posted on April 17, 2008 05:37:53 PM new
EBay Chief Says Change Isn’t Over
By BRAD STONE
Published: April 17, 2008
SAN FRANCISCO — More changes are coming to eBay, and John Donahoe, the new boss, is girding for the repercussions.
Mr. Donahoe, who has been running the company since his appointment to the top spot was announced in January, wants the company, the Internet’s largest e-commerce site, to operate less like an unruly flea market and more like a strip mall — where buyers are guaranteed to have a comfortable and predictable shopping experience.
The changes are intended to help eBay restart growth in its main marketplaces business, which has stagnated as Amazon.com has attracted eBay’s best buyers and sellers.
The effect of some of those changes was beginning to be seen in financial results. The company announced stronger overall earnings on Wednesday, including a 22 percent increase in net income from the year-ago quarter, beating analyst’s estimates. The results were aided by robust international sales, a weak dollar and eBay’s rapidly growing ancillary businesses, like the payment service PayPal and the Internet calling service Skype.
EBay’s stock, which was flat in late trading after the earnings report Wednesday, is up 20 percent, to $32.12, since mid-March on these positive signs. But its marketplaces business still continues to stagnate. The number of active eBay users increased only 1 percent in the last year, to 83.9 million.
To fix that, Mr. Donahoe has pushed through a series of significant changes to the auction site, many of them favoring big, reliable sellers. And that has meant inevitable rancor in eBay’s boisterous community of smaller sellers who have made a living out of selling knickknacks from home.
For example, in February sellers who viewed a recent change to eBay’s payment structure as a fee increase organized an attention-grabbing boycott of the site. In an interview after the quarterly earnings report on Wednesday, Mr. Donahoe, who officially succeeded Meg Whitman in March, said he was not fazed by the attention. “The good news is Meg prepared me well for this,” he said. “I will say at one point in the first quarter I got an e-mail from my mother that said, ‘John, eBay sellers may not love you, but your mother does.’ ”
Mr. Donahoe has signaled that everything eBay does is up for review. Among the speculation on the sweep of that statement is the possibility that eBay will sell Skype, which eBay bought in 2005, to the Internet search giant Google.
Mr. Donahoe did not dismiss the possibility, but said he wanted to give Skype’s new chief executive, Josh Silverman, more time to look at synergies between the calling service and eBay. “Let’s see if they exist,” he said. “In the meantime, we’re building a great business.”
Mr. Donahoe says he is focused on bringing consistency to the core marketplace business and improving the experience for buyers. Among his recent changes, eBay has revised the way that auction listings appear in search results on the site. Instead of listing auctions in the order which they end, the company is now favoring sellers with better ratings, lower shipping fees and cheaper prices.
Beginning in May, eBay will not allow sellers to leave negative feedback for buyers, a move that has many sellers complaining. “One of eBay’s mantras for the last 10 years was that they provide a level playing field for everyone,” says Jonathan Garriss, executive director of the Professional eBay Sellers Alliance, a group of eBay’s largest sellers. “But they now realize that just doesn’t work in today’s competitive environment. So they are doing a lot of things they never did before, like treating their biggest sellers like their customers and giving more things to their better customers. Any business does that.”
The fee and search changes, which took effect only six weeks ago in the United States, Britain and Germany, appear to be having a positive effect. In its earnings call Wednesday with analysts and investors, eBay said that it was seeing increases in the number of listings on the site and in gross merchandising volume or G.M.V., the total sum of all transactions on the eBay marketplace. G.M.V. in the latest quarter increased 12 percent from a year earlier.
The company said net income in the first quarter rose to $563 million, or 42 cents a share, on revenue of $2.19 billion, a 24 percent increase from the period a year ago. But its operating margin fell to 32 percent from 33.6 percent last year, as lower-margin businesses, including PayPal and Skype, grew quickly.
The changes in fees and search listings have drawn anger from some of the smaller mom-and-pop sellers on the site, who now say they have a harder time making a profit and getting their items to show up in search results.
