Triple whammy eBay news day weighs on the stock...

I hate to interrupt the "FP30+Finding" series that I'm sure has everyone on the edge of their chairs, but there was so much negative eBay news today I need to break in and provide some highlights.  As of this writing the stock is down to $23.25 and seems to have gone below the $24 support level that has been there this year.

Whammy1: Bob Swan @ Citi and GS in NY

First, Bob Swan was a keynote at this weeks Citigroup Investment Research Technology Conference (CIR) on Thursday (replay here) and he also gave a NY lunch Goldman Sachs James Mitchell preso today/Friday (audio and preso are online).

From the CIR, Mahaney published a note that was mixed at best (he summarized the note with a "neutral - uncertainty about eBay's ability to re-accelerate GMV growth remains our primary concern")  and I listened to the GS conference here are the highlights:

Negatives:

• Swan highlighted a challenging 2H08 environment (he re-iterated this at the GS talk).  Here's the snippet from the Mahaney note:

  • EBAY highlighted that macro pressures have slowed eCommerce growth most sharply in the US, followed by the U.K. and now more recently in Europe. The primary impact on eBay is lower ASPs as consumers shop for lower priced items. While the company believes it is benefiting from more value conscious shopping, lower ASPs are a headwind to GMV growth.

• Mahaney asked about the impact of an improving dollar on eBay's Q3+ results as they have benefited. Swan admitted they will have a negative impact on growth, but suggested that CBT will make up for it.  This is probably correct over a longer term (6-9 months), but with the dollar shooting up against the Euro like it has, I'm not sure how CBT could react that fast?

Neutral: (or could go either way)

• There's lots of speculation of layoffs at eBay right now.  At the GS conference, Swan was asked about the employees. He mentioned there are 16k and the rev/employee has gone up but they are always looking at it.
• Skype - said it is doing well but they are "still evaluating Skype's fit with eBay" - this could be foreshadowing a sale of Skype which Donahoe told FT earlier in the year is something they would do if it's not a fit.

Positives:

• Even with 2H08 headwinds (see first negative bullet), they are not changing guidance

• Key initiatives in marketplaces are showing progress - Here's a snippet from Mahaney:
  • Making Progress With Key Initiatives In Marketplaces, Still Some Work To Do - eBay highlighted three key areas: 1) Broader, deeper selection of great value, 2) Improved product finding and user experience, and 3) Enhance trust and safety. While the company felt it had made significant improvements in product selection through its various pricing initiatives, and trust and safety, it recognized that it needs to do more in finding and user experience.

• Paypal continues to shine (but not get credit being in the eBay entity) - Swan iterated reasons why they wouldn't consider spinning it out which could have been seen as negative to those that think this is a possibility.

Whammy 2: Jeetil@DB drops price target (to $19!) and voices Q3 concerns
This am, Jeetil Patel @ Deutsche Bank came out with a note that lowered his already bearish view of eBay.  His top concerns/reasons:

• His seller checks indicate Q3 is down as much as 15% y/y
• Fee changes appear to be a net fee increase for sellers
• US dollar strength creates a triple impact: revenues, profits and tax rate
  • by Jeetil's calcs this will be a .15-.17 EPS impact in 09 and speculates it could be offset with headcount reductions.

Whammy 3: (this is just getting out there) - CTO Matt Carey is leaving!
Matt started at eBay in 2006 and  I had the pleasure of sharing a beer with Matt at the ecommerce forum and he seemed really excited by the new direction and management changes.  I was shocked to find out today that he has left eBay to go to Home Depot.

This FastCompany (late 07)article goes as far to call Carey Donahoe's partner in an eBay turnaround and notes that half-way through the Carey interview JD said: "we have to have this guy.". It was unusual to read about this from a Home Depot press release vs. an eBay press release as they did with the departure of Rajiv.  They are inconsistent on these things and when they don't announce something major like the CTO leaving, the speculations runs rampant that they are either trying to keep it from being widely known or they weren't prepared themselves for the change (e.g. Carey let them know today or something).

It all adds up to a tough environment
I'll leave it to readers to comment and weigh in - is this just an unusually bad news day for eBay, or are things starting to really worsen more than anticipated and executives are jumping ship, layoffs are coming, etc?

SeekingAlpha disclosure: I am long eBay and Google

Comments

[Ozgood]

As THE Premier Mica Lamp Shade Artist on Ebay : nymarts.com, I am Disgusted with the Complete Lack of Business Acumen Coming from the TOP !
They, Apparently, are UNEDUCATED in Real World Economics.
I could run Ebay and Everyone would be Back "In the Chips".
It's taking more work to screw it up than it does to let the Old Tried & True methods continue to bare Fruit.
John Don...& his Cronies need to face the reallity of Massive Numbers of Sellers leaving Ebay in Droves. Thousands of Ousted Ebay Sellers won't be able to heat their homes this year, or pay their mortgages, or pay for their health insurance now.
Underestimating The SCOPE OF THE DAMAGE here is a Huge Mistake on Ebay's part.
And the Media isn't helping by keeping Quiet on this Story.
Ebay MUST return to Normal, or be dusted from the Economic Landscape.

