Wednesday, May 16, 2007

Did eBay Management Make The Wrong Bet?

One reason I like being a blogger; I can analyze and speculate to my hearts content. My analysis comes from observations of the market, available data, sources that know real details and basic logic. When I speculate, it is more based on a gut feel then anything else and my gut can be wrong. I recently speculated that eBay would raise Store Fees this year but all signs point to me being wrong in that regard.

A year ago, eBay made an All-in bet – Texas Hold-em style – on CORE over Stores and up till now the jury is still out on the move. eBay’s stock price is hovering around $34 a share which is more of a signal that investors like its balance sheet and the fact it is buying back stock, rather than that they see much potential.

Many problems still exit in the marketplace business, especially in the top 2 markets: The United States and Germany. CORE listings are declining or flat in the top 2 markets. eBay Express is struggling to gain traction, new “finding” functionality on is a huge gamble as eBay users are notorious for liking things the way they are. The Media category on eBay is broken and something radical must be done to save it.

It is clear to me that eBay chose to protect the cash cow business of Auctions over Stores because Stores were less profitable but the decision was to protect a maturing business over a growing business. It is much easier to circle the wagons to protect CORE rather than to take the aggressive approach of growing Stores, this risk aversion will come back to haunt them (that’s a little speculation).

It is clear that investors are sitting on the sidelines in regards to this stock and in fact Billionaire George Soros just sold his entire stake in eBay to double-up on Microsoft. eBay is generating tremendous profits right now on the back of PayPal and International Business but it is losing ground to ecommerce as a whole rather than breaking ground on new ideas.

In my view, Stores should have been the future of eBay, and management should have taken the short-term hit in stock price to once again become a growth company but that would have taken some vision. Better to make the hard choices when you have options instead of waiting until it is imperative.

Just my 5 cents!


aprobloggermom said...

I totally agree with you on this. I'm a long time Ebay powerseller who is just burnt out at this point and trying to find other ways to make money online. Not only did they take store items out of search, but items are now taking up to 12 hrs to even show up in search at all and the fees are killing the small time mom and pop sellers. Hopefully they will wake up and smell the coffee one day soon, and bring stores back to the top of the line. Right now, they are barely surviving for a lot of people and store sellers are fed up.

Sue said...

I largely agree with you. As it happens, taking store items out of search increased sales for me (I think because I was experienced enough to just go back to the strategies I had before SIF visibility, which gave me an advantage over sellers who couldn't/wouldn't do the same thing) - I understand why eBay made that change and think it's probably justified overall. But that doesn't mean they have to try to chuck Stores out altogether, which it feels as though they are doing at the moment. Buyers are more sophisticated these days, and the CHEAP CHEAP CHEAP of the auction format isn't always what they're after.

Randy Smythe said...

eBay management did not account for sellers wanting to make stores their bas of operations. They envisioned that sellers would use stores to gather all of their core listings in one place for cross-promotional purposes. (As Chris suggested)

The problem is Store sellers fell in love with the concept of Stores and found they could sell more profitably there.

Now Store sellers use CORE strictly as advertising for their store items just to stay above water.