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Mon Feb 4 2013 13:20:11

Hard, Soft Questions for eBay CEO Donahoe at WSJ Breakfast

By: Julia Wilkinson

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EBay CEO John Donahoe fielded questions both benign and pointed in an interview at the Wall Street Journal "Executive Breakfast Series," Viewpoints. I thought the Journal's Deputy Editor-in-Chief Rebecca Blumenstein struck a good balance of asking probing but not softball questions, although as with many such interviews of eBay executives, I wish the people asking had a better understanding of what it's like to sell and buy on eBay on a regular basis. 

In the case of Blumenthal, she did have intel from her son (where a lot of us parents get our real technology lowdown these days), who had told her eBay was the place to get shoes, specifically for basketball.

eBay's Move from "Used Collectibles" to New Items
She also knew that eBay had moved away from offering used, collectible/antiques-type items to an emphasis on fixed-price, new items. Back when the stock was around $10 a share, she said, "eBay struggled with the image...as many of us grew to know eBay as a purveyor of used collectibles...antiques, used clothing, that sort of thing. To be honest, I think some people still have that image, and you've reversed that in many ways and are selling many more new goods," she commented. (My question is, when did the phrase "used collectibles" become dirty? What's wrong with "used collectibles?" There's a market for them, to be sure. But we know eBay was chasing bigger retailers and fixed-price items, and I get some of that). "How are you trying to really change your image?" asked Blumenthal.

"What happened was the Internet is an unparalleled place for a company to reach global brand and global scale. And eBay had a phenomenal first ten years of doing that," said Donahoe. But just as an Internet company can disrupt, it can can be disrupted, he said. "So five years ago, eBay had not kept up in innovation and was slowly being disrupted. So over the last five years, we have completely reinvented the eBay."

Donahoe explained that five years ago, eBay was 70% auctions, 30% fixed price; and probably half new and half used items. And "five years ago there was no trust policies around it." (I don't think I'd agree with that statement, but I do think many buyers were disgruntled by the few bad apple sellers and that soured eBay's whole image). "The eBay of today has 70% fixed price and 30% auctions, and that's on its way to 80/20. And consumers are driving that, not us," said Donahoe.

eBay Stock from $10 to All-Time High of $55/Share
There's no denying that eBay's stock has gone up significantly since Donahoe has been in charge, though there was a funny moment in the beginning of the interview when Blumenthal introduced Donahoe, saying, "John joined eBay as CEO in 2008, taking the reins from Meg Whitman...at the time, or shortly after you started, the stock had fallen to $10 a share..."

"[I was] not the cause of that, necessarily," he joked.

"Well you can explain that later, but...the stock closed yesterday at $55/share, which you informed me earlier is at an all-time high," said Blumenthal.

Pushing New Over Used?
Blumenthal said after hearing from her son that eBay was "the place" for basketball shoes, she said she went on the site but was "a little confused as to what's new, what's used, what's a collectible...could you explain how in fashion you're not necessarily selling -- you're matching buyers and sellers, but you're actively promoting more new rather than just collectibles?" she asked.

Here Donahoe said retailers want to be on eBay because that's where they were saying their customers are starting to shop, and eBay's app is often on the top 10 of many people's iPhone decks, whereas it's hard for an individual retailer to get there. But he said, "We give consumers a choice...take shoes...we have retailers and suppliers putting brand new shoes on; if you're going to sell a vintage shoe, that's where auctions matter, because price and value is in the eyes of the beholder," he said.

Visual Search App Coming
This doesn't necessarily answer the question of how eBay pushes new stuff more than used, of course, but it did give Donahoe a chance to preview a new technology with eBay's fashion app where people could simply take a picture of shoes "and it uses visual search to identify shoes that have that color or that pattern, and it brings back results in my size in that shoe," he said. "This is proprietary search technology we're using. But, within a year, I'll be able to take a picture of your watch and have it bring back inventory that matches that. Think about how that can change shopping."

