eBay: The Next 4 Months 26 comments
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Let's recap the year for eBay (EBAY) so far:
First Quarter
- Meg Whitman “retires” to join the McCain campaign trail with Carly Fiorina.
- Former president of eBay Marketplaces John Donahoe takes over CEO spot.
- DSRs and feedback get blown up. Sellers get pissed off and strike.
- Company announces Q1 numbers that beat the Street.
The world yawns.
Second Quarter
- Company announces Q2 numbers that beat the Street.
- Rajiv Dutta quits the #2 job at eBay.
The world yawns again because GMV is dead in the water and projections for Q3 look like Steve Urkle in a thong.
Current Quarter
- Company announces huge cuts in fixed price listing fees. eBay inches ever closer to becoming a retailer as a result.
- The street claps lightly with BofA and Bernstein posting “buy” recommendations on the beaten up stock.
What is there left to do you ask?
Here’s my armchair MBA at work. Given that the Street has been begging for gains for the high side of 3 years, it’s time to start making real moves at eBay or someone else is going to do it for them. The stock today is trading at 12x going forward P/E – which means no one truly believes that this hodge podge of businesses has long-term growth potential together. They’ve never been able to convince anyone short of Tim Boyd that the company is anything more than an auction business even though PayPal, Skype and StubHub are driving revenue and earnings.
I’m betting my eBay Live 2005 pins that in the next 3-4 months John and company will be spinning off Skype to a company that actually understands what a tremendous Internet company this is or better yet let it go public and take in a couple of billion to fend off Google and Amazon on the Marketplaces front. Let’s face it, this management team doesn’t know anything more than what is in the core business.
Give the bloated 16,000 staff count a crew cut. Take the GE (GE) approach and just take 20% off for starters and get the existing people aligned against things that will grow the business. See above on what that is – ahem, not Skype. Of these, lose the public relations, investor relations and marketing teams. They’ve all failed to convince Wall Street that this stock has legs so just start over. If not, Carl Icahn may start it over for you.
Disclosure: none
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This article has 26 comments:
All these touted aquisitions are meaningless. What, airlines now signing onto Paypal? Airlines have been in financial abyss's for years now! I think the companies that have signed with paypal expect to be carried by the mother ship if problems arise.
ebay is the mother ship and she's in trouble. Ain't gonna happen!
I've noticed that almost every article and blog mentions the cut in listing fees, without mentioning the large INCREASE in final value fees, the implicit fee increase in requiring paypal, and the implicit fee increase (in some categories) of forcing sellers to include the shipping costs in the price of the item (and therefore paying fees on the shipping charges too). (Take a $100 media item with $10 shipping - under the old system you would pay $2 to list, and $4.82 for the FVF + $3.49 for paypal fees - $10.31 total (or $6.82 if the buyer pays with a money order). Under the new system, you would pay 15 cents to list, you would need to list it for $107 because your shipping is limited. Your FVF would be $10.35, and your paypal fee would be $3.49 for a total of $13.99. that's a 36% fee increase on each item sold (more than 100% increase if you are a seller who used to take money orders only).
The listing fee decrease is going to encourage sellers who have large quantities of slow-selling junk to list it on ebay, while the fee increases are going to discourage sellers who have more saleable or one of a kind items. Overall, it seems to me that the result is going to be bad for everyone.
Good post.
"The listing fee decrease is going to encourage sellers who have large quantities of slow-selling junk to list it on ebay, while the fee increases are going to discourage sellers who have more saleable or one of a kind items. Overall, it seems to me that the result is going to be bad for everyone."
There is so much junk on ebay already I cannot imagine the clog that will have escalated as a result of this.
What ebay, in their attempt to become Amazon, does't realize is that Amazon is extremely discressionary in their seller merchants.
ebay is notorious for turning a blind eye. Amazon most certainly is NOT! ebay has a mindset of "if we can get away with it..." Amazon does not embrace such a lack of ethics.
ebay was at one time a beautiful, fully functioning machine. Instead of empowering the effort that constructed such a dynamic, unique model, they used and abused and discarded.
Huge back end fees with no customer service to support any of it. A tome of policy that is so convoluted and poorly written that most members can hardly decipher it let alone follow it in any good attempt at compliance.
Paypal is the cash cow, thus the forced paypal by the removal of payment options of money orders and personal checks. Paypal is the fraud ridden payment system, not money orders or personal checks. Paypal holds sellers money arbitrarily and makes money on the float leaving sellers to ship goods without truly having been paid, paypal possesses the money. Paypal finding in the buyers favor more and more even though they do no investigation as to claims of "Significantly Not as Described".
Ebay is just a transit vehicle for paypal.
