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EcommerceBytes-NewsFlash, Number 1712 - January 24, 2008 - ISSN 1539-5065    1 of 3

eBay Shakeup Signals More Changes to Come

By Ina Steiner
January 24, 2008

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There was a lot of news for eBay users to digest on Wednesday afternoon as the company released earnings and announced that eBay CEO Meg Whitman would retire on March 31, 2008. In addition to a management shake-up, the company said it would announce more changes next week involving feedback and pricing.

John Donahoe, current President of eBay Marketplaces, is set to replace Whitman as President and CEO. Donahoe is behind some of the changes abhorred by sellers that were implemented in the past 18 months, though he has a low profile among users compared to other executives. And more changes are on the way, Donahoe told analysts during a conference call. "Watch for us to make some exciting announcements about feedback, new user protection programs, customer support and pricing over the next week."

eBay implemented a number of controversial initiatives in 2007 that some sellers said penalized them unfairly and tipped the delicate buyer-seller balance in the buyers' favor. Donahoe is also responsible for the ads served up by Google and Yahoo that appear on the auction site in direct competition with seller listings. In addition to some radical changes involving feedback, Trust & Safety and seller policy enforcement, eBay has been tinkering with its search engine algorithm. Best Match, as it is called, favors some sellers over others - eBay says it rewards good sellers, while many sellers remain unconvinced that it serves up accurate results and claim it is unfair.

While sellers may be bracing themselves for more unpleasant search and policy changes, they were likely pleased to hear talk of lower insertion fees and integration of fixed-price listings into the core platform. Donahoe said eBay has begun increasing exposure to Stores in core. Responding to analyst concern over what happened during the "Stores in Search" debacle of 2006 when fixed-price Store listings were given exposure on the core platform, executives said the new finding experience would ensure a better outcome. Donahoe used the term, "the race to the top" in referring to so-called quality listings rising to the top of search results under the new Best Match search algorithm. However, he said relevancy-based search and Best Match "was not a Silver Bullet."

While changes to pricing were expected, news of feedback changes came as a surprise. One user speculated eBay might take away sellers' ability to leave buyers feedback, similar to the system on Amazon.com, but eBay will not disclose what the changes are until next week, likely during its annual Ecommerce Forum summit with top sellers on January 29.

In a game of musical chairs, Bill Cobb, President of eBay North America, will retire at the end of the year, joining the club of former senior executives who had been groomed as potential Whitman replacements. Rajiv Dutta, one of the last long-time senior execs left standing, will become Executive Vice President of eBay Inc. and will also take over Donahoe's role as President of eBay Marketplaces.

PayPal Chief Technology Officer Scott Thompson will replace Dutta as PayPal President. Lorrie Norrington, who came to eBay from Shopping.com at the time of the acquisition, will assume Bill Cobb's responsibilities with a new title of President of eBay Marketplaces Operations. She was formerly President of eBay International.

Whitman told CNBC in an interview that she plans to work on her recently formed family foundation and will generally wind down. She will remain on eBay's Board of Directors, and she told Reuters she plans to play an advisory role to Donahoe through the rest of 2008, working at a reduced salary.

eBay posted fourth quarter 2007 revenue of $2.18 billion, up 27% versus the prior year quarter, and net income (profit) on a GAAP basis of $531 million. The company said revenue grew across all businesses highlighted by more robust growth from PayPal, StubHub, Skype, classifieds and advertising. The ratio of U.S. fourth-quarter revenue versus international was 51-49 in 2006, and fell to 47-53 in Q4-2007.

For the full year, eBay Inc. posted $7.67 billion in revenue, and net income (profit) on a GAAP basis of $348 million.

The Marketplaces business unit, which consists of eBay, Shopping.com, StubHub, Kijiji and other ecommerce sites, had a record $1.50 billion in revenue in Q4-2007, equating to 21% year-over-year growth. Revenue growth was driven by StubHub, advertising, the fixed price format on eBay and, in part, by the benefit of a weaker U.S. dollar.

eBay Marketplaces Gross Merchandise Volume (GMV) was $16.21 billion for the fourth quarter 2007, an increase of 12% over the fourth quarter of 2006 (excludes Rent.com, Shopping.com, and classifieds websites). Fixed Price trading was 42% of GMV, up from 38% in Q4-2006.

Approximately 54% of Marketplaces revenue came from markets outside the U.S. in the fourth quarter of 2007, up from 50% in the fourth quarter of 2006. eBay Stores grew to 532,000 as of December 31, up 2% from September 30, 2007, with 46% of them hosted internationally.

PayPal posted $563 million in revenue for the fourth quarter, an increase of 35% year-over-year. The percentage of Payments revenue from international was 44% in Q4-2007 compared to 41% in Q4-2006.

The company's board of directors has approved another stock repurchase program for $2 billion. The new program gives the company the ability to repurchase up to $2.85 billion of its common stock under its combined repurchase programs.

About the author:

Ina Steiner is co-founder and Editor of EcommerceBytes and has been reporting on ecommerce since 1999. She's a widely cited authority on marketplace selling and is author of "Turn eBay Data Into Dollars" (McGraw-Hill 2006). Her blog was featured in the book, "Blogging Heroes" (Wiley 2008). Follow her on Twitter at @ecommercebytes and send news tips to ina@ecommercebytes.com.

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