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Mon Jan 28 2008 10:16:47

eBay's China Syndrome

By: Ina Steiner

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eBay has always been very good at laying out vision statements. Rather than trying to explain the complicated ins-and-outs of the challenges facing eBay, CEO Meg Whitman always presented a nicely packaged PR spin that satisfies analysts and reporters.

While the company was experiencing phenomenal growth, analysts couldn't complain, didn't complain, and didn't bother to look beyond the surface - eBay was making them exorbitant amounts of money. No one challenged eBay math. Fraud remained a microscopic one one-hundredth of one percent for years, according to eBay math, and the number of eBay members grew with no one questioning how many active, unique members those numbers represented.

As growth rates began slowing in the mature markets, people began asking more questions, but continued to be generally satisfied with Whitman's packaged vision. In 2005, she promised them China. (That didn't work out as planned and turned into a major embarrassment.) Later in the year, she promised them a new vision - the Power of Three - through the Skype acquisition, another major embarrassment.

That same year, she brought John Donahoe on board, and he is taking over from Whitman officially at the end of March.

Donahoe presented his vision to the New York Times last week: it's all about search. The talk of integrating fixed-price listings with auctions is not a new idea: eBay tried it in 2006 with "Stores in Search" and rolled it back 2 months later, saying it overwhelmed shoppers to see so many listings.

But anecdotally, sellers had better sales during the SIS rollout, and Store sales plummeted once it was rolled back. It seems the mantra we're hearing from eBay now is coming 2 years too late. They only gave SIS two months before pulling it, when Meg Whitman famously said that the eBay marketplace had been "overwhelmed with identical, often poorly-priced items that have diluted the magic of the eBay experience." The irony is that eBay has now plastered the site with ads that directly compete with their sellers own listings.

I think the truth is that eBay was very afraid of the loss of auction listing fees as sellers put more fixed-price listings in their Stores (3 cents for a 30-day Store listing with Gallery photo versus about 30 cents for a 7-day auction listing - no Gallery included!)

How will eBay encourage users to list auctions - the "magic" of eBay - if they are planning on integrating Stores in Search in 2008? We may find out tomorrow. eBay is set to webcast the keynote address from the Ecommerce Forum, its annual meeting of top sellers. (One seller said he is looking forward to the changes as much as he would painful eye surgery.)

Back in 2005, I suggested that eBay needed to fix problems on its core site. Improvements are needed in many areas of eBay: increased customer service, fraud-reduction and site stability are three biggies. But instead, eBay CEO Meg Whitman told investors last week the biggest area of investment in 2005 would be in China. To Whitman I say, "tsk, tsk."

I still feel that these are the three areas in which eBay needs to focus.

Donahoe's vision of improved search includes serving up listings according to best value (taking price and S&H costs into account) and seller-reputation (based on Detailed Seller Ratings). These sound very logical, but Donahoe faces severe challenges in turning his vision into a workable reality:

The changes eBay has been rolling out in preparation for these changes threaten the long-held culture of buying and selling on eBay (allowing buyers to leave anonymous DSR ratings for sellers, counting seller neutrals feedback as negatives, changing the default sort order of search results to name a few).

eBay is tinkering with the delicate balance of feedback that enables buyers and sellers to interact based on trust. And of course, the challenge of rolling out major changes on eBay's glitch-prone platform.

Donahoe mentioned last week that he plans to accomplish his goals in a uniquely eBay way, a very eBay way. In my opinion, this means reactive instead of proactive. Instead of routing out fraudsters and bad sellers, eBay will leave it to buyers and sellers to rate each other, and it will use algorithms to favor the "better" users.

Sellers have shown they will put up with a lot - if the sales are there. Ultimately only time will tell if Donahoe's focus on improving the buying experience through search will pay off, or if his vision is another eBay China Syndrome.


eBay's Q4-2007 earnings conference call with analysts.

For eBay's assessment of the Stores in Search debacle, see the AuctionBytes interview with Chris Tsakalakis in June 2006.

Comments (3) | Permalink

Readers Comments

eBay's China Syndrome   eBay's China Syndrome

by: Luis Rueda

Mon Jan 28 11:54:46 2008

In my opinion, Ebay needs a complete restructuring of it's main business in North America, which is the country that gives Ebay it's global character and is able to post a very wide selection of products, besides that we need more options, I encourage fellow e-commerce users to visit, posting is free and your products can reach a global audience as well.

eBay's China Syndrome   eBay's China Syndrome

by: Steve Sturtevant

Mon Jan 28 13:00:28 2008

Excellent article and I agree 100% with your assessment of SIS. We've yet to reach the same sales levels which we had during the 2 month SIS 'experiment'.

eBay's China Syndrome   eBay's China Syndrome

by: bonni

Tue Jan 29 01:02:41 2008

Oh, dear. They're going to revamp the site in "a very eBay way"... Half baked, without concern for their actual users and customers, and with a lot of hot air and doubletalk? That's the eBay way, isn't it?

And I have to wonder what this sort of interference in the buyer/seller relationship is going to do to their argument that they're "just a venue". If they become more than "just a venue", they're going to have to start taking some actual responsibility for the things that go on through their site. Somehow I don't think they want that...

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