You can't find a more miserable place to sell than ebay. While they may have traffic, it's not turning into sales revenue and will do even less in that regard when in a mere couple of weeks the site is flooded with fixed price mass produced goods that most people can get locally or elsewhere on the internet.
Instead of taking this mature company into a more refined and well run auction site, the powers that be have decided to become a wannabe Amazon. Amazon does it so much better and always will, they don't try to be something they have never been.
The only revitalization of ebay core is if they erase all the inane policies from the past 5 years and get back to the basics of what made ebay great in the first place.
That's not going to happen with this bunch of fools at the helm.
I agree with you on selling skype! Use that money to buy back ebay shares and start paying investors a hefty dividend! Time has come to think about your investors eBay! Three years and 36% loss is not good!
Get rid of new feedback system! It serves no real purpose. You will only lose more good sellers. Sellers are your bread and butter! Buyers are not loyal to any one store or site! They go where they get the best deals! Hang on to your sellers eBay! Amazon does! Sellers are what makes Amazon a great site! Sellers bring buyers!
A non paying - non responding -bidder can actually leave a seller a negative on eBay! What was eBay thinking?
I thought feedback was to rate a product and seller after the buyer received their merchandise?
As it stands now if an eBay seller files under non payer on eBay to get his money back. The so called bidder, buyer who by the way, did not pay or buy anything, will leave seller a negative feedback! He retaliates for getting an unpaid item strike!
The only way you can avoid a negative is to not file for an unpaid item refund! Ebay then keeps your money and you don't get a negative!
Maybe eBay set it up that way on purpose, they know buyers used to hold sellers hostage because of retalitory feedback! eBay now holds their sellers hostage by doing the same thing! File to get your money back and get a negative! Don't file ( and thank you) and you won't get a negative....so please keep listing...we value you as a seller! lol.
In the end eBay will lose all their good sellers, and non-paying deat beat bidders will shop elsewhere! End of story! Good bye eBay!
Simple.
Of course, ebay is the difinitive model of greed, so they'll never contemplate THAT.
Yet, interestingly enough, Amazon shares are worth generally twice what ebay's is worth.
Yes, in a couple of weeks the site will be innundated with junk up to the rafters as everybody and anybody starts listing whatever they can find or drop ship or order from China.....exactly what Meg Whitman feared when stores where put in search only this will be 10 times worse. Typical of Ebay to destroy yet another holiday season for long time sellers.
So, I agree, present management hasn't a clue and I don't see that changing any time soon. Its a good time for everyone to be testing out other sites. I know they're not selling but if sellers started listing and started getting their buyers to try new places...who knows. We may break the old Ebay habit before Ebay breaks us!
I suggest that based on current price and P/E ratio, the auction side of Ebay is dragging down the value of the whole company. The initial overpayment for Skype has effectively been written off, and Paypal is getting an increasing amount of its revenue from non-Ebay sources. Break up the company, let the parts with potential for growth realise their true value, and sell off the auction side to someone who really understands the business.
I bet by the end of the current qtr you'll be able to add the following:
Donahoe leads eBay over cliff - company goes SPLAT!
Why? Shareholders don't give a damn how much Donahoe abuses sellers but the court does. Hiding sellers listings (alleged dups), false advertising (35 cent fixed listings are NOT the best deal), and best match are all examples of auction interference & possibly fraud.
What will happen to Paypal? It might go SPLAT too because if I'm not mistaken, Paypal is specifically named (thus forever linked) in the eBay user agreement. It will be interesting to see how Paypal defends holds on seller accounts for up to 180 days, SNAD refunds, etc.
Shareholders may not care how much Donahoe abuses sellers NOW, but just wait until there start being tangible (and I believe negative) results from his abuse... I think they'll start caring then...
Friday I sold all my ebay stock, and over the weekend I did some serious work setting up my web site to sell directly. My goal is to reduce my ebay sales from $6-$10K per month to $1-$3K per month in the next few months, and then hopefully to zero within a year... I sell one of a kind collectable item. If enough sellers like me either leave or reduce their sales, ebay is going to turn into a place to by cheap junk at inflated prices. And that will almost certainly have an impact on their revenue.
By the time shareholders figure it out, it will be too little to late.
I'm glad to see you are cutting your ties with eBay because no seller deserves the abuse that management is handing out. I'm not sure which is worse - having listings disappear into a black void or the 21 to 180 days paypal holds on seller funds.
You have a good business plan! I hope more sellers do what you're doing because selling on eBay is a pita & no longer profitable.
Most of the peeps saying such things are those that have a vested interest in seeing the Rise of retail and the Fall of auctions. Like Scot Wingo of Channeladvisor, previously known as Auction Rover, back when the butter was on that side of his bread.
