DailyTech - EBay Profits Down, Finger Pointed at Slow Economy

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IT EBay Profits Down, Finger Pointed at Slow Economy
Shane McGlaun (Blog) - October 16, 2008 1:56 PM

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39 comment(s) - last by Ksyder.. on Oct 19 at 8:43 PM

eBay profit train slows down

EBay when it first began was a fantasia where people could get rid of the junk they didn’t need and make some serious money doing it. As time went by and the site became more popular, things started to change at eBay and many of the changes were not for the better.

Reuters reports that eBay has announced a forecast that didn't live up to Wall Street expectations. The auction giant says that the slowing economy is to blame for its inability to generate the profits it had originally projected. EBay also says that it expects the economic downturn to drag into 2009. The announcement sent eBay shares down 5% in trading.

Profit for Q3 2008 is reported to be $492 million and eBay expects to see revenues of $2.02 to $2.17 billion in Q4 2008. Reuters reports that after-hours trading sent eBay's stock price plummeting 14%. EBay has more problems than simply missing its earnings goals as evidenced by the significant drop in stock price.

The fear from some investors is that the falling profits and the soft economy are hitting eBay just when it is experiencing one of the largest uproars in its history from sellers and buyers who are not happy with new policies that eBay is putting in place.

One of the controversial policies is the move to PayPal and one other option for payment called ProPay, which is worse in many ways than PayPal. Prior to the poor earnings announcements form eBay, it laid off 1,000 employees and dropped close to $1 billion to buy Bill Me Later in the same week.

CEO John Donahoe said, "There is a high degree of economic uncertainty and turmoil in the business market and this is impacting consumer spending, and we're seeing an impact across all of our platforms."

Reuters estimates that Wall Street was expecting earnings per share for Q4 2008 in the area of 47 cents. EBay is now saying it will see profits in the 39 cents to 41 cents per share range. Analyst Jeffrey Lindsay said, "It's really the guidance I think is disappointing. It's probably a very bad signal for 2009."

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More Likely

By Denigrate on 10/16/2008 2:15:17 PM , Rating: 4

Ebay's profits are down because they were (basically)stealing from sellers. While Craigslist is a hassle, at least I'm not losing 20% of my sale to Ebay.

RE: More Likely

By Adul on 10/16/2008 2:20:44 PM , Rating: 2

doesn't ebay own craig's list?

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RE: More Likely

By Mitch101 on 10/16/2008 2:35:31 PM , Rating: 2

Yes they own a percentage but I have to believe its all the smaller ones that are cropping up that do it for a small fee or free.

http://www.onlineauction.com/
http://www.njdevil.com/
http://www.etsy.com/

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RE: More Likely

By silversound on 10/16/2008 2:40:25 PM , Rating: 2

Well, ebay profit would have been much worse if microsoft did not offer the cashback program, future is not bright fot the whole economy, who started the zero down payment promotion for housing? Thats the all the d!psh!t begins...

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RE: More Likely

By Mitch101 on 10/16/2008 2:50:25 PM , Rating: 2

I forgot about that. Its so true the cashback has a lot of people posting items to ebay just so they can use the Microsoft cashback program.

I stopped using e-bay months ago even as a buyer I barely check them any more as most of the sellers I enjoy have gone elsewhere. I just wish I knew where some of them went.

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RE: More Likely

By ANightOwl on 10/18/2008 11:16:30 PM , Rating: 2

There are dozens of sites out there, that's the problem. Your old eBay sellers are scattered all over the place :-) As time goes on some of these sites will disappear and there will be a few left at the top.

The best places (biggest and most active) are:
http://www.bonanzle.com This a brand new, unique site. Well worth checking out. They have been getting 200 new users a DAY and listings are going up about 5000 a day.
http://www.onlineauction.com - established site
http://us.ebid.net/ - established company - newish in US - The UK site is more popular eBay over there.
http://www.ecrater.com/ - a collection of individual shops under one roof.
http://www.etsy.com/ - very popular, but it's only for handmade goods.

