Tuesday, January 22, 2008

E-Bay Auction Worries

This could get interesting I had suspected E-Bay was having some trouble as they had what I considered a very aggressive advertising campaign in Canada for their website. It should be interesting to see what the future holds, though I suspect things will get worse before they get better in my opinion.
Let me know what you think.

eBay CEO Meg Whitman is reportedly pondering retirement as the online auction giant struggles with slowing growth. Makes you wonder about those fourth quarter results eh?

The Wall Street Journal reports that Whitman is seriously thinking about retirement after a decade at the helm. That’s a lifetime among Internet companies. For instance, Yahoo has been through three CEOs in the last decade. John Donahoe, who leads eBay’s auction unit, is the front runner to succeed Whitman.

What’s Whitman’s departure mean? Big changes are coming. A few hints of how big these changes are will come Wednesday when eBay reports its fourth quarter earnings. Analysts are expecting a profit of 41 cents a share in the December quarter with sales of $2.14 billion, according to Thomson Financial.

Going into the quarter, analysts expect eBay to cut its outlook for 2008 with a lot of management time spent on reviving listings growth. Listings growth in the U.S. is expected to be up roughly 3 percent in the U.S., according to Jeffries analyst Youssef Squali. However, Squali notes that eBay gets more than half of its revenue from overseas and a weak dollar can boost results. Overall, eBay is going to spend a lot of time talking about listing prices and potentially a major price adjustment.

eBay’s has two critical issues. First, Amazon’s third party partners are taking eBay market share. It’s unclear what eBay can do to boost listings revenue (it doesn’t have pricing power anymore). Most analysts expect eBay to cut insertion fees.

Merrill Lynch analyst Justin Post writes:

EBay management has indicated that the company is looking at restructuring its listing fees structure in order to improve seller sentiment and increase listings activity (and better compete with Amazon for high volume sellers, in our view). Industry sources and our calculations indicate that sellers currently pay approximately 50-60% of their eBay fees upfront in insertion, gallery, and other option fees and only 40% in final value fees on goods that actually sell. For many sellers, particularly larger professional sellers, the lack certainty on their marketing cost of sales (because they can’t predict conversion rates) limits how much they are willing to commit to the eBay marketplace.

Simply put, it’s a good time for Whitman to hand off the reins–especially if impending changes at eBay will take a while to pay off.


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