Donahoe comes out SWINGING - big changes afoot at eBay

It's been a somewhat quiet Q4 in eBay land.  At the Q3 results, eBay didn't really talk about 08 at all, but focused on Q3 and re-iterated Q4 guidance.

Then in late November, eBay's CFO Bob Swan, spoke at CSFB and said a couple of things that were new and potentially telegraphing some changes:

• Talked a good bit about lower-margin businesses and how they are growing faster and that's "ok".
• For the first time, EVER in 10yrs I've followed the company, they had a chart that wasn't up and to the right. The user growth chart you see here: (page 11 of the preso if you don't believe me)

• Bob talked about 08 "headwinds" (slide 33), among which are increased competition (Amazon3P) and the need to do more/better/faster.

Then on Dec 2 without any fanfare, eBay quietly replaced long-time CMO Gary Briggs with Mike Linton (previously of BestBuy)

Finally, John Donahoe spoke today at the UBS internet conference in NYC.  I was able to listen in (although my audio was terrible, not sure if it was the event or my connection so major caveat here that I may have misheard some things) and I have to tell you, I'm still in shock from some of the things John not only hinted out, but downright confirmed are coming in 08.  Here are the highlights:

About 12-18 mos ago became clear to JD that it was time to evolve, hadn’t kept up with competition on Internet

• First focus on improving buyer experience (“BE”).  Huge historical growth driven by business model that just ‘caught fire’
  • Bunch of stuff here we've all heard before, shipping/feedback/ease of use/T+S
  • DSRs, advantage good/punish bad sellers 
  • In 2008 we’ll increasingly use this data (gulp)
  • We have 2,000 people in T&S worldwide  (wow)

• Lastly, playing with pricing model
  • High insertion + feature + lower FVF is historically model
  • Appropriate for value + selection in auction format
  • But in fixed price need to rebalance
  • Best formats have lower up-front, higher back-end fees
  • In last three months we’ve studied how to change fees
  • Will rebalance pricing to charge less up front and more on back end.  Take rate neutral though.

Ok, take a second and re-reated that last part about pricing.  There's been speculation with the testing eBay is doing they may look at this, but this is the first and hardest statement I've ever heard out of them.  Later in the Q+A:

Q: "When will we see new pricing"?

A: Q108 we’ll be talking about our plans here

I suspect we'll hear what's coming either at the eBay ecommerce forum (their venue for largest sellers that is Jan 28) or at the Q4 earnings call, scheduled for Jan 23.

One thing is certain, more is going to be changing on eBay in the past and I have to admit it's refreshing to see eBay a) admitting there are challenges and b) doing something about them.  Donahoe is starting to act like someone taking the wheel of the eBay bus and steering it in some new directions.

In talking to some friends on Wall St. the new pricing has people pretty spooked. If you go from little/no listing fee, what's that do to eBays margins and cash flow.  The changes maybe 'take rate neutral', but what will they do to GMV.   It's going to be a risky bet, but given the competitive pressures from Amazon right now, I believe it's the right bet to make and eBay may have some short-term turbulence, but long-term this is the best way to stay competitive.

eBay Strategies readers, what do you think?

Comments

[momemedia]

well..having lower insertion or no insertion fees seems to be good on the surface...we'll see..i'm sure it will bring in a boat load of keyword spammers onto the site...and the same items will be listed 500 ways...i have been considering going to amazon for some time now...and will wait until mid 08 to make the switch based on what ebay decides to do...and after seeing the aftermath in my category....

[Leonard Martin]

This is not relevant to the subject of eBay, but it is to the subject of readability of your site:

PLEASE GET RID OF THE GRAY TEXT ON YELLOW BACKGROUND.
Please consult any document design expert. Gray on yellow is very low contrast and therefore hard to read. Lots of old farts like myself (and there are LOTS of old farts of all kinds, these days) have trouble reading small print. This trouble is made impossible when it has such low contrast as this. I will now flee your site, though it's on a subject I'm deeply interested in, because it's giving me a headache.

Seriously, do you really want to throw away a significant percentage of this large demographic?

Cordially,
Leonard

[Bill]

Having the cost based on the FVF only is the best thing that eBay can do. It will get rid of all of the sham people that are sitting there at .01 and charging an arm, a leg and a left lung for shipping and circumventing the fvf as it is now IF they do it on the whole price including shipping and handling.
It will take some adjustment but to the sellers strategies but in the long run it will be a win - win for everyone involved. eBay needs to do something very drastic in order to maintain there position in the e-commerce world. Their market share is slowly but surely being nipped away at by Amazon and other on-line mediums. This is the only way they can consolidate their market share and remain the top dog.

Bill

[Steve Wyman]

Hi

If you follow your link an listen to the recorded version I'm getting a crystal clear sound I'm on broadband but under 1MB

With respect to the re-pricing of insertion over FVF He's SPECIFICALLY talking about doing it to Fixed priced buy it now not to auctions or shops.

I'd like to see lower insertion as would buyers as that allow me to offer more FREE P&P which I know my customers love.

Some of my competitor do auctions starting at 0.01 and charger high P&P to get around the high cost of insertion fees here in the Uk. I think that lessens the buyer experience and make people unhappy. You can see that on the sellers feedback 2.0 although they still out sell me 10 to 1 :-)

So lower insertion compensated by higher FVF on buy it now only I'm in favor. Leave Auctions shops and auctions with buy it now alone.

regards

Steve Wyman
www.theipodshop.co.uk

[tj]

If you take a look at eBay UK’s announcements today, you will see they are about to start all these “seller” enhancements….....only thing is someone forgot to tell them it was to help SELLERS not BUYERS….....everything Again is AGAINST the seller…....eBay will never learn; a complete pack of idiots.
SELLERS PAY YOU…....Buyers pay Sellers…....Never forget this simple fact

[Beyond the Treeline]

Uh, well, I guess it's hats off to JD for once again revealing that eBay is poised (yet again) to screw up business plans across the table ... The longer eBay waits to unveil the new "hocus-pocus", the harder it will be to integrate into one's '08 strategy.

It may be refreshing to see eBay coming around when it comes to change, however, there is one constant that hasn't changed: they have the speed of a tortise.

On the other hand, it can also be seen as yet another annoyance; another of eBay's constants is the inability to leave things alone. Everything is in spurts from this department or that -- but never all at once. And never quiets down. Not even during Q4's (never, ever have they left Q alone; their version of "quiet" is not anyone's version of "quiet".)

[John]

Seems that a higher back end fee will penalize those sellers with better sell through rates and be an advantage to those with lower sell throughs. Sounds to me like it'll encourage more products, but at higher starting prices or at fixed prices, making the experience for buyers worse. More crap to sort through, all at high prices. As a seller with a 95% sell through and $100 ASP, my higher back end fees will be subsiding all that extra junk that people will decide to post because there's a lower up front fee.

It would be nice to think that the changes on the front end and back end charges will balance each other out, making it a wash for me, but I'm expecting it to be a fee increase. I'm a consignment seller and unfortunately if I raise my rates even 1% to compensate for all of my vendors (eBay fees, packing materials, rent, etc.) raising their rates considerably more than 1%, I instantly start losing business.