eBay's Core Auction Business Is Looking Like A Drag

from the show-me-the-money dept

Thu, Jul 19th 2007 3:08am — Carlo Longino

eBay has reported its latest quarterly earnings, and like Intel's latest results, they offer something of a mixed bag. eBay's revenues and profits are up strongly, but its auction business is stagnating. While it showed revenue growth in the quarter, that's attributed to currency effects and increased commissions for sellers, rather than growth in the number of listings or the value of goods sold. eBay's been able to generate growth by expanding its scope of operations, which is certainly helpful, but the weakness in its core auctions business remains a concern. Questions still remain about some of those expanded operations: for instance, though Skype's earnings grew, usage is flat. But perhaps the bigger problem for eBay is that it's struggling to get the new units to feed off of each other. Buying PayPal was a masterstroke for the company, since a simple and comprehensive payments system delivers benefits to (and derives benefits from) the auctions business. But other new businesses don't integrate so well. Part of the justification for buying Skype was to ease communications between eBay auctions' buyers and sellers, but that hasn't panned out, or turned into a money-spinner. Similarly, some observers say the US launch of its Kijiji classifieds site will drive usage of Skype and PayPal, but judging by the Skype acquisition, that's far from being a sure thing. Clearly eBay's got the ability to get some M&A work done, but its ability to meaningfully integrate its purchases to spur growth among its other businesses still isn't so clear.

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Filed Under: ecommerce, m&a
Companies: ebay, kijiji, skype

23 Comments

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FatBoy Smith, 19 Jul 2007 @ 4:35am

crap sellers
The reason IMHO that eBay's core business is sucking so badly is that most bidders are sick of digging through tens of thousands of junk auctions from "professional" sellers. (Mostly selling very low quality Chinese manufactured goods with very high shipping/handling costs). Ebay was fun when the garage sale/flea market atmosphere prevailed, individual sellers cleaning out their closets.
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Adam, 19 Jul 2007 @ 5:29am

Agreed. As a buyer, eBay is full of junk, mostly from the Chinese selling $0.01 items with $30 shipping as the poster before me pointed out (to avoid seller's fees). Also, many seller plain suck, don't answer emails and take weeks to ship their product. eBay has lost its appeal, period.

As a seller. There are too many idiots there, nobody reads the auctions any more and they flood you with dumb questions that are already answered in the item description.

Also, eBay removed my listings several times for having the word "not" in the title, like "Apple AirPort, orginal not the AirPort Extreme", this is keyword spamming according them, while the Chinese are allowed to post thousands of penny auctions with inflated shipping and that's cool with eBay. They just pissed me off few times with their dumb rules that do nothing to improve eBay only irritate people.

There are still good people there but they very rare.

Adam
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Anonymous Coward, 19 Jul 2007 @ 5:39am

They keep raising the seller fees. You have an insertion fee and a final value fee. Then you have a paypal fee (which is a percentage of total price - you even pay a percent for shipping!)
This is why you get bad side effects like people lowering the price and adding it to the shipping and handling charge (which still doesn't escape paypal's exorbitant rates). The other side effect is that selling is not as fun as before because it's harder to make a profit because of these fees. This is why the auction business is not doing well.
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Jeff, 19 Jul 2007 @ 5:39am

They keep raising the seller fees. You have an insertion fee and a final value fee. Then you have a paypal fee (which is a percentage of total price - you even pay a percent for shipping!)
This is why you get bad side effects like people lowering the price and adding it to the shipping and handling charge (which still doesn't escape paypal's exorbitant rates). The other side effect is that selling is not as fun as before because it's harder to make a profit because of these fees. This is why the auction business is not doing well.
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Jeff, 19 Jul 2007 @ 5:40am

Re:
sorry about double post - i forgot to put my name in.
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Haywood, 19 Jul 2007 @ 6:02am

Re:
This is what I've been saying for years. I'm glad it is coming home to roost, maybe the powers that be will address the problem. There may still be time to lure the garage cleaners back, but many are getting pretty comfortable on Craig's List. It is mainly a problem of geography. If you live in or near a large city, Craig's List works fine, but if you live out in the sticks, the way Ebay used to be was an answer to a prayer.
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Dosquatch, 19 Jul 2007 @ 6:08am

saturation
Business growth is not infinite or indefinite for the same reasons that ponzi schemes implode - eventually, you run out of customers. In a traditional business model you may reach an equilibrium, where you are neither growing or shrinking based on repeat business.

