eBay Is a Losing Bid - Barron's

by: SA Editor Rachael Granby September 14, 2008 | about stocks: EBAY    
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Rachael Granby

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With a Friday closing price of $22.55, eBay (EBAY) is trading less than a dollar away from its 52-week low, and dangerously close to its lowest level in five years. Barron's Eric Savitz thinks the stock will drop further still.

eBay is facing sellers unhappy with recent changes to the fee structure of sales and auctions. Some of these sellers are sufficiently frustrated that they are leaving eBay and selling items through their own websites. A slowing economy is hitting eBay's profits, as is a strengthening dollar since over half of the company's revenue comes from outside the U.S.

However, some analysts believe the problems still to come will be even worse. Last week, Brian Blair and Ryan Hunter of investment-research firm Wedge Partners noted that eBay's business is "deteriorating," and that the company is preparing to fire as many as 10% of the company's 15,000 person workforce. Blair and Hunter also think that eBay is close to unveiling a new search platform it has been testing; a failure could be disastrous, as "the ability to search and find an item with accuracy is a key factor in eBay's success."

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  • In August, eBay (EBAY) announced plans to focus on fixed-price sales rather than auctions. eBay is hoping the move will help it compete more effectively against online retailers like Amazon (AMZN).
  • eBay (EBAY): Q2 EPS of $0.43 beats by $0.02. Revenue of $2.2B vs. consensus of $2.17B. Sees Q3 EPS of $0.39-$0.41, short of consensus of $0.41, and revenue of $2.10-2.15B vs. consensus of $2.18B. [PR]

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This article has 72 comments:

  •  
    Sep 14 07:13 AM
    Ebay's site is so slow due to all of the heavy code that needs to be downloaded with each page view that is can take MINUTES on a slow connection, so it's no wonder many buyers are not coming back.

    I have a fast connection, and it still can be very painful to surf due to all the heavy code.

    The space is ripe for an alternative player.
    Reply | Link to Comment
  •  
    Sep 14 07:14 AM
    Barron's is right about 50% of the time so I would take their views with a grain of salt. Ebay is still the site many people use to search for the "real" going price of an item. I'm sure the smart people at Ebay have backup contingencies if the new software doesn't go quite according to plan. The future for Ebay is better than most in a slowing economy as people out of work attempt to sell their junk accumulated over many years to fuel their fireplaces.
    Reply | Link to Comment
  •  
    Sep 14 07:25 AM
    The analysits are always the last ones to get it, lol.

    Sellers knew best match aka worst match would be a disaster from the word go because it was based on eBay Express (recently taken offline because best match was a complete failure).
    Reply | Link to Comment
  •  
    Sep 14 08:52 AM
    Incredible potential, incredibly being wasted in my opinion. Great people working at ebay, lots of good idea burried , its customers ignored. Not sure what will turn this around but I wouldnt count them out, they need to get back to the roots of how they grew, from excitement, word of mouth and making Ebay a great place everyone wants to be.

    Another huge issue is that with seller contentment way down, other factors like the worst economy since the Depression have Ebay taking the heat for all problems even though generated by less consumer spending in a bad economy.

    While people do unload junk when the economy slows down there seems to be fewer reasons to unload it on ebay. Few if any bids, constantly changing direction etc. The fastest growing areas of the market (local trading and buy online pick up in person/store) were persued by Ebay as "Ebay Local" announced, then burried while Craigslist grew at 90% over the last few years.

    The potential is here, I am not really sure what the problem is. You need people that understand why Ebay worked to replace the consultant types, or at least take them somewhere and hit em in the head with some water balloons! LOL