Questions: Fraud, Food and More
Not surprisingly, the questions in the q&a session were for the most part tougher than Blumenthal's. Angel investor and entrepreneur Esther Dyson quoted eBay founder Pierre Omidyar's "everybody's fundamentally good (or something like that)," and added "but you do a lot of fraud prevention...Can you talk a little about is it going up or down" and "how important that part of your business is?"

"We invest a lot in fraud," said Donahoe. "In fact you could argue PayPal's competitive advantage is we have proprietary fraud models, where $130 billion dollars of volume is traded on the web stranger-to-stranger, 20% cross-border...with less than 3/10% loss.
And I would say we're gaining; it's getting safer and safer. We invest a lot in it."

Donahoe added most of the fraud was occurring in certain countries. He said he had told a high-level Russian government representative "there's too much fraud going on...and since then, Department K, it's gotten better," he said, adding, "We put over 60 people in jail in Romania," he added.

Alibaba and Taobao
Blumenthal noted Alibaba and Taobao were growing very fast and asked how much of eBay's focus was going overseas? Donahoe said "eBay today is very global. Sixty percent of eBay's revenue and users are outside the US." He said eBay is continuing to expand; there are two billion internet users today, and that "will go to four billion in next three to four years." And 80% of that growth would be in the brick and emerging markets.

Amazon's Warehouse Strategy
Ivan Feinseth of Tigress Financial Partners said Amazon's biggest criticism has been its focus on warehouses, but "they're actually fulfilling a lot of the business sellers on your site are doing...so do you think you're going to get more into fulfillment?"  He also said  eBay's "drop-off points" have come and gone," and asked if he saw that as a viable part of their business. And lastly, and what was Donahoe's view of MercadoLibre?"

Donahoe explained that MercadoLibre is the "eBay of South and Latin America," and  eBay owns 19%. It's run by a "fabulous entrepreneur CEO, Marcos." We'll see, he said; "we're content now. We're now competing with Mercado in payments...PayPal is in Brazil," for example.

As to Amazon, he said "some sellers use Fulfillment by Amazon, yes," but he said "sellers are very wary" because "they view Amazon as a potential competitor who could go first-party at any moment on something they put through their fulfillment centers." And he said "sellers provide excellent fulfillment" and "small business can handle it now."

As to the drop-off points...Donahoe said he thought that was more a problem of the older days; listing was much easier today, and referenced "eBay Instant Sale" where people could sell, for example, their old iPhone. "A FedEx envelope comes" and the company CD Exchange takes them, refurbishes them and resells them, he explained.

Privacy Issues
Myron Kandel, formerly of CNN, asked about privacy, and if "the goverment comes and says we have a terrorist investigation; we want to know Rebecca's buying patterns," what would he do? To which Donahoe responded, "We comply with the laws of the lands."

Food
Jean-Marc Bellaiche of Boston Consulting Group said there had been a lot of failures trying to sell food online and asked, "What is the plan of eBay on food? Do you believe one day you will sell food on eBay?" Donahoe said the only place he'd seen grocery delivery working was in Seoul, Korea. "You need a lot of density," he said. "I don't know if home grocery delivery will go big in the US," he said. But he said things like drugs and sundries -- "things like eBay now, where Walgreens is a participant" were more viable. He saw more happening with mobile apps and things like their pilot with Jamba Juice in California, with the PayPal mobile app, where you could order a smoothie and you can "walk in and go around the line" and pick it up when you get there. He also saw some delivery working along the lines of eBay Now, with the "Uber" model.

The Rotten Twinkie
Blumenthal seized this moment to mention a "rotten twinkie" she had heard was listed on eBay and asked whether they would get involved if something was clearly "rotten or bad."

This may have been the only moment where Donahoe appeared flummoxed. He laughed nervously, then said, "Maybe someone's into rotten twinkies." Then he recovered and said, "Obviously, anything that's illegal." Then he launched into a story about how his first week at eBay, someone listed a "consecrated host," and he's Catholic. They wound up taking it down.

Did you listen to the interview with Donahoe or read the article about it? What do you think of it or any of the issues it raised? Post a comment here!




