eBay's acquisition strategy confuses market

Brian, it will all come out in the wash! eBay does have a plan and since they never share their plans its up to bloggers to speculate about it.

They have created a new search engine (excuse me, "finding" engine). They have a new desktop version of eBay, code named San Dimas and they are working on one major top-secret project I can’t tell you about right now. The rumor about Stumble Upon may be mostly about the toolbar and the users (2 mil).

Another company that is possibly on the radar for eBay is vFlyer and eBay is working on “distributed commerce” with Social Networking sites like MySpace, Bebo, etc. Believe me they have a plan. As “The Brain” always told “Pinky” in this quote from the classic Warner Bros. Cartoon.

Pinky: Gee, Brain, what are we going to do tonight?
Brain: The same thing we do every night, try to take over the world!

StubHub, PayPal and Shopping.com were excellent acquisitions and at some point, I have no doubt, they will buy Craig out of Craig's list; even ideologues have their price.

http://www.myblogutopia.com

Problems are:

1) People hate their new search engine. (EE already has it, and it sucks)
2) Desktop version not due out for 18 months. Amazon already has a similar program that has been in use for months. When it is released, if it is as bad as their other code, it will be horrible and there will be a huge uproar.
3) Sites like Myspace and especially Bebo are focussed on adolescents....a group that is by law forbidden to buy and sell on eBay (minors under 18 not allowed to enter binding contracts - which is required to buy or sell on eBay).
4)shopping.com's traffic is lower than it has been for two years.
5) if eBay does buy out craigs list, it will generate a lot of angry sentiment among ebay sellers who are paying thousands of dollars per month to sell their items on eBay. Because eBay will undoubtedly start advertising craigslist items on eBay, just as they have with EE, half.com and thousands of other sites who use Yahoo! ads. Sellers are already not happy that eBay is diverting traffic away from eBay.com. And being that eBay auctions and the paypal fees from the payments of those auctions are by far the biggest source of revenue for eBay, perhaps investors should be a bit worried too.

I don't have anything against acquisitions by eBay....if they generate revenue and don't hurt sellers. Problem is though that Paypal is the only acquisition that is making any decent money, and that is due in large part to the fact that eBay was growing tremendously at the time and after the acquisition. Had eBay not bought paypal, eBay's own payment system would be bigger than Paypal is today simply because of the growth of the online auctions on eBay over the past 5 years.

eBay management needs to prove that they can be better judges of what acquisition targets will be big money makers. Their track record is dismal at best at this point - factor in their new in-house offerings such as ebay express and it looks even worse.

Let's get our facts straight shall we? Or should I start calling you son of Gary?

Myspace demographic
http://www.comscore.com/press/release.asp?press=1019
Visitors to MySpace.com and Friendster.com generally skew older, with people age 25 and older comprising 68 and 71 percent of their user bases, respectively.

Bebos demographics
http://ypulse.com/archives/2006/11/ypulse_intervie.php
while Beboers are teens and young adults (13-24)

Shopping.com
contributed significantly to Ebays revenue and earnings this quarter. Check out earnings call script.

Paypal
http://news.com.com/2100-1017-941964.html
eBay bought Billpoint in May 1999 but did not fully launch the service until spring 2000. Despite heavy promotion, Billpoint has struggled to win market share from PayPal.

According to PayPal, it handles payment for one in four winning auctions on eBay. Given that eBay is hoping to boost the use of electronic payments for auctions, analysts said it was easier to buy its rival than to beat it.

They were smart enough to buy the best.

Firemeg – I would agree they’ve had some missteps but they do have a plan. They often come across as a ship without a rudder because they don’t communicate well. (Which is funny because, if you tell them that, they seem offended) Sellers are unhappy, there is no disputing this and if eBay doesn’t address the issues facing sellers today they will have burned through all of the goodwill left.

But, if you look at their acquisition strategy the only purchase I have a problem with is Skype. I just think it will take a long time to realize the ROI on that deal.

Their portfolio of international classifieds sites and 25% of Craig’s list makes sense. Add to this (and this is pure speculation) a purchase of vFlyer.com and you have a very robust classifieds business. I am not saying that vFlyer is in play but it would make sense.

The purchase of StubHub makes complete sense. StubHub was eating eBay Tickets lunch so if you can’t beat em’ buy em’

Stumble Upon is not a done deal so I can’t really figure that one out. At face value I don’t have a terrible problem with it.

I don’t have any problems with the Biz Dev side of eBay. I certainly do have problems with the relationship between sellers and management.

One suggestion for eBay, if you want your stock to improve, bridge the divide between management and sellers and start treating them as assets rather than liabilities and the Market will regain confidence in eBay’s future. Which will make for much more leverage when they merge with Yahoo. Did he say merge with Yahoo? Yup!

