eBay's Crossroads: Turn Around or Break Up


eBay CEO John Donahoe

The thing about corporate turnarounds is that they’re supposed to turn a company around. As in 180 degrees. They’re not supposed to stop halfway and let the company drift sideways. But something like that is happening to eBay: Its long, slow turnaround is, well, turning flat.

For the past couple of years, the online marketplace and payments company has been engineering a return to growth under the guidance of CEO John Donahoe, who took over from Meg Whitman in March of 2008. Donahoe embarked upon an aggressive and risky effort to transition eBay from an auction house for garage clutter to a marketplace centered on larger sellers and fixed-price goods like bulk inventory.

At first, the makeover seemed to hurt eBay’s growth. But last summer, after reporting second-quarter earnings, investors began to believe in the turnaround, sending the stock rallying. But since then eBay’s stock has stalled, rising just 0.3 percent, while the Nasdaq has gained 14.6 percent and shares of Amazon have surged 30.3 percent. Back in January, there were signs that the turnaround was in jeopardy, and further evidence implies that is in fact the case.

According to data from ChannelAdvisor, an online retail services company, same-store sales at eBay declined 4 percent in May from a year earlier, the first annual decline for eBay since last summer. In a post discussing the data ChannelAdvisor CEO Scott Wingo tied the decline to yet another round of changes last March to the way items are listed and priced.

Early on, sellers were reporting that the listing changes in particular were hurting their sales. Even worse, according to Wingo, the new search results appear to be confusing buyers — for some reason (Wingo himself says he’s baffled) serving up many more auctioned items rather than fixed-price ones. Which is sort of the opposite of what Donahoe was going for.

In Donahoe’s defense, Whitman steered eBay from one of the most dynamic and successful startups in the history of Silicon Valley into a fragmented, sclerotic tech company. Her handling of the Skype deal left eBay paying too much for a company that had little in common with its other businesses, and didn’t even buy control of its P2P technology. After buying StumbleUpon in 2007, eBay smothered the innovative startup under its wings. As Om noted recently, StumbleUpon has thrived since eBay spun it off.

I’ve long wondered whether eBay wouldn’t be better off broken up into pieces. If the turnaround continues to fizzle out, I suspect investors will lose patience and agree. Even some who are bullish on the stock because it’s undervalued acknowledge that the company is worth more than the sum of its parts.

If so, why not sell off each piece to companies that can offer more compatibility than the tepid synergy that eBay’s fragmented empire has tried to create? eBay’s marketplace with a global reach would be a tight fit with another retail giant. It’s hard to imagine Amazon (s AMZN) making a bid, but the growing Japanese e-tailer Rakuten has been on a buying spree, most recently picking up Buy.com.

Similarly, PayPal might better achieve the ambitions — outlined by Donahoe at the D8 conference this month — of becoming a payment provider for digital content if the subsidiary were bought by a company that was just starting to move into selling and streaming content like music. A company like, say, Google (s GOOG), which right now strikes me as a better partner for PayPal than eBay’s stagnant bulk inventory marketplace.

Whatever value remains in PayPal and other properties like StubHub will continue to be weighted down by the eBay marketplace business — a business that is, according to ThinkEquity analyst Aaron Kessler, continuing to lose market share. If Donahoe can’t jump-start the recovery of the marketplace soon, he may be hearing more calls for him to unlock the company’s hidden value by breaking it up.

Image courtesy of Wikimedia Commons.



Perfect example of the Peter Principle. You keep growing and climbing the ladder of success until you finally reach your level of incompetency.
There’s an old saying “keep it simple stupid”


Several years ago, I caught a computer virus whilst working all hours on shifts known to man, and suddenly they allowed and unblemished reputation to be tarnished by idiots.

Six years on, I’ve used ebay twice.
We sell everywhere else, quite simply if they don’t take care of my interests, I will not go back there again, unless I cannot get it from elsewhere.

Ebay used to be cutting edge, now it is blunt, boring and difficult to use.

Get too big, stop caring, and just watch what happens.
There are one or two others that are used by everyone that need a rethink too.


After 10 years on e-bay and over 10 000 transactions I’ve pretty much had enough of this site. The people running it must not ever use e-bay themselves. They seem to just constantly make changes for the sake of making changes. I just noticed that on the non-US sites my entire item buying history is now longer private after 90 days but the items are listed since 2007.

The numbers as a seller don’t pay off these days and I now tend to find more interesting stuff to buy elsewhere. If I want to buy a generic new item I’ll buy it in a shop on my way home from work.

Josh Miller

Something else that MIGHT help coheres buyers back a bit. If a bid is made that creates a new winning bidder in the last 5 minutes of an auction, the auction should automatically extend by 15 minutes (or so). I know you’re “supposed to bid what you’re willing to pay” but the human mind doesn’t work like that and the competition of bidding pretty much drives everyone to want to pay more. Also this would more closely simulate a “real life” style auction.

