Blog Post

What's It Going to Take to Fix eBay?

I have a theory about eBay (s EBAY). Everything was going great for the company until that grilled-cheese sandwich came along.

In November 2004, eBay’s stock was trading near an all-time high at $56 a share, having risen sixfold in a little less than four years. Then an Internet casino paid $28,000 for the sandwich — supposedly with an image of the Virgin Mary on it — and within a month the stock and the company began a slow, irreversible decline. This month, shares were trading below $10. eBay needs a fix, but there aren’t a lot of easy options before it.

For their part, eBay executives recently spent several hours telling analysts how things would be different. CEO John Donahoe was forthright with the audience, admitting the company had fallen short of expectations and that this was “unacceptable.” He got a little defensive on Skype, saying he’s tired of apologizing for that deal. At times, he sounded like the Zen detective on NBC’s Life: “The eBay you knew is not the eBay of today or the eBay of the future.”

That means its time for another makeover for eBay — or at least for the e-commerce business that has always been the heart of the company.  Over the past few years, eBay tinkered with its robust auction bazaar to focus it more on an fixed-price model and on its top sellers. The result was slower revenues and legions of angry, smaller sellers. Now, eBay is favoring an focus on excess inventory. eBay’s supply chain won’t rely on home attics anymore, but instead on corporate warehouses.

Will it help? It’s almost certain to further alienate small sellers, although eBay seems content to cut them loose — the new, improved eBay is geared toward even bigger sellers. But I can’t help but wonder whether the company also knows it’s simply fading as beacon of e-commerce. eBay says its 2011 revenue from its marketplace business would be between $5 billion and $7 billion. That’s compared to $5.6 billion in 2008, so over three years, revenue could rise as much as 25 percent. Or it could fall as much as 11 percent.

Now compare that to PayPal. eBay’s payments division (dominated by PayPal) saw $2.4 billion in revenue last year. By 2011, the company expects revenue to be between $4 billion and $5 billion. Think about that for a second: In a couple of years, PayPal could be as big a business for eBay as itself.

For several years, eBay has been two separate but related businesses. One of them, e-commerce, saw meteoric growth early on but matured very quickly. The other, PayPal, took years to ferment, but is positioned to deliver strong, steady growth for some time.

One of the most telling details of eBay’s analyst presentation was that it didn’t start off discussing eBay’s e-commerce business, but with PayPal’s. It could be a matter of time before it will make sense to change the company’s name to PayPal. Maybe then, it can shake off whatever ill-effects that grilled-cheese sandwich has been having on the company.

37 Responses to “What's It Going to Take to Fix eBay?”

  1. I have launched

    Low fees to help sellers but not free: I don’t want to be like Craigslist
    To make it safer for sellers and buyers i created the auction site around a community.
    Ebay/facebook =
    I will have no ads or pop ups it will be a clean site.
    I have a lot to do to the site but I am trying to reach out to sellers I can get feedback on what they think and want.
    Thank you
    see you at the next Ebay in about a year or two

  2. William UK

    Am an ebay buyer/seller from the UK and just found this discussion and agree with nearly all the gripes above. Like many, have been in Ebay since early days, and have a 100% feedback, but the effort and worries of buying and selling are too time consuming and cost-ineffective. From 1999 to 2004 things went fairly smoothly but since then it seemed to change and I have noticed the following.
    1) Increase in non-payers/timewasters/”thought listing was in dollars etc “-type excuses
    2) Changes to listings costs made it not really feasible to list hundreds of 99p items as I used to – ironically they are now trying to lure back the 99p sellers, but I now have another outlet
    3) Ebay slow/invisible in dealing with complaints – eg when another seller copied and pasted my listings descriptions and photos for their own advertisements
    4) Failure to crack down on scammers/criminals – they seemed to show no interest in getting involved in, for example, cracking down on fake/pirate sports memorabilia such as dubious “autographs” and cheaply-made copies of authentic sportswear
    4) Yet while treating old and loyal sellers/buyers like crap has been quick to play the shallow/cynical media game by allowing “zany” items for auction
    5) Paypal – three reasons – a) forced to offer it as a payment method, b) the way they gouge more fees of you, and c) the almost impossibility to deal with them over problems. Had a sizeable payment to me frozen because i was not in some category or other of paypal, and dealing with them across Atlantic was a long and tortuous nightmare
    There are many other things which posters have mentioned, but finally to say I know many book dealers who have already been deserting Ebay in droves for Abe etc, and I am actually going back to using small ads in trade digests/mags etc for sales (yes they still exist in the UK!).