The remainder of those that proclaim 'auctions are dead' are analysts and such. That is extremely confusing, to me, because they are supposed to be "good with numbers" and the ebay auction numbers are still very much alive and kicking.
First, auctions make up 57% of the marketplace revenue. Forget about Growth for the moment. Try your best to remember that old stock adage, 'past performance is not indicative of future results'.
If you had a lemonade stand and 57% of your sales went to one person, would you tell that person to leave and never return? Well, you shouldn't, not if you want to retain your current level of revenue.
Here's some more numbers to chew on. Another way of looking at the ebay revenue stream also consists of two metrics - insertion fees and final value fees (FVFs). Currently, they account for 60% and 40%, respectively.
Today's ebay is dependant upon the insert fees, rather than the more success-based FVFs. Previously, the FVFs drove the revenue, from inception until about 2004 or so. It was around that time that ebay decided to 'improve' all sorts of functions to boost Fixed Price items, to the detriment of auction style listings.
Because auctions suffered from those changes, along with the concerted effort to advantage fixed price items, we now have "auctions are dying". BUT WAIT! There's another key point to all of this.
The FVFs make up *only* 40% of the current revenue, but of that percentage, the final value fees of Auctions constitutes 78%. That's right, the FVF of Auctions outweigh the FVF of Fixed Price. Naturally they do!
Auctions end with a HIGH dollar amount, compared to just about all of the Fixed Price items. I recently saw a $20,000 toy robot auction end successfully on ebay. It would take a whole truckload of DVDs, Shoes and even iPods to equal that FVF.
Of the 60% contribution of Insert Fees towards the ebay revenue, auctions account for 43-44% of that figure. When you look at these two sets of figures, 78% of 40% and 43% of 60%, you can see where auctions are Key to the ebay financials.
Oh, and if it isn't obvious from these numbers... the movement of FVFs going from the 'top earner', down to the minority contributor... that is the reason for the GMV slide these past few years. When auctions were welcome (dare I say, even embraced), their hefty FVFs came from all those high-dollar, quality goods.
See that connection? Bueller? Bueller? Anyone?
I think eBay's current management has to go! Bring back Meg!
As a result, ebay is violating a cardinal rule of marketing. Never alter your brand image. Coca-cola paid for that mistake with coke classic - there have been others. Ebay is known as an auction house for small time auctions. If buyers want to go to a big auction, they can go to sothbys or christies.
Ebay has been very poorly managed and the greed and poor customer service are atrocious. No wonder this stock has been sliding. I see it sliding lower - perhaps to the teens.
Thank God finally Ebay has figured it out to get rid of all the thugs and thieves and bandits from their site.
Go Ebay Go.
Your name is quite appropriate...
Ebay's customer is the SELLER not the BUYER. The BUYER is the SELLER's customer....
So - if the "customer is always right" then ebay should be supporting it's own customers - the sellers...
And to your direct point -- most sellers don't overcharge on shipping - and almost all sellers disclose the shipping up front -- so you dont have to buy from someone if you don't like their shipping costs...
Ebay is driving away many more good sellers than bad sellers ...
By the way, the thugs and thieves and bandits are the managers of eBay.
So, what does that make me and many others selling on the EBay site? Customers, yes, that's right, customers, and we aren't satisfied.
Me:
Another one-time-posting-wonde...
Let me address your couple comments. If there were exhorbitant shipping charges, you have two options. First, you don't buy. Second, and here's the biggy... yeah, I said "biggy" so that current M.B.A.ed corporate management would be able to comprehend: This is a situation that should have, could have, been addressed THE TEN YEARS IT HAS BEEN ONGOING by said ebay corporate mangement, but has not been.
Secondly, the "customer is always right" is untrue. I have never heard of an ebay seller coming out on top. Never. Not once. This defies the general law of averages. Even when ebay says, "You're right!" to a seller, they still award in the "buyer's" favor and give him the money. In the face of OBVIOUS FRAUD. The documentation of this is rampant.
Amazon does not do this. It often happens that Amazon settles in the sellers favor. Now, make no mistake, they want their customers. But with proof, documentation, and proven situations, it is not unheard of for the seller to win in AZ claims. Amazon does not take kindly to fraud. You have a fair chance on Amazon, a fair shake. Amazon sets rules, and takes care of business.
Never happens with ebay. ebay is sleaze pure and refined.
AreYouKiddinMe: ignorance is such bliss. Only it's not.
Longer term more buyers = more sales - more revenues. higher fees = short term more revenues but longer term less sales, less sellers, less buyers and slower groth rates till eventually they turn negative