I can’t tell you how frustrated I get when I have lost an auction literally in the last 30 seconds to some jackass using a computer program to increment the price by a few bucks over and over during the last 30 seconds. This is part of why the idea of bidding “just a bit more” is so enticing, because most people go in and will bid just a few dollars over the starting bid instead of their maximum desired bid.


I’d like to know the same thing, Philip.
Actually, I put it through twice already, and I don’t see it even once!

Philip Cohen

So, what happened to Terri’s quite considered post that I received email notification of, but does not yet appear here?

Tony P.

“We had to create a vision of the future so people could let go of a very successful past.” -John Donahoe


Sometimes a vision is nothing more than wishful thinking. Unfortunately, in this case, the “very successful past” has no current facsimile.

Success killed? CHECK
Vision accomplished? NO

Mr. Donahoe managed to get one out of two correct. As a ballplayer, he’d lead the league in batting averages; as a CEO, he should be benched or traded to BP.

Philip Cohen


“We had to create a vision of the future so people could let go of a very successful past.”—John Donahoe.

This statement is only one of the classics to have emanated from the trachea of this headless turkey. It, and many other of his classic quotes, will undoubtedly be included in future MBA case studies on how not to run any business.

Actually, it’s frightening to think that MBA students even have to be taught such principles, to NOT “let go of a successful past”. Actually, if it was not such a ludicrous statement it would be funny. Not only that, but we are still get any clear understanding of this turkey’s “vision of the future”.

eBay/PayPal/Donahoe: Dead Men Walking


I sure hope that Donahoe knows what the hell he’s doing. Better CEO’s than him have lost their companies. Pan Am airline(1920-1991)is one example lol. Continental airline the same way, lol. One day they are riding high on the hog and next day they are out of business.


John Donahoe’s plan is a failure.
He planned to make eBay Amazon.
eBay could never be Amazon. Amazon is too pro-member. eBay is too pro-self-interest.
While eBay tried to follow several things Amazon did, confusing pricing structure, Buyer protection, sellers unable to leave feedback, eBay forgot one thing: Amazon protects sellers from bad buyers, eBay protects themselves from everyone.

eBay was working. Sure, it was a greedy corporation, run by a self-absorbed prima donna; but, for most people, it worked. Now, eBay has in fact made a 180 degree turn-around. But, when you need only some tweaking, 180 degrees is probably 170 degrees too far.

Instead of fixing the problems, eBay has made the problems far worse. Sellers were the problem every buyer had to fear. Now, buyers are the problem every seller must fear. A simple tweaking of the feedback system could have maybe not cured problems, but, made most go away.

eBay has now decided they don’t want me as a seller. I have never listed more than 30 items in any given month. Never had an eBay bill for more than $30 in more than 3 months in the entire year. eBay, does, however like having me as a buyer. I have purchased more items off eBay than most. The problem is, however, eBay forgot that by slapping me in the face as a puny worthless seller, that I the buyer, got slapped in the face as well. So, WHY would I who got pushed out as an unwanted seller, want to help continue funding that same organization? Hint: I DON’T; and will not.

And, WHY would I go to eBay to buy from a mega consumer, when I can drive 5 minutes and have my item in hand, no hassles of dealing with some faceless person, should something go wrong; no s/h fees, no return postage, if necessary.
No, eBay was the place to go to, to get items I might not find locally. The feedback system, while not perfect allowed me to know with a 99% degree of accuracy who to trust and who not to trust. Now, I have no clue.

I’m not returning to eBay. Until eBay apologizes, and quits being jack-asses. Until then, I am continuing to boycott eBay. As a seller. And, as a buyer.


eBay was once a place where I listed an item to sell.. and it had multiple bids and people found it by searching for it. Now the buyer are treated like idiots by being forced to use Best Match.

I’ve been buying and selling on eBay since 1998.. I am very unhappy with their “turn around”.



Many eBay sellers are struggling to survive. Blame it on the recession or blame it on eBay or both?

Sellers scratch their collective heads and look toward eBay’s upper management with the question, “What were they thinking?”


Headless turkeys are incapable of thinking; all they can do is run around in circles—until the oven reaches the correct temperature …


Calling for PayPal to be split-off from the marketplaces is like calling for IE to be split-off from the operating system.

The ONLY reason PayPal is as large as it is, and is used as often as it is, is because of the Marketplace “halo-effect”.

Cutting that connection will mean that PayPal would have to spend huge sums (as Visa and MC do) to compete as a viable stand-alone payment option.

Add those costs in and PayPal becomes unprofitable.

An unprofitable Paypal is worse than a combined, less-profitable but still hugely proftiable, eBay/PayPal.

Look at it this way:

Would you rather have a slower-growing PayPal/eBay combination with fantastic margins?


Would you rather have a much faster growing PayPal subsidiary with zero profits (or losses)?


