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Business Impact

EBay at Middle Age

BOSTON (AP) – When Pierre Omidyar founded eBay 12 years ago, he wanted to build the world’s most efficient marketplace. At the very least, he launched the most comprehensive one. Today eBay Inc. is a conglomeration of Web sites where people sell everything from car parts to carp arts. (What den couldn’t use a watercolor of a fish?)

But with $60 billion worth of goods changing hands on eBay’s worldwide sites this year, all that stuff has a downside: It can be a drag to pick something to buy. If you were browsing for a video game system, how would you begin to choose among the 1,342 Nintendo Wiis listed on eBay one day this week?

And so with eBay entering something resembling middle age, with growth slowing and the stock price in a funk, the company is undertaking a crucial overhaul. The goal is to make buying things easier, more entertaining and more like shopping in the physical world – three counts on which the company has fallen behind.

”Our user experience has always been fantastic, but it didn’t keep up, in my view, as well as it should have,” CEO Meg Whitman said in an interview Friday on the sidelines of the ”eBay Live” user celebration in Boston. ”You will see more changes to eBay’s buyer experience in the next 12 months than you probably have seen in the past three or four years.”

For example, to reduce buyers’ skittishness about sellers they don’t know, eBay has broadened the feedback criteria that can be left for vendors, and it has tried new strategies for reducing fraud. The company also is trying to make vendors’ shipping costs more transparent, so fewer buyers feel sandbagged by hidden charges.

EBay just added a ”bid assistant” program that lets people put multiple items on a wish list. If shoppers fail to win an auction for one of the products, the software enters them in another. That tackles a longtime eBay bugaboo because it raises shoppers’ chances of actually winning an auction without increasing the prospect they bust their budget winning more than one.

Other moves make eBay more like typical e-commerce sites, such as last year’s birth of eBay Express, where customers can load fixed-price merchandise from several sellers into one shopping cart and check out at once.

Perhaps most dramatically, eBay is crafting a more social experience, so people browsing from isolated computers feel at least somewhat like they’re going to the mall with a pack of buddies.

That is why the company is extending its buying-and-selling platform so it can run on mobile devices, blogs, networking sites like Facebook and little ”widgets” that live outside a Web browser on computer desktops. That same motive prompted eBay’s 2005 purchase of Skype, an Internet calling service, for $4.1 billion – a figure that still boggles some analysts. It also explains eBay’s new game with tenuous ties to commerce, called ”Match Ups,” which solicits votes on whether people prefer one random thing over another. (Radishes or red cabbage? Johnny Depp or Brad Pitt?)

The buying process could get even slicker in the next few years. EBay is exploring improvements to its search engine and might add product-recommendation systems that can analyze buyers’ preferences. The company also bought some ideas in this direction last month, when it spent $75 million for StumbleUpon, a Web site that lets people rate and share information online.

Here’s the challenge: While the new lures for buyers are designed to help vendors move more products, eBay has to be careful not to upset its treasured community of sellers who earn serious bucks on the site and can be prickly about changes.

”The more buyers they can bring in, we’re going to cheer that,” said Linda Hartman, a longtime eBay ”PowerSeller” who offers dinnerware from Bristol, Wis., and worries that a glut of sellers hurts her business. But she added that eBay might be banking too much on fancy Web adornments that will have little overall effect.

”The enhancements are great for techies,” she said. ”But my average buyer is probably a little old lady in Des Moines.”

EBay has rarely required such strategic reformations. After Omidyar set eBay loose in 1995, it ballooned with relatively little corporate effort, a rare example of a cool new thing that could not have existed before the Internet.

As people clambered into their attics to find junk to sell to strangers, pretty much all that eBay executives in San Jose, Calif., had to do was make sure their servers could handle deluges of Web traffic, charge sales commissions and listing fees, and then get out of the way.

In 1999, eBay’s revenue was a tidy $225 million. By 2002 it had sprung to $1.2 billion. Last year it was $6 billion, with $1.1 billion in profit.

But that trajectory can’t last forever. In one telling sign, eBay recently stopped having ”category managers” recruit and nurture buyers and sellers in most of its particular niches, such as coins or gardening. By now, because of eBay’s wild success, there are plenty of traders, and no more new categories to add. Instead those managers are focused on wider-scale issues like improving eBay’s overall buying and selling experience.

In the first quarter of 2007, users offered 588 million items for sale, but that was up only 2 percent from a year earlier. EBay’s count of ”active users” rose at a healthier clip – 10 percent – but that rate has been shrinking steadily since 2003. The growth in U.S. revenue – half of eBay’s business – has slowed for four of the past five quarters. Although international growth is stronger, typically around 38 percent, eBay has struggled in the exploding markets of China and Korea.

Add it all up, and it’s clear why the company is trying to ”reignite the core,” in the words of Bill Cobb, who heads eBay’s North American business.

”They’re not really screwing up, and it’s not that Meg Whitman needs to go or they’ve gone in the wrong direction,” said Martin Pyykkonen, an analyst with Global Crown Capital. ”It’s just that there’s some finite limits to growth, and they’re reaching that.”


On the Net:

You can see some eBay changes at

http://playground.ebay.com and http://www.windorphins.com

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