for the last week, and 10 of the last 13 days.
Together, these two sites are saying they are taking the time between now and May 1st to organize the largest strike, and they will not back down until either eBay agrees to their terms, or, Donahoe is replaced, and the changes be re-evaluated for the better of the entire community. Team leaders say they are willing to discuss negotiations with ebay executives; but, such requests have fallen on deaf ears.
The new face of eBay. Is this a company you can afford to invest in?
Disclosure: Author owns no eBay stock. He is an eBay member and is currently supporting the eBay boycott.
