Question
Well, it is now official. The media has finally caught on to what we eBay sellers have known for months now.....eBay is stagnating.
The article below states that there are "hints" that the buyers are leaving. Of course, this has been a fact for a long time, but hidden from view since there was once a huge pool of new buyers to replace those that were leaving because they were scammed, frustrated or simply unable to place a bid.
The Washington Post article is available by subscription on line:
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"EBay's Magic Has Faded But May Be Back
By Leslie Walker
Thursday, April 21, 2005; Page E01
EBay Inc., the Internet juggernaut, seems to have lost its mojo, that special swagger that made it a rocket on Wall Street for six hot years.
The company yesterday announced solid financial results for the first quarter, with revenue totaling $1.03 billion, up 36 percent over the same period last year. Profit was $256.3 million, up 28 percent.
Not bad for the average company, but eBay has never been your typical critter. In years past, its quarterly revenue grew by 50 to 90 percent and averaged 70 percent growth a year since the company went public in 1998. Yesterday marked the second quarter in a row in which eBay announced revenue growth considerably below 50 percent.
So far, 2005 has not been kind to the Web auctioneer. Its shares tumbled after the company made two announcements in January -- that profit growth had slowed in the last quarter of 2004 and that it was boosting selling fees in the United States. After peaking at $59.21 in December, eBay shares dropped to $31.58 before closing yesterday at $33.11.
The fee hike sparked a mini-revolt among eBay dealers in February, with thousands signing petitions of protest and many threatening to leave for rival sites. Some analysts worried that eBay's core business -- charging commissions to connect buyers and sellers -- could face strong competition if sellers bypassed eBay to market their own Web sites directly to buyers.
Also worrisome were disclosures that eBay chief executive Margaret Whitman had interviewed for the chief executive's job at Walt Disney Co. before withdrawing her name from consideration.
Yesterday, Whitman sought to reassure anyone who thought she might be preparing to abandon a leaky ship. "I am personally committed to being a part of eBay's journey for many more years to come," she said in a conference call with analysts.
Whitman acknowledged eBay's revenue growth had slowed considerably in the United States, where it was only 19 percent in the first quarter, but she said international revenue was still growing at rates above 51 percent. Moreover, there were more users outside the United States than inside for the first time, she said.
Whitman said eBay was doing a lot to add new features and promote growth in the United States, such as a new "best price offer" that lets buyers haggle with sellers offering items at fixed prices. She also said PayPal, the electronic payment system owned by eBay, is expanding beyond auctions to process payments for big businesses, such as Apple Computer Inc.'s iTunes store.
"These are remarkable results by anyone's standard," Whitman declared. "EBay and PayPal are the best e-commerce franchises in the world."
Yet it is unlikely eBay's latest results will stop the debate analysts have been having over whether the auction site has simply taken a breather from its heady growth -- or is wrestling with more serious problems that could loosen its monopoly-like grip on Internet auctions.
Derek L. Brown, analyst with Pacific Growth Equities LLC, has seen signs of slowing growth over the past year that he described as too deep and wide to be minor. While eBay's revenue and profit are still growing, Brown's research showed some metrics declining, such as the amount of revenue generated per listing. The average number of items listed per eBay user also started dropping last year, Brown found.
"Any one of these metrics is easily explainable or overlooked," he said earlier this week, "but collectively they tell a fairly strong story, one that has been supported by the conversations we have been having with sellers."
More and more top eBay sellers are dipping their toes into competitive waters, Brown said, testing not only rival sites but also using Google's and Yahoo's search-related marketing services to advertise their own Web storefronts.
Mark Mahaney, an analyst with American Technology Research Inc., said it remains to be seen whether Google and Yahoo present direct competition to eBay. "Right now I am skeptical of that approach, but it is an open thesis," he said.
Nobody is sure what, exactly, is causing eBay's growth to slow or its dealers to get restless. There are hints of buyers drifting away, too: After years of steady growth, eBay's traffic has dropped for nine months in a row compared with the same months a year earlier, according to ComScore Media Metrix. In January and February, eBay's traffic drops were particularly steep -- 14 percent each month.
EBay still commands huge traffic -- 66 million visitors in March, more than a third of the 164 million Internet users in the United States, according to ComScore. And its transaction volume dwarfs that of all competitors, with a total of $10.6 billion in goods sold in the first quarter of this year.
But eBay dealers have been complaining that their auctions are drawing fewer bidders and lower selling prices -- something eBay executives chalk up to natural demand cycles in any marketplace.