Comments (22) | Permalink

Readers Comments

Hard, Soft Questions for eBay CEO Donahoe at WSJ Breakfast   Hard, Soft Questions for eBay CEO Donahoe at WSJ Breakfast

by: Digmen1 This user has validated their user name.
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Mon Feb 4 17:50:16 2013

I think long term people will want to buy new stuff direct from online stores not auction sites.

To me its much easier to trust an online store than some faceless ebay seller.

Hard, Soft Questions for eBay CEO Donahoe at WSJ Breakfast   Hard, Soft Questions for eBay CEO Donahoe at WSJ Breakfast

by: Patricia This user has validated their user name.

Mon Feb 4 18:06:21 2013

I sure wish he'd wise up and separate the collectibles and old stuff and set up a proper auction environment for them.  They would pay back royally....instead he cannot deny he has made small sellers into a punching bag!  He is still chasing after Amazon without a thought in his head as to how hard that site worked for the market share it has!

Hard, Soft Questions for eBay CEO Donahoe at WSJ Breakfast   Hard, Soft Questions for eBay CEO Donahoe at WSJ Breakfast

This user has validated their user name. by: Basset

Mon Feb 4 19:28:25 2013

I think Digmen1 is correct. As long as the online stores actively market their items, they will have a stronger & stronger presence.

Recently spent time looking for a name brand household item on eBay & amazon (the other venues usually mentioned here did not have any available). I would have accepted used in vg condition or new.  After watching & searching a couple months, I found an online store (not big box) that was high ranking on the Google results.

They had the item new with warranty for a good price that compared with eBay used prices, with shipping included in the price.  Up popped a window that gave me 20% off for that day only. That was all it took, I bought the item!

Hard, Soft Questions for eBay CEO Donahoe at WSJ Breakfast   Hard, Soft Questions for eBay CEO Donahoe at WSJ Breakfast

This user has validated their user name. by: Philip Cohen
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Mon Feb 4 22:46:58 2013

"We're on the cusp of what is one of the most exciting and transformative periods in two enormous industries in which we participate: retail and payments," said Donahoe.—http://on.wsj.com/YPRplh

You can always tell when an eBay/PayPal spokesperson is trying to sell you a bridge somewhere—their lips are moving; and this headless turkey is still raving on and waving about his wanker phone; but, seriously, how could anyone with an IQ above 50 take any notice of a prediction by this turkey, other than with a grain of salt?

For instance, the Ho is now in the sixth year of his three-year turnaround of eBay, and little, if any, progress has been made: in late 2007 both eBay’s and Amazon’s stock prices were ~$40 … Not only is the senior executive management of eBay demonstrably incompetent (and obviously there is also a trickle-down effect in play), they are also criminal, demonstrated by the ugly reality for consumers dealing with the clunky, unscrupulous eBay marketplace ... http://bit.ly/11F2eas

eBay’s bilge pump, the clunky middleman PreyPal, has recently been working overtime trying to keep the eBafia marketplace afloat, but PreyPal too has a limited life expectancy now that both Visa and MasterCard have developed their own “professional” online digital wallets … All too soon PreyPal will be relegated to its effectively mandated use on the eBafia marketplace and it will then continue to atrophy along with that marketplace … http://bit.ly/UVXx53

eBay / PayPal / Donahoe: Dead Men Walking

Hard, Soft Questions for eBay CEO Donahoe at WSJ Breakfast   Hard, Soft Questions for eBay CEO Donahoe at WSJ Breakfast

This user has validated their user name. by: Ric

Mon Feb 4 22:56:59 2013

Once again the hard questions were not asked.

John, would you confirm that eBay's reported GMV value includes items for which sellers never receive payment (unpaid items)?

John, would you confirm that eBay's GMV disregards the value of returned merchandise? ( i.e. the value of returned merchandise is not deducted from eBay's reported GMV)

John, you are adding eBay Motors sales volume to eBay's overall GMV where it had been reported separately to date. Would you confirm that this change is being made in order to obfuscate existing declines in marketplace sales and further reductions anticipated when eBay introduces the new search engine?

Speaking of search engine....John, eBay invested millions in a new search engine which is soon to be implemented. Would you care to enlighten us as to why search functionality supporting Wild Card searches was discontinued ahead of the full release of Cassini?  