  3. I used to sell my invention on Ebay.
    I found this page (Blog) by punching in “Donahoe Ruining Ebay”.
    I can’t imagine it getting any worse.
    The Good Ole Days on Ebay……..a Very Fond Memory……We had Good Times…..Met alot of Wonderful people.
    I just can’t believe it’s All Gone.
    How could they have let this happen ?

  4. TennesseeTime

    To Vaguely Disturbed:
    You say there are hundreds or thousands like you- I’d say it’s more like hundreds of thousands, and possibly millions worldwide that are like you.
    Ebay earnings would be far worse if it weren’t for Paypal, which as another poster mentioned before is subject to Federal action in the near future since it operates as a bank yet doesn’t follow banking regulations. It’s just a matter of time on that.
    So if Paypal is sanctioned by the feds, what will Ebay be left with? No community, no core business, no Paypal to bail it out, and just a bunch of mega-sellers pawning off surplus crap from China they can’t sell anywhere else.
    The Ebay board of directors as well as analysts and anyone considering a major investment in Ebay need to heed the words from the ‘little people’ on this and other message boards. It’s where the rubber meets the road. Only misguidance and deceit flow from the CEO right now.
    Does anybody wonder why just about every single blog found on the internet about ebay is negative in theme? Yet somehow people are paying a premium for Ebay stock??? I’d say if it weren’t for $5 billion in stock buybacks, Ebay stock would be trading at or below the $5 mark. It already hit the $9 range just a couple of months ago, and that was with the buybacks in place.

  5. vaguely disturbed

    I have been a small seller on eBay since 1999. I have a 100% positive feedback record and have always been scrupulously honest in dealings with buyers. Yet now eBay doesn’t seem to value my business, choosing instead to favor big sellers of discount merchandise. There are hundreds, perhaps thousands of small sellers like me, and our auctions generate money for eBay. It doesn’t cost eBay anything extra to post these auctions or take the sales commission. Yet by constantly raising selling fees, they gobble up an ever-increasing percentage of my profits. What galls me most is the policy resticting payment methods sellers can accept. Without a merchant credit card account…something that most small sellers can’t afford…the only option is to take all payments by PayPal. Since eBay owns PayPal, they’re double-dipping. They get the final value fee on the sale and another fee to clear the payment. Sheer greed.

  6. Is there anything New here? Ebay is Crap and Paypal is a money float system about to faill when the Feds hit them and Donahoe is dumb as a stump!

  7. William Phillips

    It would be a waste of my time and this space to repeat the experience small sellers have on ebay this past year under the direction of Donohue. He still doesn’t get it. That is truly a shame for all stakeholders. I find it hard to believe the company has any real chance to right itself until Mr. Donohue and any like minded exec’s at ebay are escorted to the door. I am but one small seller. I was also a buyer. I am a licensed auctioneer in Virginia and I operated a retail ebay drop store up until Mr. Donohue annouced his online titanic vision for ebay last year. Fortunately for me the timing ran right with my lease renewal and I closed the doors. Ebay lost between $900.00 and $1500.00 in revenue from my small operation. These figures do not include paypal revenue generated from my sales or the purchases I no longer make on ebay. I have an MBA and I cannot remember a case study that ever demonstrated such a quick demise to what was once a cash cow. Great going Tom! It is said people perish for a lack of vision.

  8. it seems that amazon is coming up faster by the day. and eBay is now the land of the community less marketplace, while others such as bonanzle and wigix are trying to capitalize on this and promoting their social aspect. only time will tell what happens to this volatile market!

  9. revenue, revenue, revenue. That’s not there is to ebay! Ebay HAD a “mystique” and an attraction by it’s community connection. There is no price tag for that. With that gone, so will be the revenue. What part of this do investors NOT understand? Most of the money that’s being generated is going into the pockets of the top executives. It looks like they are draining the company core before they surgically remove it. When they finally have to file chapter 11 maybe then you’ll all “get it ” But then again, maybe you were paid to write this.

  10. bayUser

    We have used ebay for almost 10 years, but the last year or two have sent us looking for other options.

    The first problem as a buyer is the scammers have taken over. In the last 2 years we have had merchandise not ship, and really fight to get our money back, sellers bait and switch, and sellers not including items that were described in the auction.

    As second problem as a seller is all the corporate merchandise taking over. We shop ebay to find the unusual, used, or otherwise difficult to find. There are literally hundreds of sites that sell this type of merchandise, and they have much better sites, with more reliable sellers.

    We attempted to list a $20 item recently, and the fee was $9.75! The auction never went live, and the merchandise was listed instead on our Amazon account.

