Peck swings for the fences...

We have a perfect storm happening from a financial perspective with eBay this week:

• eBay is set to report Q4 next week Wed.
• As mentioned, we are hearing they will announce fee changes concurrently
• Wall St. is looking for them to introduce 08 guidance (all eyes will be on margins as the co has been messaging lower margins+headwinds)
• The big ecommerce forum is around the corner
• Everyone knows they are working on fixing finding
• eBay's stock hit a 52-wk low yesterday when it closed at $28 - it hasn't been this low since early/mid Sept 06 where it saw a low point around $22.  To get lower, you have to go back to early 03.  (Hey it could be worse, the folks at Yahoo! hit a 4yr low recently - I kid you not.)

In front of this perfect storm some of the sell-side analysts on Wall St. could change their viewpoints on the stock+company.  Today Bob Peck@ Bear Sterns put out a report that essentially says the fears (Amazon, fees, finding, etc.) are overdone and that at this price the time is right to get into the stock.  He put a 'Outperform' rating on the stock and a $36 price bogey.  It's a great read if you have time and I believe you can find it here without having a pwd.

Bob's basic thesis is that 60% of eBay's business is not at risk because the fixed-price format only makes up 40% of eBay's business.  Thus Amazon will probably never chip away at that 60% 'core auction' business.  There are also some good points on execution of finding/fraud/fees, etc.

I agree that it's definitely positive that eBay is addressing these things.  I do think Bob maybe sweeping under the rug some of the execution risks that eBay faces as it fixes the core marketplace.  That's going to be a big wait and see for everyone.  I'm not doubting the IQ points of people at eBay - they have smart people on these things.  But when you really dig into these challenges, they are not trivial and in many times I feel will take 2-4 iterations (in software 3 is usually the magic number) to nail.

On the Amazon side, sure 60% of eBay is kind of 'protected', but I'd say that in reality when you look at sellers the fixed-price/auction mix is really more 40% 'real multi-bid auction', 60% 'should be fixed-price'. What happens is many sellers use the auction format to sell something with a high starting bid, they get one bid and sell the item. This counts in the eBay financials as an auction item, but for all intensive purposes in my mind that was a fixed-price transaction with some hope for upside.  That transaction can be just as happy/lucritive on Amazon as eBay.

Also remember that eBay gets a LOT of its revenue from listings and there are significantly more fixed-price (bin/fp-core/store) listings than auction listings - so they have about a 60% GMV exposure, but an even higher REVENUE exposure to the Amazon threat.   This argument assumes that the fee structure changes aren't so substantial as to change the entire site's fees, but more category targeted.  eBay could mitigate the revenue risk with a more macro fee change.

These datapoints plus watching the behavior of a large audience of eBay's top sellers which make up a big chunk of GMV and I net out that Bob is under-selling the Amazon threat here.  I suspect we'll get some really interesting data on this when we see eBay vs. Amazon's Q4 results side-by-side.

eBay strategies readers what do you think?  Are the execution/amazon/recession fears overdone as Bob says or

Comments

[a concerned seller]

i dont know how you all could have liked the ebay changes, read this

I was thinking about this article last night while I was working and if my memory serves me right the last article I read about eBay actually had John Donahoe quoted as saying something to the degree of "well, the good thing about the internet is that there are alot of alternatives out there for disgruntled sellers...."

That is the very crux of this problem. The attitude of John and the rest of the eBay CEO's clearly shows that a) they choose ignorance, which is stupid....b) they are actually so snide and nasty about their current destruction of their customer base and the eBay platform that they ACTUALLY TELL YOU TO LEAVE....as if they are TEMPTING you do to do it with their SMUG WE HAVE A MONOPOLY AND YOU WILL EITHER DO WHAT WE SAY OR SELL NOTHING attitude......They don't care about ANYONE....we are only NUMBERS in their NIFTY ALGORHYTHMS which are created by techie idiots anyway.

Ever since Pierre sold eBay and Meg and her tenure started eBay has gone straight downhill (....remember that folks??? when ebay auctions cost 1/3 of what they do now, SafeHarbor (Trust and Safety) actually GAVE A DAMN about what happens on eBay, and PayPal actually paid you 5 bucks if you got them a new customer....) ......Every year, half-year, quarter in some cases they come out with a new brilliant scheme that they pitch as "necessary for eBay to continue to grow" and they say "it is going to make eBay a better selling environment...."....BUT their changes are NOTHING BUT A) AN EXCUSE TO RAISE FEES AND COSTS (whether with explicit fee hikes or hidden price hikes, and most of the time they try to hide them.....), B) A PLAN DEVELOPED BY SOME NEW UP AND COMING EBAY EXEC (I think there must be an indoctrination into the ceo pool at eBay....They probably take you to a secret hidden magic room with a cauldron and you have to develop some evil scheme to screw the public before you can escape from the devils grasp.....), and C) A FURTHER ATTEMPT TO BECOME BIG BROTHER IN SOME ORWELLIAN EBAY NIGHTMARE THEY ALL ENVISION.....I AM SURE THAT THEY ENVISION A WORLD IN WHICH ALL CITIZENS OF EARTH HAVE AN EBAY BARCODE BURNED INTO THEIR FOREHEAD WITH A LASER AND WE ARE DIRECTED BY BLOCK-WIDE PLASMA TV'S THAT TELL US WHAT TO DO AND THINK, ONLY DIFFERENCE BETWEEN ORWELL'S 1984 AND EBAY'S OVERALL LONG-TERM PLAN IS THAT EBAY RUBS YOUR FACE IN WHAT THEY ARE DOING INSTEAD OF TRYING TO HIDE THEIR EVIL PLOYS AND SCHEMES....