Is it true that Cassini will be the first search engine in the world which was designed to be incapable of handling basic wild card search functionality?

John, also with regard to Cassini, would you care to explain why Cassini is described by eBay as returning fewer items in searches and how this will effect sellers who list items that may never be seen?

And finally... John, as CEO you promised that seller facing changes would be announced in advance, would be limited to two ( OK three) releases annually, and that there would be a moratorium on changes during the holiday selling season (4th quarter) . You also promised sellers this policy would allow sellers time to adjust their business practices ahead of the changes.

That said, through the entire 4th quarter, search result pages and view item pages changed for most users on a daily basis or as often as the user cleared cleared cookies. Changes were made with banners obscuring portions of gallery images. Items discounted through eBay markdown manager no longer show the original and sale prices in search results. These changes, to name but a few, were all implemented without any notice as promised, and thus sellers were afforded no opportunity to adjust their business practices accordingly.

Would you care to explain to sellers why your public promises have been routinely usurped?

These are the kinds of questions Wall Street Analysts should be asking instead of the puffery they queried in this piece.

Hard, Soft Questions for eBay CEO Donahoe at WSJ Breakfast   Hard, Soft Questions for eBay CEO Donahoe at WSJ Breakfast

This user has validated their user name. by: Philip Cohen
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Tue Feb 5 00:44:17 2013

These tame interviews are not meant to investagative; they are little more than quite pathetic, probably paid-for, infomercials ...

Hard, Soft Questions for eBay CEO Donahoe at WSJ Breakfast   Hard, Soft Questions for eBay CEO Donahoe at WSJ Breakfast

This user has validated their user name. by: Rexford

Tue Feb 5 08:30:10 2013

"[I was] not the cause of that, necessarily," he joked."

Well, he at least got that right.

I guess she was above asking him why does he think he is one of the most hated CEOs in America.

Hard, Soft Questions for eBay CEO Donahoe at WSJ Breakfast   Hard, Soft Questions for eBay CEO Donahoe at WSJ Breakfast

by: FREDDY This user has validated their user name.

Tue Feb 5 09:37:41 2013

I agree with Digman1. I wanted to purchase a new winter coat - looked at ebay and amazon. Went to Eddie Bauer and bought direct. Felt a lot safer.   I also miss the huge assortment of antiques and collectable that were on ebay. Spent many dollars and hours browsing and shopping. Now, it is a joke on ebay. Antiques and collectables are new to look old from china. And we all know that anyone from China is one of the favorites on ebay. I think that is due to the pre coming of new owner of ebay (CHINA). Maybe not paypal but definitely ebay and China. My opinion of course.  

Hard, Soft Questions for eBay CEO Donahoe at WSJ Breakfast   Hard, Soft Questions for eBay CEO Donahoe at WSJ Breakfast

by: macsbaby This user has validated their user name.

Tue Feb 5 11:58:51 2013

The value of ebay stock is now 80% paypal. They are running off small collectible/antique sales/customers which are flocking elsewhere and his quote ''The eBay of today has 70% fixed price and 30% auctions, and that's on its way to 80/20. And consumers are driving that, not us,'' is complete fallacy as eBay is the driver of this. I predict that when paypal is split off or separated from the stock, that will be the beginning of the end of eBay. They are trying to somewhat recreate Amazon, but in its current form doesn't stand a chance against the Amazon model due to the shipping and scales of efficiency already created. The costs have also been shifted onto the smaller seller, again these sellers are finding other venues to sell. I, as a buyer, have stopped buying on ebay unless it is specifically an antique as I can find the same items on Amazon, which for me, is much more reliable and predictable. If Amazon ever lets me sell antiques there, its over for eBay.  

Hard, Soft Questions for eBay CEO Donahoe at WSJ Breakfast   Hard, Soft Questions for eBay CEO Donahoe at WSJ Breakfast

by: Valaset This user has validated their user name.

Tue Feb 5 12:09:15 2013

Wow...lots of EBAY haters posting comments.  That is too bad.  My EBAY business is up over 50% from 2011.  I have very few complaints.