    If Ebay wants to stay relevant, they need to realize their core competency was once in auctions, and do them right. I’m guessing a new auction site similar to what Ebay once was will soon take over, as they die a slow death.

    bayuser (MBA)

  11. cookingwithgingerbreadjamco

    You know, Amazon started accepting Bill Me Later credit for one season, the best season they ever had and guess what? Ebay/ Paypal the same company bought Bill Me Later. As of Dec 31, 2008 Amazon is no longer accepting Bill Me Later. Can someone say Amazon might be in trouble next Christmas?

  12. cookingwithgingerbreadjamco

    I have some insight on how current and former Ebay sellers think of Ebay and its not pretty. I recently added a site called Bonanzle which has gotten some great reviews from the experts on one the Greatest Ebay and alternatives and its pretty scary how they feel about Ebay. Many of the sellers were on Ebay for years with some having ratings in the thousands, and now they have closed some of the Ebay stores or have been forced by ebay to close their stores because they are deemed too risky to sell on another site using the Paypal system. Some left and call it Feebay- One fee for insertion charges, One charge for final value charge, one charge to use ebay and if you have a store, some were paying 250.00 a month or more to have more choices for the customers. Wait, now Ebay is telling people that they have to charge 4.95 for shipping for an item that could ship for a buck or two. This gets better, Ebay takes a stance against sellers even when they can provide legimate delivery confirmation numbers for a product sold. Wait this gets even better, people are actually filing claims for products and not returning the products to get credits on their credit cards. Last time I checked if I returned something at Kmart, didnt you have to return the product first to get a credit or your money back?? No wonder many of the smaller sellers that made Ebay get its start are leaving the site, which brings us to the crafters, the small designers, the wood sign guy, the small retailer who sells his fishing gear, the inventors, the entrepenuers, the fabric stores, the soapmakers ect. If we want to create new jobs, there is a nitch for the small business starting out getting their products on the market. We used Ebay as a place to gather scent reviews on new products and gave away samples for penny just to launch this company. Let me tell you more about Bonanzle. It is free for crafters, artisians, vintage sellers, collectors, ect. To get this started, the booth owners marketed the company to social networking sites, bought products from each other to establish ratings and trust issues, established a network of favorite shops, handpicked their favorite items and more. It was developed by a software genious who is 28 years old and designed video games until taking a full year off to create this site, who says that good old fsshioned entrepenuerism is dead in America? We sure dont think so at Bonanzle. As a seller, we have daily contact with the owners, we have input into the features, we have input into what tools we need to be successful.We congratulate Bill Harding for being insightful and intutitive to bring us such a great site to sell and showcase our products. If you bring your ebay items and don’t take out the ebay in your listings, you will get a memo from about a hundred or more members that your ebay is showing! Many of us use other sites to sell our products, but so far, with Bonanzle being easy to use and easy to shop, I will keep selling and try to make as much money as I can for Bill Harding since he only charges me one final fee and its like a dollar. Who can beat that especially when it costs me more than the cost of the product on Ebay to sell my jams, jellies, candy, baked goods and gourmet candles? Why would I keep taking a bath on fees when I can sell for practically free.

  13. Several people I know (and respect, who’ve been right before) predict one thing: within 5 years, EBay will either shut down or completely change their business model to be open only to larger sellers/businesses.

  14. Keith Mcglew

    The main problem with eBay is its greed. The whole system is weighted in favour of both eBay & Paypal, to the detriment of its customers. As a seller on eBay you are at the mercy of a company that only wants to protect its revenue. It acts as Judge & Jury in disputes, and weasels its way around the legal framework in countries where it operates. eBay is a bully, it is incompetent, and allows its platform to be utilised at the detriment of law abiding honest citizens. Where in the world would a person be allowed to make libelous comments about another person, even when a transaction has not taken place, and get away with it, only on eBay’s feedback system thats where.

    For years it was content to fill its bank accounts with fee’s from counterfeit goods sold on its platform, in fact you should say it was complicit in the distribution of counterfeit goods around the globe. The main perpetrators of these crimes were and are the so called “power sellers” of eBay, the protected species that eBay loves and cherishes at the cost to ordinary small traders. Why? because of the fee’s they get from “power sellers”.

    Even today eBay has been allowed to slant its trading platform in favour of business’s and its “power sellers”, they give better coverage and profile to products sold by these two protected elements, who bears the brunt of this, the dear old small person. Executives & employees of eBay all lie, and could not give a damn about anyone outside the company, its a flawed and corrupt organisation that has been allowed to prosper with the help of the US government.

