The past week was one of the best eBay has seen in a long time. AT&T said it will soon allow VoIP calls over its 3G network, a move that will boost Skype’s allure as eBay moves to sell it. And a federal appeals court dismissed patent claims against the voice, video and messaging application. But more importantly, evidence is emerging that the long, awkward and painful turnaround of the marketplace business is really underway.
Sales through some 3,000 eBay merchants rose 4.6 percent in August and 5.1 percent in September, according to ChannelAdvisor, an e-commerce services company that tracks data from its clients (and that eBay holds a minority stake in). That compared to sales declines in each of the the previous 12 months. That reversal of fortunes helped prompt Kaufman Brothers analyst Aaron Kessler to upgrade eBay to buy from hold and to lift his price target to $29 a share from $22. (Shares of eBay closed Friday at $24.42, up 7.6 percent on the week.) That comes on the heels of two other upgrades, from UBS and Bernstein Research, respectively, as well as a revised price target from Barclays.
In his report, Kessler noted that:
The ChannelAdvisor data is indicating a low single-digit increase in U.S. same store sales for 3Q – we would note that over the last three quarters the ChannelAdvisor data has shown a strong correlation and, on average, tracked 2 percent above the reported gross merchandise value data.
Consumers may finally be warming up to the new eBay. The company’s meteoric rise as an auction-oriented e-commerce site turned it into a cultural phenomenon, but cultural phenomenons can fade away as quickly as they emerge. And while CEO John Donahoe often said that he didn’t see Amazon as a chief competitor to eBay, the fact is that many bargain hunters were, in the long run, looking for the kind of seamless, intuitive interface and security they could easily find through Amazon and its merchants.
Donahoe’s solution was a top-to-bottom renovation of the marketplace, redesigning pages and beefing up search, downplaying auctions in favor of buy-it-now sales, and rewarding top sellers while driving away smaller ones. For a couple of years, the result was a messy muddle. Consumers lost their sense of what eBay was, exactly, and shopped elsewhere. Many alienated sellers protested angrily, creating a protracted PR nightmare for the company.
But like many messy renovations, the final result is often worth the wait. The new eBay offers a compelling alternative to any e-commerce site out there, including Amazon. Free shipping, easy access to trusted merchants, a broad inventory and an intuitive and useful search interface are starting to lure back not just consumers, as ChannelAdvisor’s data shows, but also investors. eBay’s stock is up 74 percent this year, compared with a 35 percent rise in the Nasdaq.
eBay still has a long way to go. Skype is still facing a daunting lawsuit from its founders, one that could complicate eBay’s plans to sell it off. PayPal will face more competition from Google and, reportedly, Facebook and Apple. And its marketplace business needs to nurture the recovery that has taken root. During its troubled years, many people (including me) knocked the company and questioned its prospects. But Donahoe’s turnaround looks to be working.
Gone is the fun and freewheeling arcade of auction-mania that drove eBay’s success in its early years. What’s left is something blander — but more importantly, something that’s beginning to resonate with online shoppers.