Saturday, June 23, 2007

Blast From The Past - Meg and the Machine - Fortune Magazine 2003

Meg and the Machine - I found this article fascinating as it was written in August of 2003, when eBay was flying high. It presents a unique perspective on the issues facing eBay in 2003 and they are not too different from today. What is the old saying? "If we don't learn from the past we are doomed to repeat it."

While a number of things stood out for me I keyed into two paragraphs that spoke the loudest:

"A hugely successful business model, though, has a way of masking errors. And there have been a handful of tactical and strategic missteps during Whitman's tenure. In 2002 she pulled eBay out of Japan, the world's second largest economy and Internet user, when it became clear that Yahoo Japan—then controlled by Japan's Softbank—had gotten there first and grabbed an insurmountable lead. She figured that eBay naturally would be a hit in the offline world and so spent $235 million of eBay's stock in 1999 buying traditional auction house Butterfield & Butterfield in San Francisco. The synergies were elusive; eBay quietly sold Butterfield in 2002 for what it calls an "immaterial gain."

Her costliest mistake also offered the biggest lessons about how much the eBay community determines the company's success. In 2001, eBay unveiled a checkout procedure for completing transactions. The initiative, spearheaded by U.S. chief Jordan worked well, allowing buyers and sellers to settle bills quickly. But instead of hailing it, the eBay community went crazy. The problem: The checkout procedure seemed to favor payment via Billpoint, eBay's payment-processing service. Frequent sellers had grown attached to PayPal, then an independent company, and were steamed that eBay was subverting their choice. "About one-third of the sellers hated it," says Jordan. "They puked on it. For me it was a lesson in humility and an object lesson that this is a joint venture."

Remember, these words were written in 2003, yet similar mistakes keep being made. In 2005 eBay purchased Skype for $2.6 Billion (with earnouts that number could be $4.1 Billion) because the supposed synergies with its Marketplace business seemed like a no-brainer and to this point Skype is a bust in eBay's marketplace business and just last year eBay pulled out of China for much the same reasons they pulled out of Japan 4 years prior. Jeff Jordan's quote from 2003 is telling as well, he said "... For me it was a lesson in humility and an object lesson that this is a joint venture."

It appears eBay hasn't learned from the past, in 2001 it was the fight against PayPal, today it isn't the fight against Google Checkout, though there are parallels, no I think today's similar battle is with Stores/Shops where the outcry from sellers is epic. If the PayPal battle served as an object lesson that the relationship between users and management is a "joint-venture" something has been lost in translation.

Isn't the Internet wonderful? In the old days, that article would be stuck in some archive where a librarian would have to dig it out for you, while today it's still on the web for everyone to get a nostalgic treat. Please read the entire article as it is very interesting in light of the issues eBay faces today. Happy Reading

read the entire article here | digg story

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