Is John Donahoe Finally Turning eBay Around?

Is any tech CEO more reviled by his or her own customers than eBay’s John Donahoe? In online forums, sellers seethe about the higher fees and site changes he’s implemented. They write and sign petitions calling for his ouster. Even eBay employees voted him onto Glassdoor.com’s “Naughty List” of CEOs with the highest disapproval ratings.

But while just a few months ago, Donahoe seemed destined to steer the e-commerce giant into irrelevance, a consensus is now starting to emerge that he may instead be turning it around. Investors have driven the stock up 71 percent since it hit a 52-week low on March 9, compared with a 44 percent rise in the Nasdaq. Collins Stewart analyst Sandeep Aggarwal said last week that he sees “many evidences of turnaround” at the company. And the ever-volatile Jim Cramer rebuffed viewer demands to put Donahoe on his gimmicky “CEO Wall of Shame,” saying the stock could rally further.

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Most of Donahoe’s changes are small but significant, in that they go a long way toward safer, easier shopping. For example, Aggarwal estimated that more than half of the items sold on eBay are now available for free shipping, up from less than 10 percent last year. “Free shipping” is important as it’s a phrase that generates higher conversion rates in online ads. eBay’s own search engine now promotes more reliable sellers. Recent fee changes have, by Aggarwal’s count, increased the number of listings beyond those found on Amazon. Perhaps most encouraging: Donahoe has finally come up with a coherent description of the new eBay: It’s not Amazon, or even Overstock.com. It’s an online big-box discounter, like Costco.

Other parts of eBay’s cluttered corporate structure are being addressed as well. Donahoe sold StumbleUpon back to its founders and is mulling the retirement of the Kijiji classified site. Skype is gathering enough momentum to allow for a sale or spinoff at a respectable price.

Strategically, much of these changes make sense, but it’s not clear to what degree they’re resonating, especially with consumers. Quantcast data suggests weekly traffic to eBay continues to erode relative to Amazon’s. And comScore’s data from April, the most recent available, showed a 15 percent year-over-year drop in eBay traffic — although that’s a slight improvement over the 20 percent declines logged in both February and March.

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Even if the changes work, they don’t address what may be the biggest challenge to eBay’s future: Craigslist. Yes, eBay owns a significant stake in Craigslist. But Craigslist’s for-sale listings, which are free to post, still compete with eBay’s fee-based listings. During the last recession, people looking to raise quick cash by selling their stuff turned to eBay. This time, they turn to Craigslist.

If Craigslist wanted to kneecap eBay, it could find a way to make its for-sale listings nationwide, not just locally, and facilitate shipping arrangements. There’s no way eBay’s fee-dependent revenues would be able to compete with free. That would make the challenges John Donahoe faces today look small.

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