Wednesday, January 31, 2007
When I was selling, I discounted auction items and listed items with higher prices in my store for much of the same reason’s the B&M stores do it. We offered flat S&H of $3.95 per order (we would occasionally ship 100 or more items in one order for $3.95 total S&H) so 25% of our orders were multiple items. This model actually worked wonderfully and was part of our early success until a competitor came into the marketplace and decided to change the dynamics. This seller who will remain nameless auctioned off items at around the same price as we did but they discounted everything in their store, some items sold for $1.50 to $2.00 less than we sold them for and ultimately that’s the strategy that did us in. As our sales flattened out we had to lower prices to compete and we never again saw any growth. That was in August of 2004, today it’s even more competitive and regardless of what anyone tells you, the lowest price gets the sale. So, In order to make this Markdown Manager work, sellers are going to have to go back to the approach we took in our early days and raise prices across the board so that when they do actually have a sale there is marked difference in the price. The problem I envision is that sellers who are using the Wal-Mart model of lowest price every day won’t change their strategy negating any benefit from the Markdown Manager.
I’m sure this will not be the case in every category but I feel fairly confident nothing will change in the Media Category.
Tuesday, January 30, 2007
"FastLane has about 100 people commenting on the blog each month, which is equivalent to gaining customer insight on products and brands from a traditional focus group. We estimated that the value of this was equivalent to running a focus group every month at the cost of $15,000 a month, or $180,000 a year. Voila – there’s the value of the blogging benefit laid out in black and white."
As you can see, that is substantial value. I wish eBay would do more of this type of focus group before they launch some of their initiatives or at least invite me to be part of the focus groups they do conduct. (I have sooo much too offer)
"Yesterday's price adjustments in the UK were unique for 2 reasons: 1) They included price decreases; 2) They were vertical specific in many cases. Together, these changes are more of a surgical strike to invigorating the market, which we think is very positive for the LT model. Summarizing some changes: 1) Lower FVFs in Technology, 2) Lower insertion fees in Media, 3) Higher FVFs in media, 4) Multiple listing price breaks, 5) Higher fees in eBay Motors."
He goes on to say:
"We applaud these changes as we think they are more incentivising and performance based and think they will contribute vitality. We also think the UK could be a testing bed to spread to other markets."
As I said in my post yesterday, I see these changes as a positive move, mostly in a strategic sense. It is my belief that eBay needs to stop painting their categories with a broad brush and look specifically at each category to determine the correct fee structure.
Wow, this is one of the first times I've ever been in agreement with an analyst. Just kidding Bob.
Monday, January 29, 2007
While I was selling on eBay, in the Media category, my greatest concern regarding eBay fees was the listing fee for my high volume, low margin, and low ASP product. If you look at the changes in Media fees on eBay UK, with this announcement, they have addressed some of these issues. They reduced listing fees and raised FVF in the Media Category because it’s the right thing to do. Okay (that was me interjecting some feeling) eBay generally doesn't make changes because it’s the right thing to do; they rely on metrics to move them in one direction or another.
The key point I gleamed from this announcement though, had less to do with fees and more to do with a change in operation by eBay. It appears they are starting to look at each category to find the ideal pricing to generate a vibrant, exciting marketplace. We can only hope this doesn't stop in the UK.
Sunday, January 28, 2007
YouTube Co-Founder Chad Hurley mentioned this possibility while in Davos, Switzerland. "We are getting an audience large enough where we have an opportunity to support creativity, to foster creativity through sharing revenue with our users," Hurley said. "So in the coming months we are going to be opening that up."
Look for some initiatives in the coming months. This seems to be a natural move by the company. As they try and monetize the site sharing with users will foster creativity and growth.
When the two big guys (Google and Microsoft) get into the payments business eBay has to be worried. They can protect their domain (eBay, Skype) for awhile but the rest of ecommerce is huge and growing faster than eBay.
I wonder how this rumor will affect eBay's stock price tomorrow? When your Cash Cow is endangerd that's not a good thing.
Some other Changes:
Above my picture, I've added a link to Google's AdSense. I recommend AdSense for those of you who want to monetize your blog or website. The advertising links at the top of the page and in the sidebar are part of the AdSense program and are geared to the content on the site.
Directly below my picture I've added a section for stores I recommend. If you have a store you would like to add please let me know. Please visit the stores and let me know what you think. Be sure and bookmark them if they tickle your fancy.
I've also added a Hot Deals section served up from Amazon. The deals that are displayed on the blog are customized for the site content.
My goal here is to provide my readers with as many resources as possible. I also want to monetize the site without getting overly commercial. Please let me know what you think.
Thursday, January 25, 2007
Hopefully some of this stuff will be of interest to you. My daily readership is on the rise so I'm making the assumption that is the case.
One blog housekeeping issue: I read every comment posted on the site and will most likely comment about your comment so feel free to let me hear your thoughts. Thanks to Bonni and Frank Ross for your contributions.