Somehow, this has become painted as the evil "stagnation". This prods businesses to go to no end of gymnastics trying to "grow". Gymnastics like restructuring, higher fees, layoffs, so on and so forth. Many of these actions ultimately end up hurting a business. That a business has "stagnated" - or is merely no longer growing - is not automatically an evil as long as it is still profitable.
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Randall Lind, 19 Jul 2007 @ 6:09am

Ebay need the DOJ to look into them. I am a buyer but however when a company force paypal (which they own) only then charge a % and then % to post an auction then % when price is sold anf final % of shipping.

This is not right and should be against the law. There should only be two fees one for posting and one for selling. Ebay should allow you to use Google checkout.
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Robert, 19 Jul 2007 @ 6:16am

Wanna be Rich?
I cannot agree more with the above comments. I closed my ebay shop 7 months ago and start selling on my own website due to not making enough $$$ to cover my listings and other Ebay fees. Moreover, you have idiots that would bid on your item and win it but never paid but Ebay still tries to charge you. you have to contact customer service and dispute the charge.If you're really paying attention then you should realize that this item was not paid for.....
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Anonymous Coward, 19 Jul 2007 @ 6:25am

Re:
Um, forgive me if I'm mistaken, but I've seen many forms of online payment and checkout processes used on eBay that don't use PayPal. They don't force you to use it, but they do strongly encourage it, obviously because it's convenient and it makes them money.

As for the PayPal fees, that doesn't go into eBay's pocket, or at least not all of it does. That's the fee the credit card companies charge for using their system. Every business that accepts credit cards has to pay fees like that. eBay simply passes that cost on to the sellers. I do know that when you have a business account, you get charged the fee even when you accept a payment that didn't come from a credit card, so eBay is obviously padding their pockets a little, but again, that probably pays for maintenance and improvements on the PayPal system. It has to make money somehow.
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matt m, 19 Jul 2007 @ 6:29am

infinite growth obsession.
Why is it that we expect infinite growth from these companies? eBay is a relatively established company, their stock should be priced appropriately, not at the inflated P/E ratio of a company that people are gambling on to go big. 12% year-to-year growth in pure merchandise sold is good "worst" result.

That said, I've never bought anything on eBay- it takes time and effort to check out the sellers, and then my bid is over taken at the last minute. Lame. I buy and sell on Amazon.
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Overcast, 19 Jul 2007 @ 6:43am

Well with all the recent fraud out there and E-Bay not really doing anything about it - it's no surprise.

Regardless of the realities - that's the perception by many now.
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Matt, 19 Jul 2007 @ 7:24am

Re: crap sellers
this is so right on i don't even know what to say.
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conman, 19 Jul 2007 @ 7:58am

I can hardly express my dissatisfaction with the whole AUCTION scenario. I still have and operate an ebay store and continue to survive and be profitable only because of my extraordinarily high prices I charge and get for my products. as far as the Auction B.S. goes, I had to eliminate it all together. because of some of the non-payment hassles and such, the only way I sell anything is BUY IT NOW! I am also developing my own website and will probably eventually close my ebay store only because of the fees.
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Jack, 19 Jul 2007 @ 8:14am

selling sucks
I just sold something (kind of) for the first time recently on eBay. The problem for me is that the first time I ran the auction it was won by someone who apparently had their account hacked. Their profile said that they lived in Pennsylvania but they wanted it shipped to Argentina?? I re-listed the item and the same thing happened, only this time I got an email from eBay saying that the winning account was hacked. This time they declared my whole auction null and void, not even letting me send a second chance offer.

This whole time I'm racking up eBay fees for the same damn item...and I'm going to have to go through the whole dispute process to get them back. The killing thing is that I still have the item I was trying to sell because I can't get a valid auction.

I think that's a major problem for eBay too, the fact that they are up to their eyeballs with fraudulent transactions.
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JGM, 19 Jul 2007 @ 8:34am

On eBay and Skype
The idea that Skype would aid eBay transactions was misguided from the start: one great attraction of eBay was that it automated and depersonalized the flea-market or classified-ad experience. People generally don't *want* to talk to the strangers they are buying stuff from, to the point of having extended back-and-forth conversations in email just to avoid it.

