RicRoe

eBay: Stock Fully Valued at Current Price

Stock analysts are always talking about listing growth at eBay as if it is indicative of something of value.

Analysts have yet to realize that listing volume no longer is indicative of the health of the eBay marketplace.

Since John Donahoe's introduction of "Diamond " level sellers, listing volume increases are meaningless. There are two reasons why listing volume is now a worthless metric.

First, the reduction of listing fees as well as the frequent sales held on listing fees. eBay claims they reacted to seller complaints and lowered the up front fees to place listings. What eBay executives downplayed, and what analysts have ignored is that when the lowered fees were announced, they came with a steep increase in final value fees which caused many small sellers to abandon the marketplace in order to protect their profitability.

Second, Mr Donahoe has introduced Diamond sellers to the core market place. It is these major retailers that have brought the huge numbers of listings which eBay keeps boasting about. The problem here is that these sellers, some with a million or more listings are not charged ANY fees to place those listings on eBay.

Thus analysts need to start ignoring listing volume statistics as a health of the market metric, and instead insist that eBay make public their sell through rates.

Sell through is a much more accurate metric to study in light of the fact that listings alone no longer reflect any revenue growth for eBay since the majority of listing increases seen are the result of free placement by Diamond sellers.

For example, one eBay Diamond seller brings over 1,600,000 listings to eBay, but maintains a sell through rate of 2.3%. The listing volume looks impressive, but when one looks at the actual sales generated by those listings, the volume is very small. If that seller had been paying for placement of listings, they would probably have given up on eBay as a marketplace long ago.

But since Mr Donahoe has given them free listing space, they continue to bring impressive but none the less meaningless statistics to the marketplace.

Analysts assessing eBay must look for more relevant numbers to utilize in their assessment of eBay, and stop relying on the kool aid distributed by Mr Donahoe and his management team. Analysts need to stop relying on eBay's statistical spoon feeding, and instead, go back on the hunt to get meaningful statistics upon which the true health of the company can be more accurately assessed.