Bob Lee, a video-game dealer in Columbus, Ohio, who runs a Web site called Power Sellers Unite, said he stopped selling on eBay after the recent fee increases.
"We are now helping sellers find alternative auction sites and ways to promote their listings," Lee said. "We have members who will never list on eBay and many that have cut down on their listings."
Other dealers, however, find eBay's sheer number of buyers irresistible. Rmenda Rice, a seller in Disney, Okla., said she tried auctioning her goods on Overstock.com a few times after eBay raised her fees: Overstock's "fees were lower, but the site just wasn't getting the business eBay did."
Nobody, of course, is suggesting eBay is facing any real financial trouble. It remains one of the world's most profitable companies and might even get its mojo back if its auctions catch fire in China, say, or another large market and spread there at the same amazing rates once seen in the United States."
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One more comment: Nice to see a story that has not been manipulated by the eBay flacks and hacks even if it does not bode well for our business futures. Time to get working on those independent websites!
Larry
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Yeah, my sales are way down! Bet
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Good article, Litlux, and I agree with your conclusion about sellers moving to their own websites.
The main reason why I am buying little on Ebay is the slow search that Ebay itself caused with its quest for more revenue while screwing its own customers, the sellers. It was mindnumbingly slow, and I'm on cable.
Bigger is not necessarily better, and the trends shown in that article, such as the declining revenue per listing and declining amounts listed per seller will most likely continue.
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The article fails to mention the continual changes on eBay. The slowness of the site. The huge drop in sell thru.
I am praying that the numbers for eBay Live will be a disaster this year. Maybe that will be another wake up call.
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Originally Posted by commentary
I am praying that the numbers for eBay Live will be a disaster this year. Maybe that will be another wake up call.
They're offering a $10.00 coupon.
eBay Seller Update: $10 off eBay Live!, Discover Hot Products, Sales Tips that Work
That is certainly not going to motivate me to buy a plane ticket from Philly to San Jose.
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I think eBay should minimize the importance of their search feature. If they added LOTS of new categories and encouraged buyers to shop by category, we might all have a chance. That is, assuming we put our items into the right categories!
But that won't happen.
If they added categories that are too specific, they'd lose revenue from sellers posting to a second category. On the other hand, if they DID do a better job of categorizing, maybe buyers AND sellers would return.
It seems to me the most important feature for a huge site like eBay would be ease of use.
"That's just my opinion, I could be wrong." - Dennis Miller
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I think this does bode well for our future.
In the short term some sellers will suffer, many will experience the discomfort of relocation and we all will have to deal with change.
Buggy whip and carriage makers went out of business when cars replaced horses but look at size of the auto manufacturing and service industry.
Online commerce is growing. eBay's dominance of the marketplace is what is fading.
This will give us many more productive options and, I believe, will force eBay to become more customer friendly.
I'm easily criticized for drawing historical parallels but, some people left Europe for opportunity while others waited until poverty and starvation drove them out and eventually many prospered in places like North America and Australia while the old countries adjusted, to the benefit of those that remained.
Sure, there was a lot of pain and a few wars before things got straightened out but, on balance, it was for the good.
For us, a King got things started, the Queen made the Empire expand and early subjects prospered in a comfortable but sheltered world.
Things change. What was, isn't any more. What is, is not acceptable and we have to move on.
I would much prefer to be left alone on a small plot, off in the corner, where I can meet my needs and live in peace.
The bad news is I don't get what I want.
The good news is there is all I ever wanted and more, it's out there waiting for me, only I have to get off my butt and go make it happen.
All of this is a huge opportunity for us, unfortunately it's wrapped in an unfamiliar box, takes a lot of work to open and provokes fear because it includes the unknown.
Isn't it great that we are making the trip together and are so much help to each other.
How much more difficult and lonely it would be if we were doing this by ourself.
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Mag, we could have an Ebay Dead in Philly. Maybe in a tent at the PFF this August.
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Originally Posted by snowyegret1
Mag, we could have an eBay Dead in Philly. Maybe in a tent at the PFF this August.
"EBAY Dead" - that's funny in a way, yet a good idea. Having a user organized conclave with the media invited would sure get some attention.
Though I am afraid it might contribute to more of a decline. And what I want is for the eBay management to deal with the problem of fewer buyers in a positive, honest and pro-active way. I know that is not part of their corporate culture, but they better get on the ball.
Far too much attention is being spent on the profits and stock options IMHO.
Larry
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It definitely bugs me that instead of figuring out how to get the business back here in the US, ebay talks about growing their business in China and Paypal as ways of increasing revenue.
I'm sure that will help Meg and co., but it won't do a thing to keep food on my table.