Most of the old eBay traditional sellers have set up shop at one or more of these sites in addition to some of the smaller ones.

Kijiji is completely owned by eBay.
The Craiglist story is here: http://blog.craigslist.org/2008/05/unlawful-and-un...

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RE: More Likely

By Adonlude on 10/16/2008 3:38:39 PM , Rating: 1

I remember reading some nasty stuff about ebay getting its hands in craigslist. Craigslist needed money and ebay showed up at the door to provide it for a 'small fee'. Ebay then got someone on craigslist's board of directors and they started trying to man handle the company to help ebay. Very dirty stuff.

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RE: More Likely

By thepalinator on 10/16/2008 5:11:23 PM , Rating: 3

Why else does a company buy in to a competitor if not to help themselves? It may be bad for you and me, but I wouldn't call it "very dirty stuff".

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RE: More Likely

By jeff834 on 10/16/2008 11:40:17 PM , Rating: 2

Well the way ebay managed to get a percentage of craigslist was in a sketchy way by buying it from another party (note craigslist is not a publicly traded company and the owners have said they would never have sold any piece of their company to ebay). Then ebay attempted to get inside information specifically to help them create a direct competing site to craigslist which was at best unethical and at worst downright illegal. The actual owners and starters of craigslist have sued in an attempt to force ebay to divest.

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RE: More Likely

By FITCamaro on 10/16/2008 2:25:27 PM , Rating: 5

How terrible that they only made $452 million in Q3. I mean seriously. Can't companies just be happy they're making a profit? People need to get off this idea that profits will grow every single quarter and year. The market will go up and down. It doesn't mean you're doing anything wrong. It just the nature of the beast.

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RE: More Likely

By FITCamaro on 10/16/2008 2:27:15 PM , Rating: 5

Let me add that I just get pissed when I see a company that is making money (and quite a bit of it just not as much as was predicted) cutting employees just so its stock price and earnings go up.

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RE: More Likely

By Mitch101 on 10/16/2008 2:41:01 PM , Rating: 2

I agree. The problem is the bonus system. Some bonuses are based upon how much profit they make from the previous quarter or year so cutting heads is a way some of them can get their precious bonuses. Forget about what made a company good to begin with or if service is lacking as long as I get my bonus who cares about the workers?

But I would say its finally coming back to haunt them as most people are using the smaller sites saying so what if it takes an extra few weeks to sell after all I get to keep more of my money in the end.

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RE: More Likely

By sgw2n5 on 10/16/2008 6:56:31 PM , Rating: 2

THIS

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RE: More Likely

By mindless1 on 10/17/2008 12:30:22 AM , Rating: 2

O Rly?

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RE: More Likely

By kattanna on 10/16/2008 2:57:29 PM , Rating: 2

quote:
announced a forecast that didn't live up to Wall Street expectations

wall street expectations? LOL

thats damn comical since its us tax payers who are having to bail your sorry butts out.

what about OUR expectations of wall street living up to its job??

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RE: More Likely

By InvertMe on 10/16/2008 3:59:08 PM , Rating: 3

Yep, Ebay/Paypal fees and feedback policy changes drove me away along with many many others. Ebay is a classic example of greed gone too far. Capitalism at it's worst.

I had over 10k positive sales. That's a lot of revenue for Ebay gone. Times that by everyone else who left and it's no wonder profits are down.

Ebay - Learn how to charge a fair price for your services and treat everyone fair. You will see revenues increase.

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RE: More Likely

By blaster5k on 10/16/2008 4:44:04 PM , Rating: 4

Capitalism at it's best actually. They did something stupid and lost business to competitors, as they should.

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RE: More Likely

By Chadder007 on 10/16/2008 9:12:39 PM , Rating: 2

Same here.
I haven't dealt with Ebay since they have pulled that crap and I will continue until they change back.