    Marty
    Reply | Link to Comment
  •  
    Sep 14 09:32 AM
    Once ebay eliminated sellers being able to leave feedback for buyers, they were doomed. I deal mostly with the artist sellers, and they are switching over to etsy. It isn't an auction format, just fixed price, but they have a clean look and easy searches.
    Reply | Link to Comment
  •  
    Sep 14 10:05 AM
    Something tells me Marty knows what he is talking about from experience. He nailed it - the problem is the team. They don't understand eBay. The are doing all the things that eBay's competitors used to do in the early days of eBay (latest example is the Buy.com deal - absolute insanity for anyone who knows anything about marketplace economics). All those competitors failed doing those types of deals, and eBay is failing now as well. At some point, they will stem the losses, but it will never successfully turn around until they reinvigorate a culture of innovation inside the company and get a more entrepreneurial leader rather than an consultant. eBay is more Silicon Valley, and less Proctor & Gamble. They have to re-engage the communities in a face-to-face conversation again. Re-humanize the company, and people will eventually believe again. eBay's reputation is pretty badly beaten, and some people will never come back no matter what. However, this ship can be turned around. They just need the right people, and right strategies to do it. If they keep signing deals with the Buy.com's of the world, however, they will never come back.
    Reply | Link to Comment
  •  
    Sep 14 10:54 AM
    Ebay is killing its sellers with high fees and rediculous rules. They protect the buyers not the sellers in disputes. I was ripped off for over $1000 buy a scammer then eBay and PayPal (an eBay company) basically said "Oh, Well." Any buyer can buy something using Paypal, then dispute the charge and Paypal will take the money back (steal) from your account. My listings are way down and my sales went from 7 - 8,000 per month to less than $800 per month. Needless to say that I am getting ready to loose my "Powerseller"... status, but I don't care. It is no advantage to me to be a Powerseller anyway, since you cannot leave real (negative) feedback anymore. eBay and Paypal take 12-15% of your sales in fees, way too much for way too little. I have spent thousands in fees and I get treated like a red-headed stepchild when I have a problem. eBay needs to make some real changes before they go under for good.
    Reply | Link to Comment
  •  
    Sep 14 11:00 AM
    Yay! ebay is going down the tubes. Guess they should have thought about not alienating those of us who made them. I use AlsoShop (alsoshop.com) and have not looked back at the feebay beast ever since.
    Reply | Link to Comment
  •  
    Sep 14 11:11 AM
    Craigslist is far better, although a smaller (local only) market. No fees, customers come to you, all cash transactions are among the benefits of craigslist. Ebay was great when they needed sellers (before going public). Now they need volume and buyers .. period.
    Reply | Link to Comment
  •  
    Sep 14 11:15 AM
    I used to sell laptop's and my old company equipment (sometimes 1-2 years old) on eBay, a few years back I used to sell about $140K a year. I have stopped selling for the following reasons.
    a) My last batch of sales including buy it nows, none of the 'winners' paid for the goods. As the threat of a buyer negative was removed.
    b) It is no longer worthwhile, the sale price price of items is now about 1/3 of their original value. This coupled with the high Paypal and Ebay fees, ensures that it is cheaper to junk or throw the items than sell on ebay.
    c) It became an increasing waste of time, hours spent taking pictures editing listings to comply with all the ebay policies. Answering questions, and then a big fat ebay bill with little chance of someone paying. It was more effective to concentrate on other much more effective ways of raising money.
    Reply | Link to Comment
  •  
    Sep 14 11:32 AM
    What’s wrong with eBay..well here are just a few reasons sellers are running from the disaster.

    Fees…totally ridicules
    Terrible buyer extortion
    No negative Feedback from sellers (even if buyer does not pay)
    DSR’s effecting listing exposure ????..even tho you still pay to list
    NO more cash/money order payments allowed
    Ridicules new layout page
    Mental 30 day listing duration …exposure calculated by previous sales ???
    Algorithms for almost everything ???? WHY?
    Fall in to bottom 1% due to your DSR’s and your suspended from selling for 30 days
    And the wonderful Best Match............LOL

    Complete madness
    Reply | Link to Comment
  •  
    Sep 14 11:45 AM
    as an ebay powerseller and a author of a book on investing let me add some insight.E bay s problem is thre is TOO many listngs and the sellers LOSE money on things. the commissions NEED to raised on the front end and lowered on the back end.E bay has not done that despite being told that fr the past 4 years by sellers like me. Just my 2cents
    Reply | Link to Comment
  •  
    Sep 14 12:00 PM
    No shi% they are going down the tubes. They have craped on all the sellers who made them who they were. Donahoe has made so many negative changes that make it not worth the while to sell. Donahoe has grandfathered in store chains as diamond sellers without even selling a item, so the future of ebay is big retail stores selling there products on ebay. I have news for ebay if I want to shop at walmart or sears ect... i will buy directly from there web site, it's alot easier and more secure & they have customer service. What a joke Donahoe has made ebay in such a short time. Congrat's you won we all left!
    Reply | Link to Comment
  •  
    Sep 14 12:07 PM
    When a corporation starts laying off personnel it screams, "We're in serious trouble!"

