Sell Your eBay Inc. Stock Now! Then Get Back In At...

I'm often labeled as anti-eBay, but that isn't the case. In recent discussions on the Google Finance discussion board for eBay, myself and other eBay users have been presenting the case for a pending dive in the share price of eBay stock. As I write this, the stock is down another $.45 in pre-market trading. eBay is not a good long-term investment, period. Management would have you believe that it is, but their actions speak so much louder than their words. So, now that I've been labeled an "eBay hater" and after it has been suggested that I write about eBay only for personal gain....I will now offer some advice or at least insight. Please though, don't just go dump all of your eBay stock without first reading what I have to say. Think about what I say, and then you - as an investor - make up your own mind.

 

Many investors trade eBay stock for the short-term. If that fits your profile, you probably last bought into eBay big in January around the time that eBay issued their annual report, give or take between $28.62 and $32.45. Currently the stock has slid down to $31.41 from a high of $33.99 in mid-February. This slide seems to be due to the recent Vladuz hacking and Prosperpoint.com breaches, reactions to the Chinese market and the ongoing JK Rowling lawsuit against the company. Now we are still almost a month from the end of the quarter and a couple weeks away from when we'll start hearing whispers of eBay's current growth. The stock numbers are not what I want to focus on however, but rather more concrete statistics.

 

Historically eBay stock goes through a bit of a decline after Q1, and regains
a bit of ground during the pre-summer months.  Then in summer the stocks
goes down.  This is due in large part to simple societal tendencies (many
people would rather simply enjoy the nicer weather than surf eBay for new toys). 
This graph shows a
marked seasonal dip in listings (or at least a slowdown in growth in 1999 &
2000) during the summer months.  Over the past few years, this decrease in
listings on the site has become accentuated with the decrease more acute and
also beginning much earlier in the year. The slowdown has already begun in 2007.

 

Another harbinger of bad news concerning the stock in the next month is the site traffic.
This chart shows
eBay's falling traffic.  Currently eBay is at a low not seen since sometime
in 2001 for percentage of internet traffic.  eBay was recently passed by
Wikipedia in amount of daily traffic and is in a battle with Blogger, trading
spaces daily as to which site is ranked higher.   ebay continues its slide today, but
the most telling thing about the traffic chart is the starting point.  Each
of the past five years, eBay has seen their traffic tumble slightly during the
summer months, but this year, eBay is starting 2007 in the basement.

 

So why exactly do we think that now
is the time to sell?  Based on the current trend in eBay share price, we
feel the slide will continue for a bit.  eBay management is perennially
more concerned about stock price than they are about pretty much anything else -
and maintaining growth to keep stock price from bottoming out more specifically. 
Over the next few weeks, look for eBay to pull some magic listing fee sales from
their hat.  CEO Meg Whitman is an expert at crafting recovery from a bad
quarter in the last few weeks.  Look for not just one listing sale, but a
series of listing sales that will be followed with press releases from eBay
within a day of the sale date.  eBay will site y/y listing statistics for a
certain week, which are actually based on a week 52 weeks prior when there was
no listing sale.  Analysts (especially and undoubtedly Prudential for one)
will praise the efforts of management for growing the company at an enormous
pace y/y, especially in the US and Germany.  This should result in a short
uptrend in the price of eBay or will at least level off any slide in stock
price.

 

From there, eBay will likely offer
more promotions near the end of March.  Most likely these promotions or
sales will offer discounts on eBay services, however they are usually billed at
full price with rebates given sometime in April.  This usually brings in a
huge influx in revenue for a very short period of time, but long enough and in
enough volume to propel eBay to yet another quarter of maintained growth. 
If history repeats itself this quarter, short term investors should get back in
before right before listing sales are offered up to the point when news of
eBay's Q2 numbers is being released.  The Q2 numbers should also show more
Skype revenue growth, based on more users signing up for yearly subscription.

Is Vladuz the Good Guy?

In movies about the wild west, it was obvious who was the "good guy" and who was the "bad guy." The good guy was always the one with the white hat. In the recent eBay Inc. vs Vladuz the Hacker shoot-'em-up however, it looks as if both parties are wearing the same color. The duel is between a Fortune 500 giant and virtual internet monopoly versus a seemingly collective threat that only includes Vladuz (but with the recent hacking into eBay by Vladuz, he's the one holding the revolver in this gunfight).

On one side of the street stands a megalithic corporation seemingly impervious to injury. If it were a battle without code fought in closed quarters, eBay would be the hands-down favorite. But this fight isn't so structured. eBay is carrying a very big gun, but the problem is that eBay doesn't always have very good aim...or judgment. Seems like innocent bystanders are always getting shot instead of the bad guy. eBay it seems is the type of bad guy that strong-arms even its allies (this thread on the eBay Trust & Safety board is only a shell of what it once was due to eBay censorship. Users have resorted to discussing the issue almost in code). eBay's "you know too much" attitude towards its users will eventually catch up with it, supposing eBay comes out the victor in this current dual.

On the opposite side of the street stands an enigmatic figure carrying a Derringer. All the townspeople look at him with wonder; some loathe him, labeling him as evil, others applaud the efforts (whatever their intent) in hopes that his actions will make eBay a better company - but however anyone feels, they still view him as an enigma. He seems to have only a single shot pistol (tiny in comparison to eBay's cannon), but as long as eBay keeps missing him and shooting housewives, general store owners, and other bystanders, he can keep reloading. He seems to have his pocket full of bullets. He can always reload and use these bullets that include his eBay captcha tool, his compiled images and listings and user information, and if he can't bring eBay down in this duel, he can always sneak in the back door while eBay is sleeping.