On a larger scale, Skype and other VOIP services are trending towards, not away from, traditional phone services, and if phones were the answer to eBay interaction glitches they'd be used effectively for this today.

Add to this the old videophone dilemma (both parties need to have it installed and set up for it to be useful) and you have a bad bet from the start.
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Gary Moses, 19 Jul 2007 @ 9:25am

I fell in love with e-bay when i found a T.V show poster in the trash and sold it for $234
the fees didn't bother me then, it was all free money but now as the other blogger posted ,its lost its luster due to e-bay letting professional seller sell there
e-bay don't care you you don't get your stuff u bid for ,they get paid weather you get your stuff or not
E bay works best if you got some things you was going to throw in the trash and decide to see if any one wants it
If your trying to make a living on e-bay , its going to be tuff
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Jesse, 19 Jul 2007 @ 2:11pm

Re: saturation
As others have said, it is fallacious to think that companies can grow indefinitely. If they are still making a good profit (i.e. bringing more money in than they are spending), I would call that a successful business. The problem is that investors demand more and more growth. In my experience, taking a company public is a sure-fire way to hurt it in the long run.

I buy and sell on eBay, but part of the problem I have with it is the ridiculously limited search system. If it were more robust I could cut out a large portion of the sellers from China when doing a search - sadly, there are some categories of goods that I don't even look through anymore because they are inundated with thousands of these sellers.

- Jesse
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molly, 8 Feb 2008 @ 3:17am

ebay to you sellers!!!
Do they really think we're that stupid and we can't do the math?!''

YES.

You sellers are stupid. And lazy too. That's why we can stick it to you a little at a time, and you'll stick around for more.

You chumps will be paying 50% FVFs before I get to the governor's office, baby!

Also, in May we are introducing eBay's brand new product exclusively for sellers, eLube.
It will be mandatory for sellers to keep their eLube at their work stations. However, sellers without their eLube will get screwed anyway.
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paddingtheirnumbers, 1 Mar 2008 @ 3:57am

heres a link for a listing that we believe ebay uses to generate FAKE listings, to keep numbers on the board, but they lost alot of trust with sellers and buyer, too many moves to fast. http://cgi.ebay.com/disney/ws/eBayISAPI.dll?ViewItem&ih=008&sspagename=STRK%3AMEWA%3AIT& viewitem=&item=180219770279&rd=1
check the catagory listed in click on that, its been up for over 24 hours, so yeah if its not inside work then yeah they wanna stop scams...
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donna, 2 Mar 2008 @ 4:46pm

How Ironic!
by paddinding the numbers, I cant believe that, we must travel in the same places I posted that link as well as my chat about that fictitious cataogry, and they were stunned, they wanted to know exactly how i got there, and they never seen that beofre, I had them buggin, then left them hanging, I never reported that one as I bought that item! just to see how far it will go, well got the real pay now, tried calling seller but wont get a response till monday, as I not paying for anything in a non exsistant category, the other thing is the number I gave them was for the same thing but in advance search under completed auctions, theres four of them there..when you click on sdc category you will see more canceled items, but check the category search and you find TWO all category's, AND a "partner" category, weird, to say the least, so yeah I trust them with my feedback, pos,neg nuet, the seller and buyer see if their is a discrepancy to what is posted its shown. the DSR's are hidden, buyers and sellers have no way to see if that is what they left...Ive even found fake feedback! email me if you want more info...peace...enough take space in my head, ebay dont pay me rent..later..
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General, 4 Mar 2008 @ 4:24am

A highly recommended site is elfingo.com for online auctions. They are the new ebay. Many smaller sites like this offer buyers far better deals than ebay ever could. Buyser also save a ton because this site charges little or nothing depending on the day. One more reaso I like elfingo.com is because they don't take a part of the sale at all. No commissions or final value fees. A+++ http://www.elfingo.com
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Free Online Auctions, 8 Mar 2008 @ 8:54am

I agree, there is an alternative site called Online Auction Exchange although a few sellers still post these types of listings I have been told by the site admin that this will come to an end soon, they are working out a way to stop all these cheap listing from being shown on there site ... could turn out to be something good.
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