    THAT was a no-brainer!
    Reply | Link to Comment
  •  
    Sep 14 01:03 PM
    Ebay is hemorraghing (sp?) sellers who are also buyers - and those sellers are listing elsewhere and taking their buyers with them! If you don't believe me here's a simple way you can see it. On Google Page Ranker, Ebay has always ranked a 9 out of 10. I looked last night and it now ranks an 8 out of 10 - Amazon, on the other hand is ranking a 9 out of 10. This tells me more people are now searching Amazon then are searching Ebay. Ebay has been a train wreck since January of this year. The site definitely needed work and needed some excitement brought back to its auctions - which are still 57 percent of its sales. Last January, with an honest "decrease" in fees so that sellers could bring some bargain prices to the site and some layoffs to counterbalance it - they could have been in a much better position today. As one blogger puts it "empower your sellers and then get out of their way". To put it bluntly, Donahoe has strangled sellers with outrageous policies and outrageous fees to their breaking point. We're there simply to help "finance" companies like buy.com who, it is rumored pays NO listing fees and has a miserable 3 percent sell-thru rate. With the manipulative search that shows buyers only what Ebay wants them to see, small sellers have no choice but to eventually leave the site. Can you understand that if I'm paying fees to Ebay and not making many sales then I'm better off at a free site where it doesn't cost me to list my wares and whatever sales I make have more profit in them? This is the truth most sellers are realizing and they're leaving and taking a lot of their buyers with them. Ebay still arrogantly acts like its a privilege to sell on their site - they better take a close look because sellers are leaving because it is NOT! Ebay is on the verge of doom - we've been saying it for months and now in the face of the lowest stock price in 5 years and the rumor of 1500 layoffs (I bet its more than that) will you investors finally believe us sellers??? Ebay will plod along with their September 16 changes and will flood the site with junk...just what Meg Whitman cautioned against a couple of years ago when they put stores into search! Its evident to me that Donahoe is on the wrong path and getting desperate. At this point the only thing that will save Ebay is to flush out present management and rush in new management with solid BUSINESS experience!

    (Mr. Donahoe, as I've been saying for months - I still have my camera at the ready so I can get a picture of you leaving Ebay!)

    Disgusted ex-10 year Ebay seller.
    Reply | Link to Comment
  •  
    Sep 14 01:25 PM
    When do we finally get GoogleAuction?
    Reply | Link to Comment
  •  
    Sep 14 01:41 PM
    Really how viable is the auction format - the better bet is Amazon or the like. Auctions have a place with rare and unique items, but when what the last time you needed to buy a 1978 mint obi wan action figure mint in the box. yeah me ether.
    Reply | Link to Comment
  •  
    Sep 14 02:08 PM
    The auction format is very viable, for certain areas. I deal in collectibles, vintage jewelry to be specific. The search system is now a joke. They don't care when new junk from China is listed in carefully outlined vintage categories. The DSR is ridiculous. Not only are you at the whim of the buyers who don't even understand the ratings they are leaving, but if you have a month with less than 3 ratings you can not earn the higher search ranking. That is my situation, and all of my yearly average DSRs are 4.8-5! But since 3 people over 30 days haven't left me any, much less 4.3 or above, DSRs I am punished, making my items harder to find. Many of us selling jewelry and other collectibles are passionate about it, and don't mind making a sale that gets something to someone who wants it, but may make us a few bucks. Theda, sorry you don't need any unusual items, but do not knock a format that works for sellers and buyers, that is when it is done right. The problem is not the auction format, but what they have done to make it so messed up. I too am waiting for Google auction. I am sure they are taking notes.
    Reply | Link to Comment
  •  
    Sep 14 02:11 PM

    Ever since Meg left, the company and the stock has gone down the tubes. I dont see a come back any time soon for either.
    Reply | Link to Comment
  •  
    Sep 14 02:17 PM
    ebay is killing itself.