“You can’t sell anything. Buyers say they can’t buy anything. It’s a disaster,” said Valerie Lennert, a longtime seller of custom doll clothes who helped organize the boycott in February. She says the new changes to eBay’s search engine effectively make her listings invisible.
Mr. Donahoe says it is not the company’s intent to discriminate against small sellers. But, he said, “where large and small sellers are trying to cut corners and not provide a good buying experience, we are making less room for them in the marketplace.”
Mr. Donahoe outlined some more coming changes to the site. In Australia, the company is testing a program that requires sellers to accept only PayPal payments. Mr. Donahoe said that if the test was successful, the company would introduce it in other countries “in months, not years.” Mr. Donahoe said the intent was to cut down on fraud on the site, but critics say the change will entitle eBay to a double helping of fees on each transaction.
Ms. Whitman was absent from eBay’s earnings call for the first time in more than a decade. Although she remains a director and advises Mr. Donahoe, she is spending part of her time as a national co-chairwoman for John McCain’s presidential campaign.
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posted on April 17, 2008 06:24:38 PM new
If we cannot leave neg feedback and some bidders keep their feedback private,how do we know if we should do business with certain bidders?
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Lets all stop whining !
posted on April 17, 2008 06:32:40 PM new
The PP only worries me most. What happens to the little buyer who is just over legal age and buys a $10.00 trinket and then goes out and gets a money order and mails it? What happens is that that person can no longer purchase from ebay, that's what. Not everyone in this country has a bank account and credit cards. I still see a lot of people who cash their paychecks and pay with cash or money orders. What happens to those folks if U.S. Ebay goes to paypal only?? We lose them as buyers, that's what happens. This little trick of eliminating all other forms of payment so ebay can double dip on fees from ebay site and paypal is a bit disturbing. Where is it written that cash-money orders or even personal checks should no longer be acceptable? I know where - in ebays pocket. They don't get a cut of the cash-money order or personal check payments so therefore those types of payments must certainly be eliminated. No negs for buyers is bad - raising fees is bad but if the PP only payment type comes about it's not just bad it's a disaster.
posted on April 17, 2008 07:32:48 PM new
But how many of those people you see cashing their paychecks at currency exchange or supermarkets surf on internet?
Banks would offer you free checking if you agree to direct deposit AKA deposit your paycheck with them.
We have a Chase kiosk which offers $100 sign on bonus just outside our subdivision.
Those who do not have bank account and cashing their payroll check in supermarket probably know some local place to pick up their stuff-dollar stores,thrift shops and supermarket,Big lots ,Walmart where they dont have to pay shipping ,just sales tax and these days shopping on Ebay shipping is a big expense.
I have been selling on Ebay for 10 years,I dont recall ever running into anyone who dont have a bank account ,have you??
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Lets all stop whining !
posted on April 17, 2008 08:03:38 PM new
My prediction: shortly after every major change, eBay will have a listing sale and then say the change was successful- listings are up. Problem is, by doing this eBay is not only fooling the analysts, they make it difficult for eBay to gauge the effects the changes have made.
posted on April 17, 2008 08:56:57 PM new
Hmmm...he didn't mention that they let the 'Unruly Fleamarket Sellers" list for 99 cents or less and that is what boosted the numbers!
I changed to accepting PayPal only several months ago because I was getting to the point where I was waiting so long for Buyers to send Money Orders and then when they arrived they were the Green 'Domestic Only' Money orders that can't be cashed in Canada! I had a little blurb about them on each listing ( like most Canadian sellers)but after 5 years it was driving me nuts (more nuts than usual)!
I can honestly say that I don't believe that the change has hurt me. We used to receive about 90% PayPal anyway. No...I don't like the fees but I do like the fact that we can sell something in the evening and have it in the mail the next day. We don't have to leave home to go to the Bank either.
I know not everyone will agree because we all have our different ways of doing things but for us...it works well.
Edit for my typos!