Draft Media Release

“It is with very great sadness that eBay’s Chief Headless Turkey, John Donahoe (aka “Peter Principle”—among many other derogatory terms), announces the probable demise of eBay’s most ugly daughter, PayPal. PayPal is about to be stricken by particularly virulent strains of Visa+CyberSource and Mastercard open platform, aggravated by an insurmountable lack of direct financial institutions participation and a great deal of PayPal user/merchant dissatisfaction, particularly with respect to PayPal’s grossly unfair, “all responsibility avoiding” UA, primitive risk management processes, and totally unprofessional, buyer-biased, fraud-facilitating, transactions mediation.

“PayPal’s health may therefore be expected to deteriorate and, if ultimately not completely incapacitated, will most likely be eventually confined to its mandatory offering on what little there will be by then left of the Donahoe-devastated eBay marketplaces. There is no cure for this condition, and the “eBafia Don” is particularly saddened by the inevitable presumption that it is unlikely that PayPal will be able to continue to underpin eBay’s sagging bottom line in the future.”

Also, in Australia, unlike all other payments processors operating here, PayPal has declined to sign up to the payments processors’ “Code of Conduct”. Users beware!

A detailed examination of and prognosis for PayPal (including a further link to the “PayPal Nightmare Tour”) at

Beth Donahue

More likely more calls and much shriller calling for Donahoe to go…he’s been totally unsuccessful at anything except killing the most vibrant marketplace devised. WHAT credientials did he have to run the company? NONE. And Pierre should be ashamed. I’m 14 years an eBay buyer and seller…no longer investing any time there. Not for either buying or selling…and i”m using Google Checkout on my website.


I hate ebay for their lousy service (no offense ,but have faced it) and IMO as you mentioned above Google is one of the best partners that Paypal could have to survive n thrive in such a competitive market.


EBay is an example of how valuation, marketcap, and stock price can ruin a perfectly good business model. For any successful company there’s always a point where investor’s priorities become at odds with long term viability.

Mr. Kelleher is right in suggesting a breakup my be in the best interest of eBay though at this point it would probably be more akin to a salvage operation. One could only hope that one of the remaining pieces would be an eBay returned to its online auction roots: smaller, wiser, and better positioned for the future (or at least until people no longer have stuff they no longer want.)


GIGAOM: What a shame it is that you have a problem publishing facts.

Tom Gremm

So what are the facts? Please provide your sources. I’m very interested.

Shipwreck Ebay

Donahoe has put the final stake in Ebays heart,It only took the rest of the world 2 years to see what every ebayer knew in March of 2008!Disruptive innovation? BS, Disruptive inovation was a dream in a mind or a pathetic idiot!Ebay is over!!!


Ebay is the ugliest failure in American tech industry. They had everything going for them. They kicked victory that was offered to them in a platter and are struggling hard to snatch defeat. At first, they started with the perfect formula to become no. 1 in the world. They should have just continued with it, with some minor fine-tuning here and there. Look at Craiglist. That is exactly what they did: stuck to their original formula and they are going as strong as ever. There is no drop in their usage despite all the new companies starting and dying in Silicon Valley.

IMO, eBay is preventing Paypal from reaching its full potential. With the increase in smartphone sales and the world of mobile apps, Paypal could have been the default payment gateway on all phones. It could have been the no. 1 payment app by now. But that has not happened. The fault lies squarely with eBay. Meanwhile, the window of opportunity for Paypal to succeed on phones is fast fading.

What a waste!

Josh Miller

Yeah, eBay sucks, I pretty much never go there anymore. I think the problem is that the market for people interested in “Garage sale auctions” is not the same as the market for “bulk knockoff crap from China”. They really should have just left ebay as primarily an auction site that everyone knew and put all of the bulk junk off on it’s own website so it can be more easily avoided.

Basically, what I’m saying is, I go to eBay to get a deal on a used item, not to see 1000 overpriced Buy it Now auctions for junk.

Patrice Anderson Smith

Whatever happens to Ebay in the months ahead, it will change. Definitely not the turnaround Donahoe wants but it will change or it will die! Simple as that. For over 2 1/2 years he has been promising a turnaround and a big change….that is NOT happening. Ebay has stagnated from quarterly report to quarterly report and now depends heavily on Paypal’s success (which also is not forever). At this point about the only hope Ebay has is to oust present management and his team and hire people experienced in online sales and what it takes to make those sales (the latter being the most important). Donahoe relies on Ebay’s name and since that isn’t working he probably doesn’t know which way to turn at this point. The result is nothingness…a stagnation that will kill. If it were my site I would immediately divide it like Overstock…with the diamond sellers on one side selling retail and the small sellers on the other side selling auctions and BIN’s. Its Ebay’s only hope and that hope is fading as days go by. Sellers are leaving and other sides ARE getting a foothold – whether Ebay wants to admit that or not! Ebay needs to bring community and fun back to the auction side. They need to let up on some of those draconian policies that are chasing sellers away. Take the power to destroy sellers out of buyers’ hands and make that an administrative decision! Get rid of the childish DSR’s and go back to relying on feedback and that percentage figure of negs and neutrals. Ebay needs to get their hands dirty – get into the trenches and work with buyers and sellers. Time is gone where they could simply sit back and rack in the money….they need to realize this.

12 year ex-ebay seller

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