The problem is, I think many of the investors who bought eBay on the way up will feel like the person who partied too much one night and woke up next to someone they didn’t know or remember the next morning. Can you say awkward? I still don’t think eBay is a growth company (in their current state) so the stock will still trade in the $28 – 33 range for most of the year. So I don’t see investors asking for eBay’s number.
The numbers were nice but nothing to write home about. The share buyback had a big impact on the EPS, the value of the dollar helped, Sony and Nintendo helped and PayPal helped in a big way. I think it is entirely too early to tell if the ship has been righted. I don’t think Sellers can pay much more so where is the profit going to come from. Skype is a nice idea but they missed their revenue target by roughly $8 mil (which is actually a good thing or eBay would have had to pay more money to the founders). PayPal continues to be the shining light but Google isn’t going away and the Marketplace business is dependent on International growth, which will slow. I can’t see this stock as a buy and hold but I am not an Analyst. I base my opinion on my gut.
Congrats eBay on a Great Quarter! I’ll call you.
Update: I found some analysts who agree with me. Follow this link to an article from Seeking Alpha that discusses their positions. The analysts are Safa Rashtchy of Piper Jaffrey (a noted eBay Bear) Jeetel Patel of Deutsche Bank (A great Texas Hold em' player) and Jordan Rohan of RBC Capital.
My good buddy Bob Peck of Bear Stearns has a rosier outlook on eBay though he does hedge his comment slightly “We applaud management's navigation and remain optimistic, but we also underscore that many challenges remain.”
Wednesday, January 24, 2007
I like "The Power of Three" imagery that eBay has chosen to market their three Internet brands but I choose to tweak that image a little by mentioning that in my view these three brands are each a leg in a three-legged stool. The object is to have each leg be as strong as possible because the stool is only strong and stable if all three legs are solid. If any one leg is weak the stool wobbles. Ebay’s stool is wobbly right now.
eBay’s strongest leg is actually PayPal and they are facing some issues going forward that may make them wobble a little (Google Checkout, growth outside of eBay etc.) eBay’s newest leg is Skype. The brand has loads of potential but may be years away from reaching that potential; years in Internet terms can doom you to failure. The third leg is the eBay Marketplace business and this is the leg that is the wobbliest. According to Kumar there is significant fatigue in this leg. I agree with his assessment but believe the leg can be refurbished.
There is still huge growth opportunity in the eBay Marketplace business. Online commerce represents only 8% of retail and is growing every year so in my estimation eBay should still be growing at least as fast as ecommerce. EBay’s marketplace business should not be fatigued it should be vibrant and growing. I have hope that management will look at the Marketplace business with fresh eyes. Fix the wobbly leg of the stool and "The Power of Three" will bring back the glory of eBay.
Tuesday, January 23, 2007
“With the exception of a small jump in late 2005 and a sell-off in the summer and fall of 2006, Yahoo! has traded between $28 and $38 over the last two years. The company trades for six times sales, about the same as Microsoft (MSFT). It is hard to imagine it moving back to $40. It just isn't a growth stock any more.
Amazon's stock is down about 10% over the last two years. It's had a good run recently, but no one thinks it can grow much faster than the e-commerce market overall. Getting back to $49, where it traded in late 2005 is improbable.
Ebay's growth come primarily from it PayPal online payment system. The stock is down almost 30% over two years, and getting back to where it traded in early 2006 ain't going to happen.
What gives? The companies are no longer in the "growth" category. They have gone to Microsoft-ville. Nice companies. Modest revenue expansion. No big upside.”
So what does that mean for the “Three Amigos” the remnants of Web 1.0? McIntyre says, “In some ways, it does not matter. The stocks are probably permanently range bound.”
As the Soup Nazi from Seinfeld would say, if he sold stocks, “No more growth for you!”
Sunday, January 21, 2007
"However, challenges at eBay are not subsiding, but growing. The company is spending more and more -- mostly paying Google (GOOG), a chief competitor -- to draw traffic to the site, but rumblings are still surfacing that new listing numbers may have been disappointing in quarter four.
When expenses start to increase more than free cash flow, it suggests that a company's competitive moat is under attack -- which is definitely the case at eBay. When management announces results on the 24th, they need to assure investors that eBay can grow more than it has in the recent past despite a need to increase spending.
Right now, risk in the stock appears to be at best on par with the potential reward, if not greater. In other words, shareholders are betting that eBay can overcome growing odds and continue to maintain its valuation, if not grow it, but by the numbers the risks appear greater than the potential rewards."
Friday, January 19, 2007
PayPal has the high ground at the moment mostly because of its stranglehold on the eBay platform, which just got stronger with recent initiatives. eBay sellers want to offer Google Checkout but are being prevented by eBay. While eBay continues to state this restriction is not for competitive reasons, a reasonable mind can figure out that is exactly what is happening.
Google is getting some traction in the world of e-commerce outside of eBay where PayPal has had a tough time. [Update: here is a great post on the trouble eBay is having gettiing traction off eBay] So each has their strength and both companies have deep pockets, so is this battle going to end in a stalemate? No, I think eventually that Google and PayPal will work together. The two services are actually more complimentary than you would think.
