Sunday, January 27, 2008

The End of the Meg Era at eBay as We Wait for Fee Changes

As you probably heard in the news this week, Meg Whitman announced she will be stepping down as CEO of eBay. Her supposedly hand-picked successor, John Donahoe, will replace her as CEO. Donahoe, incidentally, worked with Whitman at Bain & Co., a firm where presidential candidate Mitt Romney was CEO, Romney having founded Bain Capital, the private equity co.  (There's been some talk of Meg being made secretary of commerce if Romney wins).

"Dogged by slowing momentum on its flagship auction site, eBay is trying to reinvigorate its oldest and most lucrative business, which allows individuals to sell items online to the highest bidder or at a fixed price. Mr. Donahoe, 47, has spent the last three years wrestling with this problem and could make more drastic changes as he assumes the helm," wrote Mylene Mangalindan in The Wall Street Journal on Tues Jan 24 2008.

eBay is also about to announce fee changes this week:  "In the next few weeks, eBay plans to reduce the fee it charges merchants to list a product for sale and will increase the fee it collects when a sale closes," according to the article.

The thing that worries me about Donahoe is that he compared eBay to a "flea market" -- and this in a negative way: "A year ago, we had 14 per cent of global e-commerce, we're the largest e-commerce provider, and our home page still looks like a flea market," he says. "The world around us had changed. In particular our buyers' experience hadn't kept up."

Well, if he has a big problem with a lot of the type of stuff on eBay -- the antiques, collectibles, even the funky and the weird -- maybe especially the funky and the weird -- he may have a problem with what I think makes eBay special.  It's the place where you can find stuff you can't find anywhere else. I don't think that's a bad thing, though granted,  the term "flea market" probably has one of the most negative connotations of all the offline businesses eBay could be compared to.

However, if he was instead critiquing the design of the site, maybe I am being too harsh here.  I guess time will tell.

One thing that we do know is eBay is going to jack up the sales commission on auctions, although they will be reducing listing fees. Which, I don't know..may not be so bad. Well, let's not get too excited.

One reason eBay is doing this is they are evidently not making the money on auction fees they used to, because the proportion of fixed-price listings vs. auction listings has gone up:  "...auctions, while still the largest part of its business, are no longer so dominant,"  according to one article.  "In the past three years, fixed-price sales have risen from 28 to 41 per cent of the total," Mr Donahoe has said.

"To adjust, Ebay is looking at moving away from its traditional initial listing fees and instead taking a bigger commission on a sale."

Would I rather see higher final sales commission from eBay than higher listing fees? I don't know that I can answer that until I deal with it.  My sense is the listing fees going up would be more painful, so if they have to raise something it's better that the do it the way they're up the commissions. Not that I'd be happy about paying more to eBay. (Which begs the question, will the reduction in listing fees make up for the sales commission increase? This is of course going to vary from seller to seller.).

But that is not to say it's going to be a success. How all this will play out, how sellers will react, whether some will actually up and leave, or maybe they will suck it up and find it preferable to listing fee hikes, remains to be seen.

Meantime, if you have thoughts, please email me at or post a comment here on my  blog. I'd love to hear your opinion.

Oh yes..a few more not inconsequential things: according to the WSJ piece, "Rajiv Dutta, president of PayPal, will succeed Mr. Donahoe as president of the auction business and will join eBay's board. Bill Cobb, president of eBay's North America business, is retiring at the end of the year. Scott Thompson, PayPal's chief technology officer, will become president of PayPal."

I think Dutta in that job will be a good thing. I was impressed with him at the last eBay Live convention when he talked about PayPal. I also will miss Cobb and his affable speeches at the conventions. He would say in many cases that eBay was going to look at things and take suggestions away from the sellers at the conventions. He was also not afraid to admit when eBay was wrong. I do wish he'd given us more Stores presence, but we all know Stores don't make eBay as much money. Finally, I enjoyed the fact that he was also a Monkees fan, like me. And I'll always appreciate him giving us Davy Jones as entertainment.


1 comment:

  1. What we need is a viable alternative to ebaY. THEN and only THEN will the cost of doing business online be more reasonable. EbaY makes a LOT of money. The profit margin is enormous. Maybe they shouldn't have sold so much stock(for their own immediate profit, let's not forget), but the company still 'makes a killing'. I'm really offended when they complain about their profits.