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Yea blame it all in the economy

By tungtung on 10/16/2008 2:26:52 PM , Rating: 5

All the while the real culprit is the stupidity of their own policies. Lately all they do is try to suck more and more money out of their sellers, I mean who is stupid enough nowadays to keep using eBay while other sites are available at more reasonable prices (read: free). They said that the economy is slowing down, but why keep raising fees? Aren't they supposed to at least keep their fee as low as possible to attract people then?

Also the arguments that the aforementioned free alternative (or the other cheaper ones) are not safe, well eBay aren't exactly safe either. First of all their buyer protection policy is a complete joke at best, since most of the time they just going to bounce you around and in the end not give anything back even if you have been clearly scammed in the transaction. I've heard that all the seller need to send eBay and Paypal to prove that the item has been sent is a receipt from any courier or post office, without any clear indication as to what was sent out, or even to whom it was sent. From the seller's end, the inability to leave negative feedback to buyers, in my opinion is a big mistake.

Not to mention the latest tendency of them to suspend people's account without any clear explanation. Then demanding to see a bank credit card statement before they reinstate the said account, which is completely absurd (Just google around for this topic and you will see dozens of people complaining about this problem lately).

I believe that all these problems are the real reason why more and more people are driven away from using their (eBay + Paypal) service.

Don't blame on the economy eBay, open your eyes and see that you are your own enemy. Your own policies are what drove people away from using your services!

RE: Yea blame it all in the economy

By Fracture on 10/16/2008 2:40:54 PM , Rating: 2

Liked your post. I want to add that I see eBay approaching a position paralleled to AOL many years ago.

eBay should immediately begin approaching Google/Microsoft in an effort to salvage the large marketshare they have. Ads and product placement on auction pages could be a serious boon to companies selling new products though it may slightly hurt the sellers of used products. But that's why it's an auction, so people only pay what they feel it's worth.

There is an ongoing feud between sellers and eBay as their right to respond to negative criticism had recently been revoked. By not allowing sellers to refute claims or protect their image, many smaller businesses now suffer "incompetent buyer syndrome."

I hope eBay takes the hint and begins looking to ways to expand their service and not just ways to take in money.

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RE: Yea blame it all in the economy

By LeftSide on 10/16/2008 2:48:19 PM , Rating: 3

From a buyers standpoint ebay has gone down the drain as well. Ebay was great 5 years ago. You could find something obscure that some guy in the middle of nowhere was selling cause he didn't want it anymore. Now you search for something and you get 50,000 of the exact same listing, with the exact same picture, from the exact same seller. They give huge incentives and discounts to their powersellers, and forget about the average seller who made ebay great in the first place. If I want to buy a new usb thumb drive I can go to any website that sells them, the site will be much more organized and informative. Ebay was a great place to find used stuff at great prices, now they are just a cluttered unorganized mess of cookie cutter listings. They should have a search function to only search non-powersellers, then you could find what your looking for.

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RE: Yea blame it all in the economy

By Inkjammer on 10/16/2008 3:04:15 PM , Rating: 2

Yep. I used to like eBay when it was a system anybody could use, like an online garage sale. Now I search for stuff and get bombarded with stores and "buy it nows" and have to go digging for the real auctions. And half of the sellers seem to always be listed out of China, too.

I used to buy a lot from eBay, and make the occasional sale. Their prices got jacked and their friendly attitude towards regular bidders get hosed. That, and every freakin' auction in the world would sniped at the last possible minute.

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RE: Yea blame it all in the economy

By diego10arg on 10/16/2008 3:55:37 PM , Rating: 2

This is also happening with Mercadolibre comunity in LATAM. Most of the sales are new products posted as "Buy Now" from "Big Sellers" rather than "$1 Start Used Products"

Normal people trying to sell used stuff became almost pushed away from the site by the way they run their business.

Maybe M$ or Google or any other big company should enter put a step into that market...

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This kind of downturn with the Live Search boost.

