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EBay: Disruption Isn't Always GoodEBay: Disruption Isn't Always Good

This month marks the one-year anniversary for eBay CEO John Donahoe, who replaced Meg Whitman in April 2008. In his earlier position as president of eBay Marketplaces, Donahoe already had the reins of eBay's biggest division. During that era, he was talking about <a href="http://www.leggmason.com/thoughtleaderforum/2007/conference/donahoe.html">"disrupting ourselves before we get disrupted,"</a> and he seems to be carrying that philosophy with him. But is eBay's kind of disruption really a good

Dave Methvin

April 19, 2009

4 Min Read

This month marks the one-year anniversary for eBay CEO John Donahoe, who replaced Meg Whitman in April 2008. In his earlier position as president of eBay Marketplaces, Donahoe already had the reins of eBay's biggest division. During that era, he was talking about "disrupting ourselves before we get disrupted," and he seems to be carrying that philosophy with him. But is eBay's kind of disruption really a good thing for eBay or its customers?One good thing that CEO Donahoe has put on the table is a spin-off for the puzzling Skype acquisition. In a Wall Street Journal interview, Donahoe says that "Skype's best place is as a stand-alone business. Behind PayPal, Skype may be the most valuable franchise on the Internet today. But if there is not synergy there, it does not belong in eBay, as I have communicated consistently." Still, in 2007 he was saying, "Skype will release version 4.0 early next year that provides a nice entrée to begin pulling some of eBay's content and PayPal's services into Skype." Perhaps that's when he realized there was no synergy, because I certainly don't see any in Skype 4.0.

EBay's larger "disruption" strategy runs afoul of the company's reality: Most of their revenue comes from the eBay Marketplace and PayPal. When the disruption strategy makes you lose focus on what got you here in the first place, lots of bad things can happen. EBay has a near-lock on the online auction market, but they are still finding ways to make their captive audience suffer. It reminds me of a quote from the movie Animal House: "This situation absolutely requires a really futile and stupid gesture ... we're just the guys to do it!" My own experience with eBay in the past year indicates that it ain't what it used to be. Fraud is rampant with some categories of products. I sold three computers, and for two of them the initial auction was won by a scammer who had stolen someone else's PayPal account. They wanted me to send the PC to some place other than the PayPal account's registered address, which I specifically stated I would not do in the listing. It's quite a hassle to notify EBay, get a refund of the listing fee, and wait for another week for the new auction to finish so I can finally sell the thing. EBay's response to this problem was to favor established businesses and power sellers over individuals and occasional auction buyers. I suppose the reasoning was that those inexperienced buyers and sellers require more hand-holding and are more likely to fall for scams. This has turned eBay into more of an Amazon Marketplace, with "Buy It Now" purchases and eBay storefronts becoming the rule rather than the exception. The problem is that eBay's buying experience (as opposed to an auction experience) is nowhere near as organized or responsive as Amazon's; it varies greatly depending on the actual merchant selling the goods. For "Buy It Now" purchases, the same products can often be found outside eBay for an equal or better price. In an analyst meeting last month, eBay announced that it was returning to its roots and focusing more on the classic auction side of their business. It's too early to tell how this about-face will affect eBay, but there may be more signals in this week's first-quarter earnings call. If this was accompanied by an improvement in eBay's fraud prevention and customer service, it might just return some of the fun to buying and selling products. In the meantime, I've found a couple of alternatives to eBay that I use to unload my no-longer-wanted stuff. Craigslist has the advantage of being oriented geographically; that makes it possible to sell things where shipping would just be too great. Cash payment avoids the PayPal tax as well. For simplicity, nothing beats Freecycle.org though. No, you don't make money from Freecycle, but there are a lot of things on EBay that don't fetch more than $30 and the hassle of holding an auction for something that cheap isn't worth it to me. Sometimes, finding a good home for something you no longer need is reward enough.

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