eBay Analyst Day: In a Nutshell

Posted on March 12, 2009. Filed under: eBay | Tags: , , |

I have much to say about the information released yesterday (ebay Analyst Day) but I thought I would take a minute to “boil it down” to its simplest form.  Doing so helps me to get a much clearer picture since so much was said yesterday, much of it being “fluff” in my opinion.

In a nutshell, eBay Inc is predicting great things for the future of their company based primarily on growth from certain segments of eBay’s two core areas:

1. PayPal – Merchant Services
2. eBay Marketplace – Classifieds and Advertising

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I am a little fuzzy as to the specific reasons eBay is predicting such amazing growth in the merchant services area other than “it’s a big market segment that we can get a good piece of” argument (it wasn’t real clear to me from the presentation yesterday) so I can’t comment much either way.

Regarding the growth of eBay classifieds and advertising formats, it is important to note two things: (1) growth in these two areas is dependent upon maintaining online traffic to eBay as a result of the traditional formats such as auctions and fixed price; otherwise it would be difficult to convince anyone to spend much money to purchase an eBay classified ad or online advertisements linking off eBay if there are fewer and fewer sets of eyes looking at the eBay site and (2) unlike traditional eBay marketplace formats which require sellers to offer PayPal, the classified ads and advertising formats do not; thus, there is not the synergy between PayPal and eBay Marketplace for those two type of formats which, coincidentally, are the formats eBay Inc predicts will experience growth between 2008 and 2011.  The PayPal penetration possibilities for these two eBay Marketplace formats is 0% or something close to it. 

So, in order to drink the eBay Kool Aid that was offered yesterday, one would have to assume at least 3 major things:

1. PayPal Merchant services are going to experience amazing growth just as eBay claims.
2. Online traffic to the eBay Marketplace site is going to remain constant or increase. (To assume this, one must also assume that selection on eBay as provided by the sellers will not further diminish so that there will be something of interest for buyers to purchase so that they will continue to return.  Selection is NOT the same thing as number of listings).  Therefore, eBay must attract new buyers and/or convince existing buyers to visit more often and spend more money.
3. eBay Classifieds and Advertisements Revenue will grow just as eBay claims and these formats will not overly cannibalize the sales from the other formats (auction and fixed price).

I would love to hear your opinion about what was said yesterday and whether you think eBay can accomplish what they claim.

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4 Responses to “eBay Analyst Day: In a Nutshell”

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You know what lives in a nutshell don’t you?

You just stuck your finger on all three major flaws in the rainbow picture.

It would cost eBay 2x JD annual salary to can him. Cheap at the price.

Oh, Henrietta you always make me smile 🙂

It sounds to me like they might be positioning to sell off segments of eBay.The conflict of interest with eBay owning PayPal and double dipping on fees is adding fuel to the fire for eBay sellers.The innate bias inherent in this arrangement will be challenged by all other non-eBay merchants to the point where the CEO will have to choose one or the other. That being said, eBay and PayPal might have made a “death blow” mistake. The bag ladies(LV and Coach bags)are pissed.The new policies, starting April 9th, advise all buyers who receive counterfit bags to destroy them and they will be refunded by PayPal.Who is doing the judging on which ones are fake; the buyer? Please expound on this nightmare.

Forecasting 20% annual Paypal growth in the midst of this recession and crumbling of eBay’s GMV is a bit optimistic. Donahoe is acting like a politician here.

He seems motivated to sell off skype. I could care less one way or the other about skype because I don’t use it. I care about money in my pocket.

Bottom line on EBAY:
They’re leaving their core competancy. In business, this is the kiss of death. Look at their complicated business model… classifieds, external links, diamond sellers, regular sellers, trusted sellers, a disjointed search that will get worse…

I appreciate Donahoe selling the sizzle, but is there any substance here?


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