By gemsurf on 10/16/2008 2:38:46 PM , Rating: 3

If Ebay is off this far after the boost in income they have to have received from the Live Search frenzy, imagine what their position would had they not received that boost since June?

If I owned ebay stock, I would bail now while there is a higher percentage of value, than when the real reality sets in!

RE: This kind of downturn with the Live Search boost.

By michal1980 on 10/16/2008 3:16:57 PM , Rating: 2

i just got 'burned' by ebay.

I use it out of lazniess to dumb stuff thats not worth much.

But then you get a stupid non-paying buyer. And the only option is postive feedback?

Why? Why, Why, Why.... should the only feed back I can leave for a buyer be 'postive'. The buyer did NOTHING postive. Didn't pay, waited a week just to send a message saying they wont pay, GRRR.

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RE: This kind of downturn with the Live Search boost.

By Motoman on 10/16/2008 4:19:48 PM , Rating: 3

...which is precisely why NO ONE SHOULD EVER SELL ANYTHING ON EBAY EVER AGAIN.

Seriously...listen to this guy's words...as a seller on eBay you start off bent over a barrel with your pants around your ankles, and it gets worse from there.

Somebody please try to justify that policy. I could use a good laugh.

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When people need money, they sell stuff...

By Motoman on 10/16/2008 2:30:11 PM , Rating: 2

...like one might do on an auction site, like eBay. Their listings should skyrocket during an economic downturn due to people needing to sell stuff they would normally keep.

One theory anyway.

Regardless, there is not the slightest doubt that eBay's woes are 100% their own fault. Royally screwing over your sellers with extortionist fees and limp-wristed feedback and seller protection features, while at the same time trying to force payment methods for buyers explains that in it's entirety.

What I really don't get, but kind of do, is why other competing online auction sites aren't taking off - one would think that people would bail from eBay and take their business elsewhere. That's not happening. I think probably because no other site can gain any critical mass...especially as buyers think only of eBay and have no inclination/knowledge to go elsewhere.

It essentially seems to be eBay or nothing. For me - who used eBay for years - it's been nothing for the past year. Looked at the other auction sites and realized that there's not enough business there to mess with. Sad. With any luck, eBay will go bankrupt and someone else will take over the market via attrition.

RE: When people need money, they sell stuff...

By aos007 on 10/16/2008 3:54:31 PM , Rating: 2

That would be a pretty logical turn of events.

The only question is how permanent the boost will be. People who have an imperative to sell are likely to also need to get as much money as possible. They will probably realize that EBay is eating good chunk of that desperately needed money and after a few transactions may opt to craigslist or local paper ads instead. And they would walk away with the impression that EBay isn't what it is cracked up to be anymore, so even when the economy recovers, the EBay reputation will not. And that would be the end.

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RE: When people need money, they sell stuff...

By mindless1 on 10/17/2008 1:08:47 AM , Rating: 2

That's a nice theory, but those still buying nonessential goods tended to be the ones who previously had even more disposable income, people accustomed to buying new products instead of someone else's used goods.

During an economic downturn, even if listings went up that's not more people looking to buy.

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The economy is fine.

By peritusONE on 10/16/2008 4:12:38 PM , Rating: 2

Declined stock market != bad economy. eBay should quit pointing fingers at media sensationalist bullcrap.

Let's all hope their profits continue to decline. eBay is a despicable, openly greedy company, and I hope they find life tough in the years ahead.

RE: The economy is fine.

By g35fan on 10/16/2008 5:53:38 PM , Rating: 2

I'm glad to see Ebay hurting. I'd only be more glad to hear news that Ebay was FAILING.

I was turned off years ago and haven't been on since. Things that pissed me off was that you used to be able to sell your car for $40. If it didn't sell you could relist it again at no charge. I don't even want to guess what the fee's are now. Then the whole fiasco with screwing the sellers. Then sellers can't leave negative feedback for buyers? WTF??? Now the news that Ebay is moving away from auctions to all buy-it-now listings. Stupid stupid stupid. The last few years with the rise of CL I would check prices on Ebay as an average price but you can't even do that anymore.

