How eBay Stopped Being Recession-proof

What’s happened to eBay?

During the previous recession, the company thrived, partly because it was still young and growing, but mostly because it offered a place for some people to raise a few bucks quick by selling off their stuff and for others to find bargains that were often better than Amazon — or anywhere else, for that matter.

Take a look at this chart. It shows eBay’s stock against the Nasdaq in 2001 and 2002. This was eBay just before its peak, when it was a freewheeling, town square bazaar where entrepreneurs, hucksters and oddballs met and in many ways, a cultural phenomenon. Hardly a week passed when some bizarre item for sale didn’t make headlines.


Fast-forward to the past year, and our current recession, as exemplified in the chart below. Things have reversed. The performance of the Nasdaq is once again abysmal, but it’s still doing better then eBay.


In the first week of December, the heart of both holiday shopping and hard times, online traffic was up 9 percent at major online retail sites overall , according to comScore. Amazon’s traffic rose 10 percent and Apple’s surged 29 percent. But eBay’s traffic fell 9 percent.

The shift is a direct result of eBay CEO John Donahoe’s strategy to make eBay more friendly for shoppers. Over the past year, eBay has de-emphasized auctions and put more focus on “buy-it-now,” fixed-price sales.

By instituting a series of dramatic changes in policies and fees, eBay intended to shore up sales. Instead, it may have blunted its unique edge in online auctions and plunged headlong into another market where competition is much more intense. In grooming eBay to be more like Amazon’s merchants, Donahoe has created a competitor, but one that is growing more slowly. Indeed, analysts are starting to question the wisdom of the move. This morning, one downgraded eBay while another cut earnings estimate for the year, noting that the transition to fixed prices from auctions is being hurt by the recession.

In some ways, the strategy makes sense. I, for one, never took to eBay’s auctions, preferring the simplicity of “buy it now.” And while I recognize that eBay is now a safer environment to purchase things, I still compare its prices and seller ratings with those of Amazon and other sites before making a purchase.

So as a consumer, I welcome Donahoe’s changes. But I still wonder if he didn’t make a big blunder for eBay itself. Legions of buyers loved the thrill of winning an eBay auction, the eclectic collection of strange things for sale, and the feeling of wandering around an open market where nearly anything might happen.

The freewheeling bazaar is fading away. Instead, we are left with something that is, for better or worse, less dangerous.

We are left with just another strip mall on the Internet.

Chart images courtesy of

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