[ex eBay]

Carey should have never been hired. He was/is not capable at an executive level and can't even speak in public without saying "uh" every other word. No one followed a word he said and his accent made him sound like a hillbilly in the heart of the technology world of San Jose. His internal "strategies" were ill informed and it was apparent that he was in way over his head. His experience at Walmart didn't even include walmart.com so he has no experience running an online platform. Home depot has been going downhill for awhile, so it's no surprise that Matt retreated back to the deep south and to a place where good ole boys are still welcome. Silicon Valley ate him alive!

[m j malik]

"TRINKETS ONLY?" Will Ebay be offering expensive hard to find collectibles, antiques, paintings, sculptures, and so on to the Ebay buyers in the future? Will it be worth the risk of the
possible "total value loss to the seller" due to MORE NEW EBAY POLICY? Where's the seller protection?
Sooner or later, all sellers selling expensive items on Ebay will be forced to offer their expensive valued merchandise in exchange for a 180 day (6 month) option for all ABUSIVE BUYERS to cheat sellers days or months later for any reason whatsoever when purchasing items thru the mandatory merchant account or "push pay pal" paperless program come October 2008.
Even if items are marked "as-is”, perfectly described, or noted "no return policy" , it won't mean anything anymore. Sellers will now be required to except merchandise back within 45 days of purchase for whatever excuse the buyer has under the new policy terms of item not as described. Believe it or not it even gets worse. Pay pal will now not only snag the money for the item out of the sellers pay pal account, it will also now reimburse all shipping and handling costs to the buyer as an added bonus.
Now ABUSIVE BUYERS can purchase items thru PAYPAL that they may have had no intention of paying for, remove parts they need and then either return or not return item to seller, then filing a claim of not as described, missing parts, or lying that it was broken and force the seller to reimburse including the additional shipping and handling. If the seller legitimately complains about the ABUSIVE BUYER, he will then receive an UNPROTECTED NEGATIVE and all the buyer will get if seller takes the "uncompensated for "time and effort to prove the buyer was a fraudulent or abusive, according to: Clint from clint-us@ebay.com Aug-14-08 14:57 PDT 34 Quote: "We would reevaluate the case and, if we agreed that the buyer was at fault, we would flag them as an abusive buyer and prevent them from taking further advantage of the claim process.
Best regards,
Clint"
FLAG THEM?? Are you kidding me????
WHAT KIND OF GARBAGE is that? WHERES MY MONEY??????
WHAT IS GONNA STOP THAT THIEF FROM DOING THE SAME THING TO ANOTHER SELLER USING SOMEONE ELSES USER ID or A NEW USER ID, or A DIFFERENT NAME ETC... THIS NEW POLICY MAY ENCOURAGE MORE THIEVES, FRAUD AGAINST GOOD HONEST SELLERS and put the final nail the coffin of EBAY."
It sure doesn't take a rocket scientist to see how disasterous this new policy will be. You can see how well the new one-sided feedback system is working. Encouraging buyer dominance, black mail, control, and abuse over the seller.

It's obvious we do not live in a perfect world. It never was and it never will be. There will always be the honest majority and the ones that are not. We also have laws in the land that punish the ones that steal from others without punishing the honest that do no wrong.(try telling ebay staff
this- YA RIGHT !!!!)
With regards to the EBAY COMMUNITY, the vast majority of sellers and buyers have always been honest, while the smaller portion of dishonest sellers have been either thrown off Ebay while
the dishonest buyers have caused a great financial loss to the sellers with their fraud, damage of merchandise , pay pal charge backs, causing uncalled for locked out paypal accounts,
overdrafts ,Ebay Suspensions, financial stress and much more causing good honest sellers to leave Ebay Community do to NO FAULT of their own other than agreeing to allowing the 180 reverse charge option which destroyed their Ebay business.