    The fees are way too high

    and on 1 oct for music cd's a seller can't charge more than $3 for s&h

    Paying for a package, POSTAGE POSTAGE POSTAGE AND
    a trip to the PO, $3 is ridiculous. I'm losing money there.

    I assume they will limit s&h on other items as well.

    Then they canceled 3 of my listings because I put the words
    "Like New" in the listing title.
    They didn't tell me this was against their rules,

    BUT THEY DID CHARGE ME FOR ALL 3 LISTINGS.

    If I'm paying for the listing why can't I say it's Like New????
    Reply | Link to Comment
  •  
    Sep 14 02:24 PM
    There are plenty of good sites out there already - no need to wait for google - which could end up being more of a hassle than its worth - Google is not known for communicating with people at a level they can understand :-)

    The major trouble is helping your buyers to break the Ebay habit. Reach out to them, tell them where you are listing, give them an incentive to try buying from you at a new place. I still carry Paypal because it makes buyers feel more comfortable buying elsewhere.

    I feel Ebay is on its way out - it will be replaced by many new sites: Wigix, Bonanzle, iOffer, OnlineAuctions, eCrater...and so on - all up and running and mostly free to list - all they need is the buyers.
    Reply | Link to Comment
  •  
    Sep 14 03:02 PM
    eBay sellers please fill out this survey - I do not work for eBay

    tinyurl.com/6zgyk4
    Reply | Link to Comment
  •  
    Sep 14 05:25 PM
    Chelle - I filled out every single question in your survey and I could not submit it. I poured over it again and again - and finally just left it. If there's a glitch in it you might want to check that.
    Reply | Link to Comment
  •  
    Sep 14 05:45 PM
    Ever since ebay changed their feedback system so that sellers cannot leave a negative for problem buyers, ebay destroyed it's own core and brand - that of small user auctions and exchanges. Ebay's fees have gotten excessive as well. In a sense, ebay doesn't really care for it's clients and has shot itself in the foot.
    Reply | Link to Comment
  •  
    Sep 14 06:04 PM
    Thing is eBay doesn't listen to anyone and never would because they've joined the elite club and don't really care about what anyone thinks or say. Why else you anyone make changes even though they affect them adversely and still not bother to do something about it. They have forgetten how they became popular in the first place and changed their business model so radically just to be like the others. Sellers pay listing fees for their items yet they manipulate some to be highly visible and the others are relegated to the background all because of this DSR. With the recent changes aimed at driving away small sellers, it would be a real surprise to see eBay back to its former glory. Probably this is the begining of the end for eBay.
    Reply | Link to Comment
  •  
    Sep 14 06:05 PM
    Where to start? I don't really feel like going into all the reasons that feebay will be nothing but a blip on the radar in the (hopefully) near future as that would take hours of my time. but I will tell you a few things investers. For one, feebay would be even more pathetic if they weren't padding their numbers. You might want to look into that. Feebay grossly underestimated the (HATE) factor and HATE it is. They were built on the sweat and tears of it's sellers and now they throw them to the side. Fine, that happens. But, many sellers were there best buyers and now there is no way in He** that feebay will ever see another cent from them. Not even through preypal.
    Now lets look at it as a buyer. Hate it!!!!!! I am sick and tired of looking for something and getting nothing but what feebay wants me to see which is often irrelevant to what I was looking for. How do they think they can decide for me what I want or which seller I want to buy from. With there stupid best match I always wonder what I am missing but I am not going to spend endless time going through page after page.
    No money orders or checks. That was it for me. Not because I don't have a credit card but because I won't use it there. You could pull the limbs from my body and I wouldn't use preypal. So no more buying from me.
    Feebay wants to be like Amazon? They never will be. They wouldn't have to even try to emulate Amazone had they not sh*t on so many sellers and buyers alike. They could have cleaned house years ago but chose to sit back and collect the money.
    As an aside, I was reading a blog and a woman stated her children are having to go without now because of feebays greed and now her children also HATE feebay. So, do we have a whole new generation that is going to hold feebay responsible as well? Interesting concept.
    Reply | Link to Comment
  •  
    Sep 14 06:16 PM
    "As an aside, I was reading a blog and a woman stated her children are having to go without now because of feebays greed and now her children also HATE feebay. So, do we have a whole new generation that is going to hold feebay responsible as well? Interesting concept."