[ edited by otteropp on Apr 17, 2008 08:58 PM ]
posted on April 18, 2008 12:48:06 AM new
Requiring Paypal, to the exclusion of other payment methods, seems totally unamerican, Still, if Amazon has done it, I suppose it will fly in court. I like Paypal, I only wish I could offer Google-pay as another payment option. Edited to add: interesting spin eBay has given this, that the changes affect only the "Mom and Pop" sellers. It's the mega-sellers that are leaving eBay in droves - WAKE UP Wall Street!
[ edited by pixiamom on Apr 18, 2008 12:56 AM ]
posted on April 18, 2008 05:35:27 AM new
Amazon has been using 'one click' as the only form of payment for years,they do exclude certain countries as credit card fraud is too high.
As for mega sellers leaving Ebay,it is not the cost of accepting Paypal,most accept credit card transactions with their own merchant account .
It is the margin is just too thin,you cannot employ any full time worker and offer fringe benefits with Ebay profits.
Auction style selling is too unpredictable -you list an item at low price and hope the bidding will bring you more,it is hard to do any business planning if you dont know how much you would sell the item for.
When professional sellers who do this as a business sell side by side with weekend warriors who find their items at garage sale,attics or shoplifting,there is really not enough profit to foot the bills.
But then,Ebay started out as a person to person sales venue,not really meant for professional sellers,it is just that the retail environment is so brutal,those who closed their brick and mortar stores stay home and sell on Ebay with the remaining merchandise and continue to do so as a living and then there are some who sell on EBay to bring in some cash to meet store expenses and then wholesalers and importers see advantage of extra sales or they have a family member or employee who like to do this after hours for fun and profit since they have access to merchandise at wholesale price.
We have an antique village near the airport and one store is responsible for selling on Ebay,any store which needs some cash would bring their items to that store.
posted on April 18, 2008 06:13:27 AM new
In two words: Antitrust Act.
You can pay with a MO or Check on Amazon:
From Amazon:
Amazon.com accepts American Express, Diners Club, Discover, JCB, MasterCard, Eurocard, Visa, Visa Check Cards, payment from your bank account, Amazon.com gift cards, Amazon Store Card, Webcertificates, and checks, money orders, traveler's checks, or cashier's checks denominated in U.S. dollars and drawn on a U.S. bank. Additionally, we accept Borders Gift Cards and Waldenbooks Gift Cards as payment for qualifying orders.
We do not currently accept international wire transfers, PayPal, or Smart Cards. For grocery purchases, we are unable to apply manufacturer's coupons, food stamps, or any other payment method not listed above.
posted on April 18, 2008 06:20:42 AM new
I like Paypal, so that said.
The real issue is -- some buyers would rather pay using money orders. They just do not want to have a CC or checking account open on the net.
Of course realistically they will use CC at restaurants, Walmart, etc. But ya cannot convince them one is just as safe as the other.
The BUYER should have a choice .
It has all ready been established eBay thinks sellers will do what eBays wants or else. NOW they are jerking around the buyers ... hehehehe
On this brainstormed ideal we will all lose, including eBay ,methinks.
posted on April 18, 2008 08:17:49 AM new
There are more people that don't have a checking account and only pay with a money order than you might think. In fact there has been a big increase of people sending money orders to me lately. I have also noticed more people waiting to pay for their items on their payday,sometimes I am waiting for several days to even hear from them. So I guess the bottom line is if you don't have much money stay off of E-Bay. How sad.
posted on April 18, 2008 08:43:05 AM new
Ina Steiner from Auctionbytes reports that some people get a PayPal only option when they try to checkout - even if the seller has indicated they accept MO and checks - a glitch?
posted on April 18, 2008 10:18:39 AM new
Don't forget the little elderly lady who wants to pay by check because she still doesn't trust in the Internet.
I got a call from ebay a few hours ago full of helpful ways for me to keep my standards of selling high.
They wanted to know if I was looking for other venues from which to sell. I told them that I would let them know after next month when I can not longer leave a neg for a buyer.
posted on April 18, 2008 02:49:48 PM new
There are some Ebay bidders who dont want to use their credit cards for impulsive buying,so they prefer to send a money order.
