Thursday, April 17, 2008

Back to Your Regularly Scheduled eBay Complaining!

Now that I have that positive post about eBay out of the way, I thought I would write about what concerns me most about the current state of eBay.

It is all about Active Users: (According to the Q1 Earnings call)
  • Active Users grew 1% Y/Y to 83.9 million. eBay said that if you exclude China and Taiwan that number grew by 6% (of course, since they don't tell us how many active users are in China and Taiwan that percentage is basically meaningless, they could say it was 30% and we couldn't dispute it.) BTW, when did they start excluding China and Taiwan. The Annual report says:

    Active users are defined as: "All users, excluding users of, StubHub and Internet Auction Co., our Korean subsidiary, who bid on, bought, or listed an item within the previous 12-month period. Users may register more than once and as a result, may have more than one account."
  • According to The, "Though first-quarter profit jumped 22%, growth in active users was almost flat and the number of the new listings was up just 4% from the previous quarter.

    eBay's much publicized tweaks recently to its platform to make it more attractive to buyers aren't paying off, and analysts say the company's weak fundamentals in a slow economy pose greater risk than ever to investors.

    eBay's pain could get worse. As it struggles to jump start demand, the company's sellers and shareholders are only likely to get squeezed more, analysts say. "

  • eBay Management is now concentrating on re-energising their customer base by using coupons to stimulate activity. Why pay $150 to acquire a new user when you can pay $50 to get an active user to spend more money on the site? The approach does make sense if you go after the 120 million or so non-active eBay accounts to try and re-engage them.

I believe they need to spend money on TV, in an effort to change the perception of the eBay brand and encourage new active users, but that approach is too costly in the short-term. So instead, eBay does what they do best, they manage the cash cow as best they can until the other businesses; PayPal, Skype; StubHub, Advertising, Classifieds, etc. can replace what they may lose in the Marketplace biz.

IMO, there is plenty of additional growth in the eBay Marketplace business, but eBay doesn't seem to have the stomach to go after it.

Amazon on the other hand continues to outpace ecommerce and grow faster than eBay. Amazon doesn't need to spend any money on TV because their brand is already well respected and valuable to consumers.

Coupon programs will help in the short-term, but it isn't a long-term solution. eBay needs to bite the bullet and change the perception of their brand. TV is the best way to do this, but not with another campaing like "Shop Victoriously". Once they figure out what they want to be when they grow-up, they need to launch a re-branding campaign to make eBay the place to shop once again.

I'll say this again, they need to stop trying to figure out how to make auctions work in harmony with Fixed Price items, create "eBay Classic" and run it as a separate platform . Then they can run a TV ad campaign to establish the new brand for the "New" eBay and please do not repeat the same "Get it New" campaign they trotted out for Express when it launched.

Just my 12%


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Tony P. said...

Yessiree, it is all about active users. If there isn't a massive hemorrhage taking place, I'd be surprised. That 1%, or even the 6%, is a gain, but that could be the gain after the loss.

Maybe 10% left ebay last year and a 16% influx of newbies accounted for that 6% rise. Maybe they're all in India, or East Elbownia, who knows?!

Ebay is determined to drive out the Bad Guys with Best Match, DSR's, etc. and it looks like the Dis-Advantaging is working Perfectly. The jury's still out whether the Baddies will take the hint and leave. Why should they?

Meanwhile, back at the ebay-ranch the regular farmhands are getting downright pissed off, something fierce. They be gettin' on the horse what brung 'em and ridin' out. I'm figuring that for every 10 sellers that leave, there goes 9 buyers.

As I sees it... we lose 9 cowboys, but we gains 10 injuns.

(oh gawd, is that not PC, or what?)

Tony P. said...

Randy, how about lending your knowledge of 'street speak' to something a bit confusing?

Specifically, concerning this:

Brian Pitz and Brian Fitzgerald, Bank of America: Maintains Buy rating, but contends that “eBay may have to eliminate a source of revenue from listings fees longer-term, especially given increasing competition from AMZN and Craig’s List.”

What is meant by that bolded portion? It can be interpreted in several different ways, with some of those 'ways' having more than one possiblilty. Ideas? Thanks!

where the hell is MY tin hat???

Randy Smythe said...

Tony, basically they are saying "no mas" to listing fees in order to compete more effectively.

This is the direction they are headed, they just won't remove listing fees all at once.

My guess is they will make a category specific change where they drastically reduce listing fees and then over time they will just go away, replaced by higher FVF fees and more Best Match control.

BTW, your tin hat is on the fence behind your Monkey Spaceship

Tony P. said...

Thanks, Randy. I thought that is what they meant, but the more I read it, the more I read into it. ;-)

(got it.. putting it on)