Thursday, October 16, 2008

The Morning After - eBay's 3Q Conference Call.

Somehow this post feels like I'm just piling onto to eBay when they are down. It almost seems unfair since they are so vulnerable, but after 2 years of blogging about eBay, I finally feel vindicated. The analysts and the press are finally seeing the light. 

What the Press has been Saying
There were two excellent articles recently by Victoria Barrett of Forbes and Brad Stone of the New York Times. These are the first two articles to identify the real problem with eBay and it isn't eBay sellers.
What the analysts are saying:
Other than Jeetil Patel of Deutche Bank, most analysts have felt that eBay was an undervalued stock, that had a few problems in the marketplace business, but they were still bullish. Now that there is irrefutable evidence that the demand for eBay items is declining and the structural problems are clear to be seen, they have finally changed their tune.

  • Jeetil Patel - Deutche Bank has seen the problems all along. He is sometimes a lone voice in the wilderness. " We reiterate our SELL on shares of eBay, and are lowering our price target to $13. We think the stock will remain under pressure, particularly as business trends onsite appear to have worsened dramatically in September, largely due to the structural issues facing eBay (lack of demand, increasing seller fees, lack of reinvestment).

  • Scott Devitt - Steifel Nicholas - Scott still has a buy rating on the stock, but admits: "Unfortunately, our view of the stock has been mostly wrong, but we believe that current share prices more than reflect the significant headwinds facing the business."

  • Justin Post - Merrill Lynch - Justing just recently downgraded the stock to underperform. "Given magnitude of eBay's 3Q GMV miss ($14.3bn vs $14.9bn expected) and weaker 4Q guidance, results have a negative read-across for AMZN and GOOG. However, eBay sellers as well as private and public eCommerce companies have indicated more deterioration on eBay than other channels and off-eBay PayPal volumes beat our estimate by $260mn.  We are incrementally more cautious on sector, but believe some of eBay's 3Q $640mn GMV miss likely moved to AMZN."

  • Mark Mahaney - CitiGroup - Mark recently downgraded the stock to a hold and had this to say; "What's Gone Wrong? - 1) Macro -- negatively impacting eBay, PayPal, StubHub, everything; 2) Execution -- fee/rule marketplace changes have been highly disruptive & arguably poorly implemented; & 3) Structural - Decreasingly desirable Auction format & an infrastructure-less business model arguably ill-equipped to match rising consumer requirements."
If you listened to the conference call John Donahoe and Bob Swan blamed all of this on the economy; the macro-economic environment. But next week, Amazon will announce their 3Q numbers and Q4 guidance and while they may be impacted slightly by the macro-economic environment, their numbers will not be anywhere as dire as eBay. 

This year, Amazon put eBay in their rear-view mirror, but I believe this holiday season they will put eBay out of view completely. This should never have happened and short of the Board of Directors pressing the reset button on this management team, the eBay marketplace will not recover.

Just my 15%

27 comments:

Anonymous said...

Well stated, Bravo!

Anonymous said...

I agree, someone needs to pull the eject lever on the side of JDs Aeron before he makes eBay into the next Yahoo.

When is 'counter-intuitive' just plain wrong? When the marketplace tells you it is.

ms.pat said...

Its so good to see them all coming around to the real problems at Ebay. Nothing good can happen for this ship until they get a new captain that can turn her around! Its blatantly obvious now. Funny...but when sellers went around and commented on articles by these analysts we were called "whiners"....now, let them eat their words!

Funny, the old auction business model would have excelled in this kind of an economy - instead, they're floundering and this holiday season will be a disaster...restricted by a management team who clearly was not cut out for this type of work!

Miracle of miracles...some of the same buyers who bought from me on Ebay have now sought out my website and are becoming comfortable there. They like the idea of the Paypal shopping cart because its a link between me and how they shopped on Ebay. I've picked up several buyers who will shop with me for the holidays.

Moonlight said...

Randy,

Have you seen Ina's latest blog post about who should be Donahoe's successor? Look at the first response.

No, it wasn't me. lol!

Mike said...

Ousting Donahoe and Norrington would be a sorely needed "disruptive innovation".

Randy Smythe said...

Crap, that's just what I need to complicate my life. Become CEO of a publicly traded company.

Honored but naw, I'll have to pass. Wait, I keep forgetting the job pays well. Maybe ...

A slightly embarrassed blogger here.

Rich said...

Conversation with an Amazon customer service rep this morning [using their instant call back, problem solved!].

Me: "I love you guys!"

Phone Rep: "It means a lot to us when we heea that!"

Me: "I noticed you spruced up your home page a bit. You're not gonna do an eBay on us are you?"

Her: "Don't worry---that will never happen!"

Rich said...

"hear"

ms.pat said...

Randy - whoever they chose for CEO you certainly should be an advisor or consultant of sorts. What they haven't had up till now is the seller's perspective and what sellers NEED in order to sell! That really should be the bottom line but they long ago forgot it! In that respect you'd be worth your weight in gold to them ;-)

David said...

randy If you were CEO of eBay, would you end the diamond powerseller program?

Randy Smythe said...

Rich, that is perfect. Thanks!

Pat,

Then Jeff Jordan will have to be the CEO and I'll work with him.

Randy Smythe said...

David,

I would have three sites eBay Classic with reasonable listing fees and low FVF.