eBay representatives attributes their horrifying decline in profit margin and site activity "....on the bad economy."....it is the standard quote they have all been instructed to tell sellers while they get ebay stuck further in the La Brea tarpits.....And of COURSE they tell you to hang on and not close listings, THEY WANT YOU TO KEEP PAYING THE LISTING FEES!!!! They refuse to believe that they have made the customer base so mad that we NEVER want to return, and they ABSOLUTELY REFUSE TO.... A) WORK, B) STAND BEHIND THEIR GOOD FAITH POLICIES THAT THEY STATE IN THEIR TERMS OF SERVICE CONTRACT, C) ACT IN A TIMELY MANNER (regarding ANYTHING!)......AND D) THEY REFUSE TO TAKE ANY RESPONSIBILITY FOR ANYTHING WHATSOEVER.

I GUARANTEE THEY BELIEVE THEY HAVE A MONOPOLY....THEY DID...to a large degree..., but now it is disappearing before everyone's eyes....DUE TO MY FRUSTRATION AND ANGER WITH EBAY AND MY PAST DEALINGS WITH THEM I SINCERELY HOPE AND PRAY THAT THEY REMAIN STEADFAST IN THEIR CURRENT BELIEFS, DOGMAS, AND PRACTICES, BECAUSE I WANNA SEE EBAY DIE DIE DIE DIE DIE DIE DIE DIE!

BURN, BABY BURN,,......BURN IT TO THE GROUND SO I CAN RELIEVE MYSELF ON THE SMOULDERING ASHES!!!!

lmao......

A former PowerSeller/one of the former 5000 largest eBay stores/sellers

[Tim]

Scot, I think you are right on about the 60% auction number being artificially high… I know I use auctions as a BIN with the hope of a small upside and the greater hope that the auction duration (as opposed to a possible quick sale with a real BIN) will have the added effect of driving people to my eBay store or other listings.

I, and many other sellers, list at what an acceptable BIN price would be, but use the auction format for the reasons above. That is the kind of knowledge you and others who work with sellers would have, and not the Wall Street money guys. Good call.

[David Silvernail]

I laud your comment about a possibility of eBay failing in it's execution. It seems that 2007 was "The Year of the Buyer". Many of eBay's strategies and policy roll-outs were designed to protect the buyer from bad sellers. However, they've missed the point. In their effort to "protect" buyers against "bad" sellers, they've managed to alienate and bias against all sellers.

eBay is obviously the 800-pound gorilla in the online auction industry. However, they don't sell products themselves (like Amazon does), so they must depend on the seller to provide the products which generate their revenue. It's the seller that supports eBay's business model. Without the seller, there is no eBay. Period. They also continue to bias against the seller through bad policies.

For example, if a one-of-a-kind product was damaged during packing, the obvious thing to do would be to offer your apologies to the buyer and refund their money. eBay also makes the seller jump thru the hoop of getting the buyer to agree to a mutual agreement message stating that both parties agree not to complete the sale. eBay will then refund the Final Value Fee (FVF) that the seller has to pay for a completed auction.

However, if the buyer does not agree the mutual agreement message, the seller is stuck paying eBay the FVF for a sale that will not go through. The worst part, and the crux of my example, is that the seller has no way to dispute this with eBay. They are stuck holding the proverbial bag.

eBay needs to realign their policies to level the playing field so that sellers have equal protection. Until then, eBay sellers will continue to seek out greener pastures by creating their own sites, or moving to Amazon (if their items have UPC's or EAN's)

I personally feel that eBay has forgotten their core customer, the sellers. Until that changes, I can't see eBay growing again. My advice to eBay would be to lower their Final Value Fees, fix their policies, and concentrate on their core business, which is to provide a platform for sellers to sell.

-David

[John]

I am a marine gourmet, and my intents are porpoises. Great with tarter sauce...

[Ray Johnson]

You write good articles, that contain very useful information for people to stay on top of things. I really enjoy reading your blog! Thanks for sharing! =)

[Scot Wingo]

Hey Jay - sounds like calling this a typo is being generous ;-) thanks for pointing this out, you learn something every day and thanks to you, I've learned alot, for all intent and purposes, today :)

[Jay Senese]

Hey, Scot, see you soon! Typo in your posting:

you typed "intensive purposes". According to WikiAnswers:

Is the saying 'all intents and purposes' or 'all intense purposes'?

The correct phrase is "to all intents and purposes." This phrase dates back to the 1500s and originated in English law, where it was "to all intents, constructions, and purposes." In modern usage, "for all intents and purposes" is also acceptable. The phrase means "for all practical purposes" and is generally used to compare two nonidentical acts or deeds, i.e., "She went to his room and drank with him, which he viewed for all intents and purposes as consent to sex." A shorter equivalent phrase is "in effect."

When used in a strictly legal sense, the wording would be "intent and purposes," as it refers to one's mental attitude/state at the time said action occurred.

A common malapropism is "for all intense and purposes" a result of the original phrase being misheard and repeated. The word "intense" is used here incorrectly; "intense" is used in English to indicate a degree of intensity, i.e., "As the afternoon passed, the fire grew more intense."