In the past, Honest Ebay Sellers had the option of selecting a safe form of payment for their value of merchandise exchanged which was really the American Way.They could select the form of payment that they were comfortable excepting
which gave them GUARANTEED IMMEDIATE FUNDS with no future Unpleasant surprises. Money that was relied upon for sellers and their families to: pay bills, raise a family,go on vacation, save for the future or just go out and buy something else e.t.a.l. That WAS truly the American Way and the Ebay Community offered this opportunity to the public. Perfect examples include: Postal Money Orders which are guaranteed immediate funds to the seller in exchange for immediate shipping to the buyer with no hold time for funds to become
available. Another example would be a simple personal check that once it cleared the bank the item was then safe to ship with fund in hand. For Overseas and in the States there is always the safe bank transfer option. These options mentioned above are especially desirable for larger ticket items over $100.00 and up. Pay pal and Credit Card payments are only desirable for speed and convenience with smaller ticket (LOWER RISK) items because the charge back option on them are easily absorbable and not as likely several months down the road. Besides, The scammers won't hit the sellers on the little transactions, only on the substantially larger big-ticket items. Also in times like this where money is tighter, people think twice about what they just bought, recently bought that they realize that they either got their use out of it, desided they really didn't need, money right now is more important than keeping it just to name a few examples. Given the temptation and opportunity to charge back an item for 6 months (180) days from purchase,
unfortunately many good honest upfront sellers get stung on this example in the most unfair manner.
NOT ANYMORE.....STOP......LOOK.....LISTEN........................................
EBAY staff is now telling us sellers that we MUST OFFER THE OPTION FOR ALL BUYERS TO EXCHANGE OUR VALUED MERCHANDISE FOR a 6 MONTH BUYER OPTION ! YES You know what that means? No GUARANTEE OF PAYMENT WITHOUT REVERSED CHARGES FOR 180 DAYS FROM DATE OF PURCHASE. This option gives the buyer all kinds of time for excuses as to why he or she doesn't want the item anymore. On any large ticket item this could be disasterous results. NOW, WHERE DID AMERICAN WAY GO ?...GONE BYE BYE
MORE NEW EBAY POLICY
ABSOLUTELY NO MORE IMMEDIATE EXCHANGE OF VALUED
MERCHANDISE FOR U.S. DENOMINATION FUNDS. When that large charge back appears somewhere within the 180 days from purchase and the money is already by that time spent. IT'S ALL OVER and the EBAY/ PAYPAL system will have literally Destroyed yours and your families life style with absolutely no remorse Whatsoever. Ebay's track record has proven time and time again that they really don't care what’s in the best interest of the Ebay Seller's .They feel that there will always be enough sellers and their additude is like the boss that tells you if you don't like it you can leave and don''t let the door hit you in the ass on the way out.
You've all heard the old saying, "if it ain't broken, don't fix it"
I get the feeling EBAY has just modified that phrase to something like this. "IF IT AIN'T BROKEN , KEEP SMACKING IT ARROUND REAL GOOD SO YOU KNOW THAT IT TRUELY IS BROKEN THIS TIME "

[JHoespmp]

As a consistant gold power seller for 4 years, a stocking distributor, and full time ebay I can verify that the general public 'buyer' was the guy who sold his garage/closet junk and bought higher priced new items. This type of seller now is not selling, and is also not buying on ebay. Donahoe's target market was the 20 somethings with home equity ATM machines, and instant paypal credit decisions. These 'buyers' are simply bankrupt now, and their HELOCS are either frozen or tapped out.

I've witnessed ebay's activity and page hits go from a thriving and cash rich buying audience to a quiet whisper, as junk sellers simply don't have the extra dollars to buy new luxury items anymore. The sales (and page hits) have gone from a perfect incline graph to a shattered plumeting decline in all catagories I've tracked.

The 35 cent listings Sept. 16 is an attempt to pump up the listing volume, and flood the selling floor, while the sell through rate will suffer the same 3% misery that BUY dot com exhibited when the test program was initiated with free listings earlier this year.

Donahoe has destroyed nearly two decades of momentum and trust and has spawned new venues other than amazon that will reward the garage junk seller with spending money again, but they won't be buying on ebay.

The stock is looking extremely bleak, and shrinking daily. Its taken one man 6 months to destroy a company with a 50% online marketshare, and if Donahoe was secretly hired by amazon to do this to ebay, their money was well spent. Ebay is now watered down rubbish, and getting worse every day. Time for the bears to bail out and bury this miserable company.

[Dave]

These analysts do not mention seller flight. I saw a very large competitor – twice our eBay volume -- go NARU on 8/27. Coincidence? I don't think so – he threw in his hat after the latest changes were announced. That was the third competitor big enough to be on my radar screen to go NARU since July 1. I have seen more of our competition go NARU or just stop selling in 2008 than in the prior three years combined.

We're hanging on, going to free shipping on many items, and hoping that our high DSRs (4.9, 4.9, 4.8. 4.7) will help us do well with Best Match. But despite less competition, our sales have dropped ever since they limited the number of listings per page by each seller. We dominate a few niches, and that change really hurt us, giving us a 20% sales drop in August.