PayPal is in essence an online bank account without any regulatory issues. Sellers receive payment into their PayPal account and can choose to keep the balance there, spend it online where PayPal is offered, or download it into their real-world bank account. Google Checkout is a credit card processing application. It does not hold a balance it simply processes your transaction on a daily basis and transfers them into your account.
Paypal and Google Checkout are similar in that they allow account holders to make payments from a single account using credit cards but PayPal has advantages with its ability to maintain a balance. PayPal would fit nicely into Checkout just like VISA, MasterCard and AMEX does but Checkout directly competes with PayPal.
So how is this going to end up? In a perfect world the two companies would form a partnership. This would give Google access to the eBay marketplace and give PayPal access to the rest of the world. PayPal has had a tough time getting accepted in the world outside of eBay where Google Checkout is making some headway and Google wants to sign-up eBay’s millions of buyers but can’t. PayPal would benefit greatly by being included in Google Checkout and Google Checkout would benefit just as much. What’s a company to do?
I don’t see eBay giving up their position unless they are forced to and that would escalate this small battle into a full-scale war. If Google were to launch their own store platform, as a way of reaching out to eBay’s sellers or add similar account function to Checkout that might force eBay’s hand. I can tell you this; eBay will not do anything until they are forced to or unless they realize the cost of fighting the battle is too great.
Sellers have been complaining about security issues on eBay for years and its taken them until now to actually address them in some meaningful way. What could have brought about this change? I do have one thought as to the motivation for announcing these buyer initiatives; eBay’s buyer metrics must be changing severely. eBay generally does not make changes because they simply make sense. It has been my experience that they only make changes when the metrics cry out for change; SIS (Stores in Search) is a great example.
What could eBay’s metrics be saying now? Perhaps, even though eBay was touting itself as the #1 most visited site during this holiday season that in reality ASP’s and conversions declined. Maybe a great many visitors came to look but not many actually bought anything. I think we will know the answer to this when eBay reports earnings on the Jan 24th.
I would have liked to hear what they had planned for Stores in 07’ maybe that will happen at eBay Live.
Thursday, January 18, 2007
My take on this so far is a big Yawn! "Much ado about nothing"
I'm glad to see eBay taking a more serious look at fraud but the Feedback and Seller registration initiatives lack punch. I want to get details on Express and what their plans are for Stores. We will have to wait and see what they come up with.
I'm also dying to know what the response was to the Seller Profitability session. Hopefully they treated GlacierBayDVD fairly in their case study.
Wednesday, January 17, 2007
I thought it quite interesting that one of the sessions will be about seller profitability and includes a case study about my former company GlacierBayDVD. I spoke with eBay about the issues we faced that forced me to close down the business in January of 06. It will be interesting to see how well the session is attended.
Tuesday, January 16, 2007
I will be updating my blog as I get information from the conference so check back regularly. In my view this will be a key moment for eBay to present their vision for the marketplace. This conference will set the tone for all of 2007. Both Sellers and Investors should pay close attention to the news coming from this conference.
Thursday, January 11, 2007
#1. They are trying to address the growing complaints from buyers that the marketplace is no longer a safe place to purchase product. The deal doesn’t assure you will receive your product it just says you won’t be out any money. Combining this increased purchase protection with recent moves by Trust and Safety to stamp out fraud on the site seems to make since. This is more of a marketing move than anything else.
#2. I believe there is a growing fear at eBay that Google will get enough traction from their Checkout service to have some impact on PayPal. I believe they made this move to try and separate them more from Checkout. Rick Aristotle Munarriz from The Motley Fool thinks the same thing as he states in his recent article eBay Doubles Down on PayPal
“My theory is that if you were to bring in eBay for questioning, it would ultimately break down and concede that "Google Checkout made me do it!"
This announcement by eBay is just another movement in a long dance between Google and eBay that “should” eventually end in an embrace between the two. PayPal needs Google Checkout to expand outside of eBay and Google Checkout needs PayPal to reach critical mass with buyers. I think this pairing is inevitable but eBay will resist it as long as possible.
Wednesday, January 10, 2007
More to come.
UPDATE! It looks like the deal is official. Here is a press release from ebay.
According to Ben Charny of Marketwatch:
"EBay has its own ticket marketplace as well. But it's unclear just how robust it is and what impact the StubHub purchase will have on it.
If traffic is any measurement, however, StubHub's business is far more active than eBay's.
StubHub saw 2.1 million unique visitors and generated 22.3 million page views in August, according to Nielsen//NetRatings. EBay's ticket section saw 309,000 unique visitors and 875,000 page views."
Looks like Stubhub was the leader in this vertical.
Here is a link to my thoughts about StubHub way back in Oct. I sill think, if this deal happens, it is a good move for eBay. I would rather see 9 more of these deals than another Skype.
In regards to eBay there are 2 key events happening in the month of January. Next week eBay is holding a Seller conference for the top 200 eBay sellers and is expected to announce some major initiatives. Rather than speculate about the affects of this event I've decided to report on it. Also eBay announces Q4 earnings on the 24th of January.
I’ll be back to my regular posting schedule next week.