    This is an interesting "aside" and needs to be brought more into the light. Glad you did. I, too, have read such items here, there, and on. This is a much larger blite ebay has creative than I think they realize.

    From my own personal orbit of friends and family, the limited edition, mind you, is approximately 25 - 30 have ceased to use ebay altogether. There really ARE other places to shop now.

    eBay has become the most HATED and despised company I think I've ever heard! Even those still clinging to selling hate the company.

    That's pretty sad.
    Reply | Link to Comment
  •  
    Sep 14 06:22 PM
    The point being, I forgot to add, that ebay has boobytrapped their own FUTURE in the next generation of buyers. That circle above that I mentioned all have or are going to have children and are very vocal in their refusal to have any part of ebay and Paypal again.

    Although, ebay won't be around. But it IS worth pointing to the ebay trolls that haunt the boards.
    Reply | Link to Comment
  •  
    Sep 14 06:33 PM
    eBay is doomed. And that is simply because they lost sight of their true essence. eBay was built as an open market, on the premise than one man's trash is another man's tearsure. That is what made eBay so intriguing and fascinating at the beginning. There is where its magic lied. eBay then got greedy, and its organic nature got regimented and taxed beyond any common sense. Not happy with just a reasonable commission on sales, they started charging for listings, for adding words to your listing, exhorbitant commissions on sales, etc. eBay forgot that they were just a mean for the business, not the business itself. They became arrogant. As a result, eBay is now dominated for a few merchants of low-quality, expensive goods and the magic is gone. I don't check eBay anymore: I am afraid a fee will be levied just for seeing.
    Reply | Link to Comment
  •  
    Sep 14 07:17 PM
    eBay deterioration started well before John became eBay's CEO.

    - eBay was always so proud of its super-loyal community. There were far too many cases when effects of bad experiments or technical issues were mitigated by the loyal users.
    - eBay keeps changing their mind - who is more important to empower - sellers or buyers?
    - eBay upper management does not seem to use its customers or the lower-level employees for new ideas, many great ideas were buried for years only to reappear after steps of competitors
    - eBay's philosophy for a while was - "we need to better retain our users", does not feels like a great plan for expanding a business
    - Many employees have left the company during last 3 years. Did they want to work in a company that's deteriorating its own business?
    - As internal processes and management chain become more and more sophisticated and elaborate, more and more smart employees left the bureaucracy
    - Have you ever seen people that feel making career is their full time job? It hapens everywhere, but after a certain level it becomes a problem and the company will be very hard to fix
    - As many noted, search relevancy plain sucks there
    - As it seems, almost every change done in the past years would read like "we're making our site so much better for the users", and then you read between the lines "and we will collect more fees, by the way". Talking about feebay?
    - IMO, eBay's marketing is pathetic - rosy pictures with lots of stuff and brave words, but nothing interesting after all. Where is the substance?

    They still have great technology. They still have many great people working there. But the system becomes more inflexible.

    eBay once was a great story...
    Reply | Link to Comment
  •  
    Sep 14 07:34 PM
    When ebay files chapter 11, they will blame the ebayers & the economy for there failures. They made a money machine & got more greedy by the year untill the only way to generate more revenue was too screw the sellers with outrageous fees & policys taht are designed to squeeze every dime they possibble can from the sellers regardless to the fact that we are set up for failure.Donohoe is so blinded by greed that he does not even realize his poison policys have eroded the structure of ebay for ever. Minds well close shop and start anouther business with a new name.The name ebay just angers millions of people accross the world. Good job Donohue! Your biggest Fan