OK, enough of the analogy... However you look at it, Vladuz IS both bad and good for eBay as a community. As a company, well, he just makes management look silly. Some eBay users will inevitably be scammed as a result of the recent Vladuz (and related) scams, but in the end it should mean more fraud protection for users. About a month ago, eBay released their latest anti-fraud weapon, and though the move was applauded by Wall Street, the scammers laughed and the sellers and buyers cried, and cried, and cried. And if you actually take the time to read those three "cried" links, you'll probably feel that their concerns are legitimate. At the same time as the SMI policy was released, eBay also instituted a new rule preventing new sellers from accepting anything except Paypal for ebay auction payments.

These two policies were announced after Q4 2006 and proclaimed by management to be nothing short of the end-all of what little fraud remained on the site. Now two weeks into the latest bombardment of Vladuz related listings, management is looking like an impotent cowboy with a black hat standing naked in a brothel surrounded by giggling women. Time will tell if eBay continues shooting those who snicker and point, or whether they will suck it up and admit the problems, learn from the humility and move onward in a safer direction toward rebuilding their reputation.

Vladuz & Scammers Continue to Disrupt eBay Inc.

The video at the left might help any newcomers to this
story to get caught up a bit.  I did not come close to posting all of the
news stories when making the video, nor did I even begin to scratch the surface
of all of the scams. 

     This morning eBayers, both
buyers and sellers, woke up to yet another round of scams.  Were they done
by Vladuz?  Possibly.  Were they done by someone connected to Vladuz
or using his information?  Possibly?  Or are they perhaps just copycat
phishing scammers who are trying to mimic other scammers to try and stay below
the RADAR themselves?

Scammers (Hackers? Vladuz?) Strike Again & Bypass eBay Inc. Security Measures

eBay.com is a mess. For roughly the 10th day in a row, the site has been hit with an onslaught of scam listings for high ticket items that seem to be the work of not only phishing scammers, but also hackers. Evidence now shows that the scammers are able to bypass eBay Inc. 's stated security measures. eBay management has been stating for months that items (especially high ticket & high risk items) will take longer to index or resolve to servers so that the listings can pass through a series of security checks to help prevent fraud. Somehow, scammers are now able to bypass these measures and have their items show immediately. We found dozens of scam listings on eBay today, that have been listed for almost a week with no action by the company's Trust & Safety department.

At 11:28 PM EST, we captured this screenshot (click image to magnify if needed): http://firemeg.com/images/zd.htm2.jpg
Many of the listings contained a redirect to an off-eBay pharming site that looked to be an eBay login page. So, in essence, a buyer would click on the listing title and immediately be asked to sign in. Doing so would immediately send an email to a scammer who would then have the customer's user ID and password....a common scam made possible by eBay's unwillingness to close this hole in security. eBay officials acted quickly, and the listings were removed within half an hour.

However, at 12:05 AM EST, only 37 minutes later, there were 30 more fraudulent listings posted to eBay Motors for the same search term ("test listing"). Screenshot here: http://firemeg.com/dontouch/dontouchpics2/testlisting2.gif
Notice that the listings were sorted by "Newly Listed" and that the items had been on the site for only five minutes at the time of the screenshot. Herein lies the problem...eBay has been telling sellers for months that listings (especially for high ticket items) will be subject to security checks prior to being indexed (ie. prior to showing in searches). eBay management will not disclose what exactly they mean by "security checks," but there has been quite an uproar over slow indexing of items on the site. Many sellers are fuming that they are paying for 7 days of exposure, yet are getting less - sometimes the listings are not showing at all after 7 days. But...the obvious scam listings in the last screenshot were all indexed immediately! Leading those who saw this to wonder, is this a result of a hacker that it is possible, or has eBay been lying to us about security measures to cover up their slow servers and indexing problems?

eBay states that in order to have a listing show up immediately at the time you want it to, sellers need to schedule their listings prior to the time they want them to appear on the site (it costs and extra 10 cents to do this). Scheduling listings, according to eBay, does not exempt listings from the security checks. So even if the scammers in the screenshot scheduled their listings, they should have been removed by T&S before they ever made it into the searches. So there are a couple of reasons how the immediate indexing could have occured.
1) eBay is lying and does not really implement security checks, and items are just slow to index due to ebay's software and servers.
2) eBay has been hacked and something is allowing these scammers to bypass security checks.
3) scammers are scheduling their listings and T&S is simply impotent and incompetent.

Whatever the reason, the fact is that scam listings are on the increase and eBay management is doing all they can to cover up the hackings and hijackings that have swept the site in the past week. (more on this to be posted tomorrow). Third party statistics sites are showing spikes in listing numbers whenever the masses of scam listings hit the site. It will be interesting to see if eBay execs subtract all of the fake listings in their next quarterly report, or whether they include the listings in the totals. Over the past week, there have been days when there are 10,000+ related scam listings in just one day, and the highest we've seen from one seller is 3,500+ in one day. And that doesn't take into account all of the other hijacked accounts and scam listings that don't appear to be related to the recent attacks that are being attributed to Romanian hacker Vladuz.