The one note I would remind everyone: If you are going to succeed in business, you must always be looking to adapt and make changes to your business model.

I would also advise: if you hate EBAY so much, go find another marketplace to sell on that works for you.

Hard, Soft Questions for eBay CEO Donahoe at WSJ Breakfast   Hard, Soft Questions for eBay CEO Donahoe at WSJ Breakfast

by: Patricia This user has validated their user name.

Tue Feb 5 12:56:00 2013

Hey Valaset - that's just what is happening.  Sellers have been leaving ebay in droves and now Ebay can see the bottom of that barrel.  If you're lucky enough to have found a niche market more power to you but you are NOT in the majority.  I deal in my own artwork and have found a site that is dedicated to art and where my stuff sells...bye bye ebay!

Hard, Soft Questions for eBay CEO Donahoe at WSJ Breakfast   Hard, Soft Questions for eBay CEO Donahoe at WSJ Breakfast

by: Digmen1 This user has validated their user name.
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Tue Feb 5 14:03:53 2013

@Patricia
Yes there are more and more niche sites
Etsy for handmade
And dedicated antiques sites.

@Ric
Really, most of the points you raised are fairly minor and not worthy of a prime time Wall Street analyst.

@Philip
I'm still waiting for Paypal to atrophy, I have not heard a thing about the new payment methods.

Hard, Soft Questions for eBay CEO Donahoe at WSJ Breakfast   Hard, Soft Questions for eBay CEO Donahoe at WSJ Breakfast

by: comet This user has validated their user name.

Tue Feb 5 14:04:48 2013

Hey @ FREDDY---Wish you had found MY Eddie Bauer and similar ON EBAY.

No fears here!

While I do realize and respect what you are saying tho I have to say that it is NOT the small sellers by and large that are "To Fear" it is the company as a WHOLE that makes EVERYONE a victim of ebays shorsightedness and GREED.

This puff piece just confirms ALL we have ever heard and read and thought about The Ho.

Does his resume HAVE more than one line?

"Will sleep with any one for cash?"

Hard, Soft Questions for eBay CEO Donahoe at WSJ Breakfast   Hard, Soft Questions for eBay CEO Donahoe at WSJ Breakfast

This user has validated their user name. by: Philip Cohen
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Tue Feb 5 14:57:07 2013

@Digmen1,

Next time you visit Home Depot, ask the cashier how “Pay Here With PreyPal” is going … LOL

But you are right to an extent, it is very early days for the more versatile and “professional” digital wallets of Visa and MasterCard, and they are not even yet available in Australia; but they are coming (can you hear that rumbling noise), and if you think that all those merchants that already have a merchant account with a real banks will not take up and offer a Visa/MasterCard online digital wallet in place of the clunky PreyPal, you are as delusional as John Donahoe and David Marcus … LOL

PreyPal has had a ten-year start and the advantage of being effectively mandated on eBay, but in the long term that will not be enough to allow this utterly clunky middleman to succeed any further now that Visa/MasterCard are in the digital wallet race … http://bit.ly/UVXx53

But if you think otherwise, you should be buying shares in eBay …

eBay / PayPal / Donahoe: Dead Men Walking ... http://bit.ly/11F2eas

Hard, Soft Questions for eBay CEO Donahoe at WSJ Breakfast   Hard, Soft Questions for eBay CEO Donahoe at WSJ Breakfast

by: AgendaSwallowsAll This user has validated their user name.

Tue Feb 5 23:31:35 2013

My Father made boxed potatoes by putting the water, potato flakes, butter & salt in the pot and turning the heat on which resulted in a disgusting crusty brown substance.

When I tried to teach him how to make them properly, his eyes bulged out of his head and he said ''What, you don't like French Fries?''

My Father = John Donahoe, enough said.

