eBay Inc. Releases Q2 Numbers & Investors Yawn
A Business Week article says that listings fell 6% on the core site, while other articles are saying that there was a 2% decrease in core "style" listings and another 25% decline in SIF (Store Inventory Format) listings. Whether those numbers reflect US listings or all listings is a bit unclear. My guess is that it reflects all listings worldwide (eBay has a very good/bad habit of countering decreases in listings in the US with international increases in their statements).
It seems as if investors do care about listing numbers on the site, despite most analysts assertions to the contrary. Some die-hard eBay backers point to higher revenue on the lower number of listings as a positive sign, but the market doesn't seem to be listening to them. One thing that is important to remember is that during the last quarter eBay Inc. offered at least five listing fee sales and also lowered their FVF on the first tranche (sure the maximum savings on FVF is only $.19, but...) in an effort to boost listing numbers. eBay also began running two-day sales, and started announcing them up to two days in advance, so that sellers could be ready to list lots of items and/or dump loads of inventory from their eBay Stores into core auctions for the sales. Many sellers and some investors see these tactics as little more than an attempt to manipulate the listing numbers.
A 25% decline over the course of one year in SIF listings is a bigger-than-huge blow to eBay, and is in-line with the predictions that you've read from me. So why the decline? That's easy, "knowledge." eBay sellers are learning things faster and on a greater scale than they had been. Many sellers now know that eBay is not the only place to offer their goods for sale and still get good traffic. Combine that knowledge with the fact that many are simply tired of dealing with eBay and Paypal issues, and you have the beginnings of an exodus. The increase in number and quality of shopping search sites also plays a big role in the decline of SIF listings. Now sellers have the ability to have their items show up on dozens of websites around the world - the majority of them free - where before it was only eBay.com and Froogle (now Google Products) via their eBay feed. Some sellers are tired of the poor customer service too, and the fees....why pay fees now that there are viable alternatives? Five years ago it would have taken almost a computer science degree at the least to start an independent webstore and customize it so that it stood out. Today, many sellers are doing just that and having their sites up and running in weeks, and making sales shortly thereafter.
Meg Whitman is the other major reason I see for the yawn from Wall Street. She is so far out of touch with eBay sellers that it borders on the ridiculous. It has been over a year now since she started spouting her little catch phrase: "The Power of Three." The marketplace, payments and communications. Sure, that's powerful. The problem is that this is not a trinity, it's basically three somewhat related things. eBay.com in generating the majority of the revenue, and people are using Paypal to pay for their items, but not using Skype on eBay. Paypal brings in 40% of eBay revenue, but of that amount, a majority of it comes from eBay sales. Plus the "Three" in question are all on separate sites.
Meg should have kept counting if she wanted the market to take her seriously. Try the Power of Six: marketplace, payments, communications, networking, search & entertainment. The fad appeal of online auctions has long diminished and what remains are those buyers and sellers who do it simply to buy and sell. The new fads are networking and entertainment, both of which Meg has failed to bring to eBay. Unless you call chatting with a Live Help representative "entertainment." And search? Well, it seems that rumors of an eBay / Yahoo! merger are popping up all over the place on a daily basis. Some investors must want to see something like that happen.
eBay had the power to become a one-stop for a great majority of internet traffic. What it has become is what it was six years ago, the first place people look for used items to buy. If eBay wants to be taken seriously by Wall Street it needs to find some direction. Obviously listings and sellers matter to investors, ignoring the concerns of sellers is probably not the best policy. Also Meg & Co. need to start showing that their internet capital acquisitions not only make sense, but are profitable and popular. Buying up-and-comers is fine as long as occasionally a few of them make it to the big leagues, if they don't, why waste the money in the first place.
As I finish this little article, eBay stock is down 93 cents.