Just my 5 Cents! (Adjusted for eBay Economics)

http://www.myblogutopia.com

Randy I must say I'm impressed especially after your negative experience with Ebay. I applaud you for your integrity and objectivity.

I agree with your primary issues with ebay.

This person FireMeg is simply a spewing and ranting ball of babble gook. Makes him look like a completely uninformed basher and is not representative of sellers who just wishes ebay would just improve and help the sellers.

I don't agree with ebay on alot of things but I have enough integrity to admit there are real good things about the company.

Gretchen - Me uninformed? Uh, no sorry. I don't think so. I'm not saying I know it all, but I sure as heck no a lot more than a lot of people here that simply read analyst reports.

Randy - I have no problem with the stubhub purchase, provided they accomplish two things. 1) Actually make some money. and 2) Don't hurt eBay sellers in the process.

Secrecy is good when trying to prevent competitors from knowing what you are doing until it's a done deal. Secrecy is bad when keeping changes in the company direction from sellers while still promoting a direction that may soon go away. (ie. promoting free month of stores until days before the huge fee hike announcement last summer).

Investors get quarterly updates on the status and health of the company, as well as regular press releases. Shouldn't sellers be given as much if not more info? Sure, eBay announces some things months in advance, but it also makes announcements about policy changes that are effective immediately. Would you like to run your investments with no warning of anything going on with the company? Probably not, just like sellers don't want to be kept in the dark. We have business plans that need to be amended each time ebay makes a change, and waiting to the last minute is disrespectful of the sellers who are driving the revenue.

Anyway....I have no problem with eBay acquiring internet capital...if it is a successful and profitable buyout that doesn't hurt or disrespect sellers.

I do think that eBay should be hiring people with vision to actually produce some of these sites and ideas rather than spending billions of dollars on them once they become popular. With eBay's track record of take overs not being so profitable or popular, what would be the big deal if eBay Inc. engineers produced an in-house site or program that failed? Investors don't seem to be too upset that EE is a pile of crap. They just need to try it and if it fails move on to another project that might work instead of dumping more money into a hole.

Firemeg - I certainly agree with this statement.

"Investors get quarterly updates on the status and health of the company, as well as regular press releases. Shouldn't sellers be given as much if not more info? Sure, eBay announces some things months in advance, but it also makes announcements about policy changes that are effective immediately. Would you like to run your investments with no warning of anything going on with the company? Probably not, just like sellers don't want to be kept in the dark. We have business plans that need to be amended each time ebay makes a change, and waiting to the last minute is disrespectful of the sellers who are driving the revenue."

Gretchen - FireMeg and I are not so different in our views. He's just more "Shock and Awe" than I am.

Noone is disputing there are valid issues with Ebay. I think what Gretchen is referring to is the tendency for FireMeg to spout unsupported assertions like Gary E. Sattler. For example Ron Tartar corrected FireMeg's negative assertion with the following points. He either purposely lied or was too lazy to get the facts.

Myspace demographic
http://www.comscore.com/press/release.asp?press=1019
Visitors to MySpace.com and Friendster.com generally skew older, with people age 25 and older comprising 68 and 71 percent of their user bases, respectively.

Bebos demographics
http://ypulse.com/archives/2006/11/ypulse_intervie.php
while Beboers are teens and young adults (13-24)

Shopping.com
contributed significantly to Ebays revenue and earnings this quarter. Check out earnings call script.

Paypal
http://news.com.com/2100-1017-941964.html
eBay bought Billpoint in May 1999 but did not fully launch the service until spring 2000. Despite heavy promotion, Billpoint has struggled to win market share from PayPal.

According to PayPal, it handles payment for one in four winning auctions on eBay. Given that eBay is hoping to boost the use of electronic payments for auctions, analysts said it was easier to buy its rival than to beat it.

I agree with Gretchen and Sara. As Sellers we need to hold ourselves to a higher standard despite our issues with Ebay. FireMeg although his heart is in the right place and I thank him for taking up the cause, he really needs to keep focus on the key issues and not make outrageous unsupported statements like he does often. It makes us all look bad.

Outrageous unsupported statements? Nothing I said was outrageous...perhaps I should have said "teens and twenties demographic" when referring to Myspace and Bebo's focus, rather than "adolescents." Bebo is as other has stated, very heavily used by people who are not old enough legally to use eBay.

Also, I said NOTHING about shopping.com's revenue - NOTHING! Stop putting words in other people's mouths. Check the traffic. It IS down. That's not outrageous.

I'm also fully aware of Paypal's history and current situation. 40% of paypal revenue comes from outside of eBay transactions. This seems like a huge amount, until you consider that paypal total revenue is only a fraction of the revenue brought in by eBay. eBay auctions account for 2/3 or more of the total revenue of eBay Inc.