I would have stores with monthly fee and marketing programs they could participate in for a fee.

I would have a new Fixed Price Marketplace where there were no listing fees and a higher FVF, so if Diamond Sellers wanted to take part they could but on they would pay the same FVF fee

DSR's would be gone, seller verification would begin.

The model would be eBay, we empower sellers and get out of the way.

Of course if any sellers broke the law, there would be storm troopers and a Black ops team on their doorstep.

Mike in Chicago said...

Stick a fork in them already, They're done. However, I have to say I'm somehow enjoying watching them fall piece by piece.

Anonymous said...

I've said this before. It's like watching a movie with an evil character (think Vincent Price) and you just can't wait until the good guys come and take him down.

I truly feel Donahoe has a heart the size of a prune.

Tony P. said...

"... off-eBay PayPal volumes beat our estimate by $260mn."

Yep, and off-eBay PayPal revenue surpassed the PayPal revenue generated on-ebay - for the FIRST time. That also indicates that buying & selling is taking place on websites, just not as much on ebay.

Kinda kills that theory on "macro-econ is to blame for everything", doesn't it? Why the hell can I see that and fancy-smancy stock analysts play deaf & dumb?!


"We are incrementally more cautious on sector, but believe some of eBay's 3Q $640mn GMV miss likely moved to AMZN."

Yeah, and some of it moved to the Goodwill bin, flea markets, trash bin, etc. An overlooked 'metric' - the totally disenfranchised.


Randy, I read some analysts' articles that stated that ebay's ills don't 'appear' to relate to their "business model change". Those analysts fail to recognize that PEOPLE make up ebay's marketplace, NOT some sort of ebay product.

The way they talk about ebay's maneuverings, you'd think they were talking about someone moving wooden crates around. They simply fail to realize that PEOPLE are ebay's "product", if they have one at all.

Now, I do realize that those analysts prolly are aware of the "people factor" but simply discount it as not being of any real importance - so I guess that's what really pizzes me off. That, and the fact that anyone would actually listen to such people for stock advice.

Hell, you could invent a company, provide bogus fiscal numbers and have all those Wall Street dunderheads proclaim your company is the new HOT stock. Oh wait, that's part of what has happened.

Point!

Randy Smythe said...

Tony,

Everybody has a blind spot, even analysts.

Question for you. Which of the analysts above do I talk to the most?

ms.pat said...

randy - sounds good. I suggested a team of sellers, both small sellers and powersellers mixed to advise management of what is needed in order for sellers to make sales. You could head that team and report directly to the CEO. We had something like that with arts community watch. We reported directly to an ebay manager once a week by phone conference. It could work and would be a lot more effective then a bunch of jugheads with mba's making judgements on things they know nothing about! ;-)

Moonlight said...

Oooooh, I know, I know.

Both of them.

Mark Mahaney:
2) Execution -- fee/rule marketplace changes have been highly disruptive & arguably poorly implemented;

3) Structural - Decreasingly desirable Auction format & an infrastructure-less business model arguably ill-equipped to match rising consumer requirements."

Justin Post:
"However, eBay sellers as well as private and public eCommerce companies have indicated more deterioration on eBay than other channels...." "....believe some of eBay's 3Q $640mn GMV miss likely moved to AMZN."

Good for you, Randy! Whichever one it was, the point is getting through some blind spots.

ms.pat said...

Well....just don't know where to put this so I'll put it here. All the pinks who oversee the Ebay discussion boards have been laid off - Maeve - a popular pink said her last day is tomorrow. I've also heard LiveWorld - the group who runs the discussion boards, chat boards. groups, etc. will be cut lose when their contract comes up.

Cliff said...

Randy,

You're splitting FP from Stores now too? Missing the benefit there.

With no listing fees wouldn't Store items and FP items be the same items?

Or do you mean a third site of stores combining the FP and Classic listings for each seller?

I still don't see the benefit of splitting the site myself, though we've been over this and I understand why you want to split into 2 (3 is new to me though!). I say, just make the sort tabs a little more evident.

But overall I think Best Match might be the #1 factor breaking us. Make it go away Randy!

Thanks,Cliff

Randy Smythe said...

Cliff,

Stores would have both Auctions and FP and sellers could use them as their websites also. There would be a shopping cart and everything.

If I could make Best Match go away, I would do it.

Anonymous said...

Thanks for keeping us informed on all this.

eBay today so reminds me of the Jacques Nasser days at Ford. It only took a couple of years for them to hand him his hat, but they're still feeling the results of the wreckage.

Dan @vzaar said...

It's certainly a very grim time for the marketplace and sellers are finding it very hard to succeed not least because of the constant stream, of change.

The PayPal numbers and Skype are pretty encouraging. But certainly, I wouldn't want to have a pile of ebay stock right now.

David said...

eBay stock keeps getting lower and lower. It's down 65% for the year at $14.66

Randy Smythe said...

David, the share price is going the way of Yahoo's. It will spike once again when eBay is in play for an acquisition.

Tony P. said...

Question for you. Which of the analysts above do I talk to the most?

Jeetil Patel

If you can, that is. 'cuz he gets it and has gotten it for a long time. He is, without a doubt, the exception to what I wrote.

Randy Smythe said...

Tony,

I wish I had a prize for you. Yep, Jeetil and I go way back and he certainly understands the eBay business from the seller's perspective.