  15. I think that should be a great idea to change famous name Ebay with PAYPAL.however,when Ebay fall I that that should be a matter,.Paypal is a diamond of the Internet community,Paypal has almost the same name as “dollar does in the offline world”so I think no matter how badly fall ebay will ,as long paypal is the Jewel of internet commerce.,the presence of ebay I think no longer needed

  16. Hein Bloed

    Whats it going to take to fix gigaoms rss-feed?

    I don’t want to be fed with articles I’ve already read.

    Please fix – otherwise I’ll have to unsubscribe in order to keep sane.


    • @Hein Bloed

      Actually it might be a problem with your RSS reader. I am not aware of this problem with anyone else and we checked as well. There are some readers that pull the feed repeatedly. Let us know the exact nature of your problem and what RSS reader are you using.

  17. What surprises me is how long its taken competition to take them on. eBay and Paypal offer commodity services to be honest but it’s such a free-for-all that sellers OFTEN go bankrupt from the downward price pressure auctions create which results in ridiculous same category price competition. Once you subtract the fees ebay and paypal charge on a transaction there is often no margin left and it’s MUCH cheaper for a seller to set up their own site and generate their own traffic. eBay is effectively a ‘shopping mall’ with it’s own CC merchant facility, that’s pretty easy to replicate!

  18. Everyone says they are pushing away from the auction model but frankly they need to be pushing towards it more.

    For starters, something I think would be a huge improvement, the auctions should auto extend as long as bidding is being done. My primary frustration with ebay is being “sniped”. Basically, the auction should ad say, 5-10 minutes to the end time if a bid is placed within 5-10 minutes of ending.

    Yeah you can argue that you’re supposed to “bid your highest bid” but people just don’t think that way when they thing auctions. Also in the “heat of the moment” you tend to find you’re willing to pay a little bit more for an item.

  19. prior ebay seller

    eBay was quite a lovely phenomenon when honest sellers sold to honest buyers, selling their personal but unneeded treasures. However, like any good thing, the dishonest sellers and dishonesst buyers spoiled it all. I purchased and sold over 500 items on eBay and got scammed once. As a seller, it was easy to buy a little digital scale, and use the automated features of eBay, PayPal, and UPS, which all worked together seamlessly, with automated messages, delivery verifications, etc. It also worked when dishonest sellers received honest criticism about their nefarious ways of fraudulent commerce. But now, I really don’t know if eBay can survive when it trys to be a competitor to Amazon, etc. I liked it better when it was an online flea market, not an online BigLots.

  20. soapers

    What is the forward looking view on acquired sites like Stub Hub? The founders sold the company to eBay, but did not sign a non compete – and have started a competitor in UK! Another ‘doh’ for management!

  21. Tony P.

    A headline from today:

    Rare Superman comic sells for $317,200

    Nope, not sold on ebay. No way would anyone put something like that up for auction on ebay. Not on the ebay of today. Not Mr. Donahoe’s ebay. No sir!

    Ask yourself why that is. (no ebay user need ask, naturally, they know the answer).

    Is it because auctions are “maturing”; perhaps fallen out of favor? The fact that that comic fetched over $300K, contradicts both of those premises.

    Ebay’s viability as an auction vehicle is at an all-time low. There’s your answer. But if it “sucks” at auctions, and auctions themselves don’t apparently “suck”, why is the World’s Auction Marketplace in such straits?

    Dumb question? Everyone knows that ebay has been transforming itself. OK, fair enough. BUT.. have we settled that question about auctions “maturing”? That’s one point.

    Point Two: would you willing transform a business that could conduct $300K deals, into one that conducts $$UNKNOWN$$ deals?

  22. sfmitch

    I use eBay / Paypal as a last resort. Using either is pretty miserable. Compare user experience with eBay/Paypal with Amazon. Holy crap – it may not be possible to be any further apart.

    I have done a fair amount of biz on eBay (270+ feedbacks) but don’t like using eBay/Paypal, here’s why:

    1. scammers, scammers, scammers. Dealing with all the people trying to rip you off stinks.
    2. unpredictable delivery times – for the old eBay (used things are things that you couldn’t find anywhere else) not knowing when things were coming was fine. Trying to get something you need / want is quite frustrating. Again, compare purchasing on Amazon vs eBay (especially if you have Amazon Prime).
    3. customer service = worst service in the entire world. Have you ever tried dealing with Paypal? So frustrating – I don’t have the words.
    4. it’s annoying – the user experience is subpar. finding what you want and blocking out all the stuff you don’t is a drag
    5. auctions are a niche – a large niche but there is no reason that eBay should be able to grow, grow, grow. If eBay stayed true to auctions and did the best job they could, they would make money, users would happy and life would be grand. the need to deliver ever increasing returns has led mgmt to keep changing things up which has led to confusion and customer/vendor alienation.

