|Thu Mar 5 2009 17:25:14|
eBay CEO John Donahoe at Goldman Sachs Conference
By: Ina Steiner
eBay CEO John Donahoe and CFO Bob Swan gave a presentation at the Goldman Sachs Technology and Internet Conference on February 26, 2009, in San Francisco. Some of my notes follow, you may still be able to listen to the webcast through a link on eBay's Investor Relations page.
When asked about zero insertion fees, Donahoe said, "One of the historical leanings from eBay is that a little bit of skin in the game from the seller is a really important screening mechanism."
When asked whether insertion fees could go all the way to zero, he said it would vary by category and country, but, "It won't go up. It will go down over time. But there's nothing planned this year in that front. We made the structural changes we needed to on that front last year."
Trust, Search and Category-Specific Shopping Experiences
"We must improve trust on eBay. I am tired of and done with us providing a sub-optimal experience," said Donahoe. "We made important progress last year, we will continue to make progress this year to improve trust on eBay." He said eBay would continue to improve the buyer experience on search. And eBay will work on category-specific shopping experience around Books, movie and video, Consumer electronics, Clothing shoes and accessories - "that will be good for both buyers and sellers as we customize the categories."
No TV Advertising
While Donahoe did not rule out television advertising at some point in the future, he said eBay's highest growth opportunity is to retain current buyers and grow their share of wallet. The actions eBay has to take to accomplish that will also attract new buyers, he said.
Negotiating Deals with Service Providers
Donahoe quelled rumors that eBay would roll out an in-house fulfillment service for its sellers, but said eBay would provide tools and incentives for sellers to provide great shipping. Chief Financial Officer Bob Swan said eBay would "leverage our collective community to negotiate the best rates possible."
Classifieds and Local
Online classifieds is growing very aggressively. eBay saw 15 percent growth in that business and in that format last year. "You'll see us take the classifieds format and the eBay format and blending them in certain countries. We're doing that right now in Spain and in France. I think you'll see the whole local market, the lines that had held us back, start to come down. We'll be going after that market aggressively."
Bailout Money and Bill Me Later
When eBay's CFO Bob Swan was asked about the risk of Bill Me Later (BML)'s debt, he said BML leverages the great cash flow of eBay's balance sheet and said they are very excited about their ability to finance the growth of that portfolio while managing risk on a transaction-by-transaction basis.
"And if that fails, we can always go get TARP money," Donahoe said. "Seriously. I make a bit of a joke, little did we know when we bought it. But we have an innovative way to extend transactional credit, which I think is (unintelligible) underwriting characteristics."
TARP stands for Troubled Asset Relief Program, the government bailout program to buy mortgages and other troubled assets owned by financial institutions.
"We are not anywhere near needing TARP, and we think we have a lot of potential," said Donahoe. "I think we both feel even better today than the day we bought it."
Donahoe is not backing down from any of the changes eBay has rolled out, I would expect more of the same.
The fact that eBay thinks of itself as a company that might qualify for TARP was eye-opening to me. With Bill Me Later, they think of themselves as a consumer lending firm. But given that eBay has over $3 billion in cash sitting offshore, it's really hard to figure out why TARP was even on Donahoe's mind.
Does anyone else think analysts have an unhealthy obsession with margins?
More Thoughts and Conjecture
John Donahoe may be beginning to see eBay more as an ecommerce financial services firm - on a transactional level - than as a marketplace business. With PayPal and Bill Me Later in its portfolio, eBay may look to related services when searching for acquisition opportunities. Zuora, Prosper, Mint are examples of the range of Web 2.0 "financial services." (Interestingly, PayPal's CEO sits on Zuora's board, and eBay's VP of Global Billing - Payments sits on the company's advisory board.)
PayPal's Merchant Services business is strong, and mobile payments and micropayments present growth opportunities. But eBay isn't the only ecommerce company in online payments, and Amazon is encouraging developers to work with its FPS platform, enabling it to power some innovative services.
Lastly, Alibaba is in town chatting up eBay, Amazon.com, Google, Yahoo, Microsoft, Starbucks, and GE about possible partnerships. Could Alibaba be interested in taking Skype off of eBay's hands? It seems in some ways quite unlikely, but interesting to think about.