AgendaSwallowsAll

Hard, Soft Questions for eBay CEO Donahoe at WSJ Breakfast   Hard, Soft Questions for eBay CEO Donahoe at WSJ Breakfast

This user has validated their user name. by: Philip Cohen
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Wed Feb 6 04:13:01 2013

The word “ebay” synonymous with “fraud” …

Just for fun I Googled the word “ebay” today and all I got back was articles about shill bidding … it seems that this ugly commercial entity “ebay” is now synonymous with “fraud”. Well, many people have been aware of that for years but it is interesting to see that a Google search now confirms that belief …

eBay / PayPal / Donahoe: Dead Men Walking ... http://bit.ly/11F2eas

Hard, Soft Questions for eBay CEO Donahoe at WSJ Breakfast   Hard, Soft Questions for eBay CEO Donahoe at WSJ Breakfast

This user has validated their user name. by: Rexford

Wed Feb 6 08:39:10 2013

Valaset, before you get too cocky, just remember that the next eBay change may be the change that sinks your business.

I've seen more than one eBay cheerleader change their tune over night.

Moreover, where have you been?  Moving on is EXACTLY what sellers have been doing.  And most are very happy about it---and more profitable.

Hard, Soft Questions for eBay CEO Donahoe at WSJ Breakfast   Hard, Soft Questions for eBay CEO Donahoe at WSJ Breakfast

by: Ed This user has validated their user name.

Wed Feb 6 09:27:22 2013

@Valaset Wow...lots of EBAY haters posting comments.  That is too bad.  My EBAY business is up over 50% from 2011.  I have very few complaints.

The one note I would remind everyone: If you are going to succeed in business, you must always be looking to adapt and make changes to your business model.

Once you have $50,000 to $100,000 in inventory and they cut your sales with no regard to your investment be honest will you be Happy or Unhappy. Most of the people that you say hate ebay is because they lost money for no good reason.
eBay has not proven to be the best partner and I am a Power Seller and a TRS and my sale were up about 30%
In a couple of months we lost thousands of dollars in sales so they could divide the sales among other to make sure they would not leave ebay. Do you think they care about the sellers investments or ebay profits. The sellers you say hate ebay are the sellers that built good businesses over years and years of hard and then ebay turned on them like mad dog.

You need to pray it does not happen to yourself.

Hard, Soft Questions for eBay CEO Donahoe at WSJ Breakfast   Hard, Soft Questions for eBay CEO Donahoe at WSJ Breakfast

by: pace306 This user has validated their user name.

Wed Feb 6 10:00:53 2013

Another softball interview. Im not sure why anyone expected any real answers.

While I agree with most of RICs questions - I have a few others that *I* believe should have been asked.

1) Isnt it FRAUD to take money and FVF for listings - telling selles they will have thier items seen by buyers, when you are actively manipulating the search away from them? Isnt it theft as well since buyers wont ever see those listings?

2) Since you are currently STILL involved with copyright issues in a lawsuit in France, isnt it time that you curbed the dogs of VERO and stopped allowing fraudulant takedowns?

3) When will you (through Paypal if you must) finally vet buyers so that there will not be anymore ''unpaid buyers''?

4) If you insist on putting competing ads on a sellers page, when will you offer the seller a percentage of what you are getting from those ads? They wouldnt be seen if the seller wouldnt have brought that set of eyes to that page - so isnt it fair?

4) When will you hire/train professional CS reps to deal with issues? Why must sellers get ''engrish speaking'' agents in the far east?

5) When will you subsidize the shipping costs of US sellers like you do for the Chinese Megasellers?

6) Why havent you yet completed the international shipping deal with PB? Even Paypal is wondering when it will finally roll out to all, and why does it cover so few countries?

7) If you are doing so well with MERCADO ... why wont you integrate those buyers (who may have issues with being shipped from the USA to South America) into eBay directly?

8) Why were the peple at your eBay booth rude, obnoxious and not interested in helping sellers?

9) When will eBay finally be ''grown up''? Why does it take such a long time to put professionalism into eBay.

and 10) Why does eBay hate small to midsized sellers? Why the games? Why the hate?

Hard, Soft Questions for eBay CEO Donahoe at WSJ Breakfast   Hard, Soft Questions for eBay CEO Donahoe at WSJ Breakfast

by: Steevo This user has validated their user name.

Wed Feb 13 12:20:52 2013

70% fixed price, heading to 80%.  Auctions are dead in most categories.

They didn't say what percentage was new vs. used.  Or I didn't see it.  

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