Now question on AMZN payments,how does AMZN accept money order or personal check?Do you just mail one to their customer service?
If a person really want to skip Paypal and buy from you,he can always email you and then you will close the auction,of course he may never send you a payment and if he does,he would not get any buyer protection except complain to the post office.
One question I have is selling high priced item,the Paypal fee would be a big bite!
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Lets all stop whining !
posted on April 18, 2008 07:58:37 PM new
I thought ebay owned Paypal??? If so , of course they'd make all auctions paypal only...in fact, since they're so big they can do anything they want....how does it feel to be "Walmarted"?
posted on April 18, 2008 08:20:12 PM new
Here,just off the press from this week's Barron's-
FRIDAY, APRIL 18, 2008
HOT RESEARCH AM
Something Not Clicking at eBay
TEXT SIZE PRINT EMAIL DIGG SINGLE PAGE REPRINTS GET RSS eBay (EBAY: Nasdaq)
By American Technology Research ($32.12, April 17, 2008)
WE ARE DOWNGRADING SHARES to Neutral from Buy.
EBay shares have staged an impressive 25% rebound over the last month on expectations for a "beat and raise" [beat earnings expectations and giving upbeat guidance] quarter, as well as hope of reacceleration in gross merchandise volume growth. EBay delivered on the former, but not on the latter.
In addition, active user growth decelerated to 1% year over year -- this was not unexpected but highlights the continued challenges that the company is facing vis-à-vis the generation of buyer demand. We see limited upside to the shares from current levels and are therefore moving to the sidelines.
We are lowering our price target to $35 [from $40]. EBay shares are unlikely to garner significant multiple expansion from here unless/until the turnaround in the core marketplace business gains more momentum.
We believe that 20 times our new 2008 earnings-per-share estimate of $1.75 and 12 times our new 2008 earnings before interest, taxes, depreciation and amortization per share estimate of $2.56 are appropriate valuation multiples for a stock that faces both macroeconomic headwinds and the prospect of continued market-share losses to other e-commerce channels.
As we expected, eBay delivered a clean beat-and-raise March quarter. First-quarter 2008 revenue and EPS of $2.19 billion and 42 cents, respectively, were materially better than Street estimates for $2.06 billion and 39 cents. Management raised its 2008 guidance midpoints to $8.85 billion in revenue and $1.73 in EPS versus consensus at $8.74 billion and $1.66. The market was pricing in a beat and raise, and eBay delivered in fine style.
We see negative derivative implications for Amazon's average selling prices. EBay's gross merchandise volume per listing rose only 2.1% year over year. Although there are certainly some company-specific reasons for this, it makes perfect sense to us (in light of the deteriorating macroeconomic backdrop) that consumers are "checking down" to lower prices.
Although Amazon boasts a far greater level of operational momentum than eBay and continues to take share, its stock remains priced for perfection, in our view.
posted on April 18, 2008 08:31:01 PM new
It is not possible to accomodate every one,Ebay would have to decide that it is here to serve the majority-those who shop online with a credit card.
On Bidville,Epier and what not,sellers often ask for a money order,and then once they receive the money order,then they tell you the item is missing,misplaced and would you like a replacement??
They will never say-would you like me to return your money order or tear up your personal check!
We can sit here and talk about a few exceptions-old lady who does not trust giving out cc data on internet(then why the hell is she trusting to buy from a stranger on internet??),Why is anyone so cautious buying something just based on a photo??
Teenagers who dont have a credit card but know where to buy a money order,know enough to use mom and dad's credit card or even get one in the mail .
Young people are smart,where there is a will,there is a way .
People who work but cash their paycheck at currency exchange could be a blue collar worker,they dont surf internet,they go to sunday flea market to do their shopping or dollar store or thrift shop.
And if they really want to shop on Ebay so badly,they can get a VISA/MC gift card and voila ,they have a credit card as good as gold.
What I want to know is that if I have a piece of land and my neighbor is drilling oil on his lot,how do I prevent him from drinking my milkshake?
Any oilman on this board?
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Lets all stop whining !