Down with Ebay and down with the corportations being legally obligated to increase profits. It's litterally killing America.

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RE: The economy is fine.

By Motoman on 10/17/2008 12:26:58 PM , Rating: 2

...corporations aren't *legally* obligated to increase profits. Their shareholders *expect* them to increase profits, and the executives' bonuses <should be> tied to increasing profits.

The problem is that when a monopoly like eBay realizes that it's got no more "organic" growth left (i.e. they've saturated the market...taken all that there is...essentially, good job you capatilist champion!), they turn inwards on their own existing customers. eBay has been trying to grow revenue by squeezing more money from the customers it already had - and when that becomes your growth strategy, you always lose. Always. I guarantee it. Forever and ever this will be true.

The problem is that eBay refuses to admit that they are the source of their own problems. Ultimately, something good will come out of this. Either...

1. eBay will realize it's mistakes, and undo them
2. eBay will cede enough consumer/seller loyalty to invigorate competing online auction sites to make them viable
3. eBay will flat out fail, fall apart, get bought/dissected, whatever, so long as they die

Any of the above would be OK with me.

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ebay stinks now

By PascalT on 10/16/2008 6:19:13 PM , Rating: 2

Selling there is such a non-profitable idea when you have pay ridiculous listing/selling fees and on TOP have to pay the ridiculous paypal fees.

Down with ebay. I just use Craigslist or Kijiji now.

RE: ebay stinks now

By jeff834 on 10/16/2008 11:46:03 PM , Rating: 2

ebay owns Kijiji

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RE: ebay stinks now

By Ksyder on 10/19/2008 8:43:35 PM , Rating: 2

My father is an ebay powerseller and I wanted to see how his listing fee/paypal fees have changed over the past few months and I found something interesting. I only had data for the summer months up until now and I found that from then until now, his ebay/paypal fees as a percentage of gross sales have actually dropped from roughly 16% to 14%. I can't remember when they upped the fees but I was surprised to see that his fee percentage has actually dropped. He uses paypal/ebay exclusively and essentially all of his payments are received through paypal.

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well

By LumbergTech on 10/16/2008 5:44:25 PM , Rating: 2

i think they are partially right, a good amount of the problem is probably the economic downturn, however, their policies probably multiply this factor to reach the problem they are currently experiencing..

i have pretty much completely stopped using ebay (as a seller, and mostly as a buyer as well. As the article originally stated, the thing that got me hooked on ebay was that i could get amazing bargains, or at least find the best price for something, most of the time, or, if i wanted to unload something , like a computer part that i had replaced with an upgrade, i could just pop it on there and recoup a good amount of the costs. Now, however, with their added fees to sellers (including ridiculous paypal fees) while the deals are often still ok, they are not better than what is available elsewhere and therefore i have no reason to use it. also, as a seller, i can not really profit off of the items i could have in the past, even though the market itself didnt change, ebay tacked on those extra fees and took away the incentive for me to sell there

Is it bad?

By elpresidente2075 on 10/16/2008 11:04:14 PM , Rating: 2

Is it bad that when I read the title, I thought "At least they didn't blame it on piracy"?

Way to go John

By spread on 10/17/2008 8:43:04 AM , Rating: 2

eBay should be making more profit thanks to the slowing economy. People are buying and selling more used stuff.

Way to go John.

What's up with all these useless CEOs?

Ebay is dying

By guy007 on 10/17/2008 12:46:30 PM , Rating: 2

I have over 1k 100% positive feedbacks but the Ebay fee's were so preposterous I had to take my business elsewhere. Myself and other sellers left Ebay before the economy tanked so the idea that it's the economy is preposterous. Ebay is collapsing under it's own greed.

At this point selling on Ebay is like being in jail and picking up the soap. The only people who still do it are the ones who don't know any better.