    Did I mention how bad their customer service is. eBay – Bah!


  24. Yep, good points on ebay predicting 3 years out quite happily, but no ideas on the next year or so, and analysts’ concerns with actual execution (with that team?). You’d think that good management could have grown the company while transforming it, instead they’ve managed to build up a negative branding to die for. Folks now, far from being loyal, want ebay to fail – takes real genius to create that.
    PAYPAL is the one bright spot in Ebay’s self generated panoply of disasters, but I’m pretty sure PAYPAL has done so well because Donahoe and company have been focussing on ruining Ebay – that jobs pretty well completed now, so onto other areas! Great! The black thumbs have arrived – I suspect we’ll see a ton of well-meant but misguided decisions on PAYPAL and it’ll join EBAY in its dive. No number of colorful PowerPoint ballons will be able to keep it up.

    So sad that EBAY nows sees itself as a great big tacky Liquidation World when it was so close to being a money spinning world-wide Christies or Sothebys. What limited little world did the management come from?

  25. As to eBay as a marketplace…. One minute they were the worlds biggest online marketplace. The next minute, the new CEO wanted to turn the site into Amazon Lite…results….buyers left the site in droves, sales declined, and sellers began to abandon the marketplace. Now the same CEO wants to change course yet again, and become a liquidator haven, remaining sellers are starting to think the exit door is looking better and better.

    As to eBay growth. Last quarter, the CEO stated that with the economy in a tailspin it would not be possible to make any future looking projections…results….. eBay stocks have recently dipped to the $9.00 range. Now, to try and sell his latest reincarnation plan, Donahoe can suddenly can project 3 years ahead, despite the fact that the economy continues to be in a deep recession.

    As to eBay users; Prior to announceing drastic changes in February 09, CEO Donahoe proclaimed that buyers and sellers that had voiced unhappiness over chaange at eBay were nothing but ‘noise’. This statement which Mr Donahoe has yet to publicly apologize for, still hangs in the air as a sign of how the companies leadership has become completely disconnected form eBay’s most important resource…it’s users.

    If eBay wants to have any chance of returning to it’s former glory, the company needs to sweep this CEO and most of his current team out the door.

    eBay has squandered goodwill among its members as it has managed to destroy the sense of community which was the foundation of eBay’s past success.

    Until a management team is in place that works to restore the shattered sense of community, any predictions of restoring eBay to previous levels of volume and success are delusional at best.

    When a company that was once a household word across the country alienates it’s users to the degree that current management has achieved, and continues a course of distancing themselves from their core users, it becomes obvious that company management is clueless and needs to be replaced.

    Under John Donahoe, eBay will continue to loose marketshare, while Amazon will grow and become the sector leader and a host of smaller venues gain stronger positions.

  26. Ebay’s success came from the little people…buying, selling and becoming a community. Buyers had their favorite sellers, sellers of worth had a following of buyers….and so the cycle of buying and selling goes. Back in 2004 they began to pare down the strength of auctions. First with the deletion of “Going, Going, Gone” and then the take over of feature plus auctions that single handedly dominated some categories, electronics, art, etc. Ebay at that point had begun to move away from auctions – undoubtedly Meg’s idea. The idea of Ebay Express was a stab at fixed price listings but was so poorly executed it was bound to fail. 2008, enter John Donahoe – Meg’s handgroomed replacement who began to put into place a half-baked plan that was probably cooked up by the two of them. Since then, Donahoe set buyers against sellers with his feedback and DSR innovations. He upset the balance of buyer/seller and, with his countless outrageous policies he made Ebay a hostile place for small sellers. Thousands of small sellers left…leaving their following unable to find what they were accustomed to buying on Ebay. Sellers who left never went back to buy either….then the disastrous 4th quarter holiday season report last year where Ebay declined 16 percent. Right then….John Donahoe and his team should have been fired and a team experienced in online sales AND customer satisfaction should have been brought in to replace them. At this point Donahoe is outright fishing…first he says they’re going to be the world’s biggest retailer then at his bright and shiny Analysts Day he claims he is not a retailer. Anyone who ate that pab wasn’t worthy of their job title. Clearly the wrong man is in the wrong job and a multi-billion dollar company and its customers (the SELLERS who pay the bills) are suffering!