We've got our fingers crossed for Q4, but things on eBay are so unsettled that we can't count on anything and projections based on last year's sales are useless since the rules have changed.

I hope things settle down and they stop making changes long enough for things to normalize. eBay either does not realize or does not care how expensive their constant changes are for high volume sellers. The man hours of investment and the opportunity costs are outrageous – all for a system that while imperfect was at least a decent status quo.

As long as I change only a few gallons of water in my aquarium each week, the fish are fine. When I fall behind and then change half the water, it is not unusual for some of the fish to die. eBay needs to stop changing the water and let our ecosystem stabilize.

The next six months will be critical for us as we determine our commitment to eBay into 2009 and beyond. I don't think we could take another year as tumultuous as this one without seriously reducing our listing quantities and changing our business model. eBay is traditionally 30% of our sales, but that number is currently dropping. There is a point of diminishing returns where it is no longer worth the investment. We're not there, but I can see a hint of it on the horizon.

[tj]

eBay always take the high ground & totally believe this is none of their doing….
A business of this size being run by disconnected idiots (high education or I.Q mean nothing….if you don’t listen or know your business)

To have a $60 stock now being quoted as $19…looks like the plan has worked, now John where are all the buyers?????

[D. Reagal]

Ebay is losing staff at a great rate now - and internally employees are fleeing from certain departments, it's been happening since Donahoe first became president. The employees are worried about their stock, as well as their future. Expect that a lot more of the real brain power at Ebay will be leaving in the next six months. Ebay has imposed a hiring freeze within the last few weeks, at both Ebay and Pay Pal ... despite having hundreds of job opening and a loss of top middle level employees that have never been replaced.

Job recruiters in the Valley are getting indundated with resumes from Ebay employees, and that will continue. Internally Donohoe lost the faith of his top core people when he told them he was only onboard to 'turn around the company' and would look to jump ship after about 18 months to 2 years.

He's going to leave Ebay in shambles, unable to compete with Amazon and having lost the niche that made them the leader for a decade.

[Joanna]

"and he seemed really excited by the new direction and management changes"

The fact that he left speaks volumes. Maybe he was not as happy with the new direction and management changes as he "seemed" to be.

I find it interesting that no where above is there any speculation that maybe, just maybe eBay's changes simply aren't working. There is no mention that perhaps buyers and sellers DO NOT WANT another Amazon. No speculation that maybe buyers and sellers were happy with an auction site, and happy without Best Match. These changes were shoved down buyers' and sellers' throats by the new management. One only has to read the blogs to hear from the high numbers of unhappy eBayers, both buyers and sellers. Only on the rarest occassions do I hear of eBayers who actually like Best Match, or who like the DSR system, or who like the instability that all of the changes implemented have caused. While I do agree that some changes were needed, most eBayers I know never expected or wanted eBay to become Amazon.com. Ebay did not listen to or ask sellers (yes, sellers are their customers) what they wanted. They just pushed ahead. It is monkey see monkey do management. They saw Amazon's success and had to follow suit.

I think it is grasping to blame it on the economy. In bad economic times people will go where they can find the best deals. The best deals are at eBay. Shoppers still flock to Walmart and Amazon, but eBay has slowed. It makes no sense. Why hasn't anyone stated what seems to be quite obvious? Buyers and sellers don't like these changes. If buyers and sellers liked the changes they'd be flocking to the site. They are not.

[johndoom]

It's the middle of the end for eBay. The end started when John Donahue started rolling out his "changes". You should have sold your stock last spring when they announced their changes and it was very clear they were not willing to work with their sellers. I did thank god. Here's the bottom line with eBay, THE SELLERS PAY THE FEES. PERIOD. If they go, their customers will follow.

The backlash and word of mouth on eBay's rapid decline is huge on the street. Both buyers and sellers have nothing good to say anymore. A walk through the Rose Bowl this fall will give you a good indication of things to come, the Rose Bowl is a small microcosm of what it was three years ago. I know antiques and used goods are only a small percentage of what eBay sells but those are the items that built eBay into what it is today (or was). The Rose Bowl is 50% of what is was 3 years ago if that, their used to be an energy out there and just like eBay it used to be exciting and fun . Lest anyone forget eBay used to man a booth out at the bowl, they knew how important that base was, now if they dared to put one out there it would probably get burned down.
I sold my eBay stock earlier this year, have curtailed my eBay listings to a couple a week and the only reason I am even listing on eBay anymore is so I didn't have to transfer any money into my Paypal account, which I only use now to generate USPS shipping for my Amazon sales. Man I wish I would have kept my Amazon stock I sold to buy eBay stock 6 years ago, what a mistake that was.