Can eBay's new focus help restore its glory?

There's no doubt eBay Inc. (EBAY) has been refocusing itself on its core market of e-commerce. Only this past week, eBay announced its intention to unload Skype in an IPO, sell StumbleUpon back to its founders, change and tweak its marketplace Website and buy Korea's Gmarket.

Skype: It's no secret that Skype has been a drain on eBay's resources without giving much in return. While some grand vision saw the marketplace, PayPal and Skype somehow working magically together, that has quickly fizzled away and the exorbitant price paid for the telephony company -- $2.6 billion -- has long since been partially written down. No wonder, then, that investors are happy about the IPO. Other than ridding eBay of Skype, the IPO could give eBay some cash it could use elsewhere. I've seen valuations ranging from $1 to 3 billion, but never liking the Skype model, and despite its recent applications for Apple's iPhone and RIM, I doubt eBay would get that much.

StumbleUpon: eBay never managed to integrate the personalized recommendation engine into its core business. Not sure it even tried. StumbleUpon saw its business stagnate and eBay was left with one more asset that stuck out like a sore thumb among the marketplace and payment system. eBay got something for StumbleUpon, that's for sure, but mostly it may just be happy to be rid of it.

Changes to the marketplace site: eBay is trying here to directly address concerns from investors and sellers regarding its site. These are only the latest tweaks eBay is implementing in a long line of changes and it's not done. But eBay's site has not kept up with the changing times, not when it comes to consumers' preferences, nor new technology. It is here that eBay has a long way to go -- to pick up the pace of innovation, if it can.

Buying Gmarket: Growth engines -- that's been the main concern as revenues from eBay's marketplace operations fell 16 percent to $1.27 billion in the fourth quarter. About 55 percent of those revenues came from outside the U.S. Gmarket's sales rose 25 percent to 279 billion won ($210 million) last year, and this acquisition is supposed to help eBay push into Japan and other Asian markets in the next 6 to 12 months, according to CEO Donahoe. So again, investors are hailing the move. Still, eBay hasn't always met with success when it has ventured overseas, and the success of this one is still to be seen.

Can all these changes help eBay return to its glory days of high growth? That's very unlikely. eBay is making adjustments -- desperately needed ones to be sure -- but its current model is mature and outdated. At least by internet standards. The company should definitely continue to sell noncore assets, including perhaps online ticket broker StubHub, but that still wouldn't make its marketplace better.

To compare, it's enough to look at, Inc. (AMZN), whose shares gained 50 percent so far this year, versus eBay's 3.4 percent. Amazon's site is well designed.The company is diversifying its revenue streams, is constantly upgrading its site, is undercutting mortar and brick stores' sales and it's taking market share away from eBay as it expands its auction-selling business. The question is, as always, if Amazon can expand so successfully into the auction-based business, why couldn't eBay do the same for the fixed-price one?

eBay is struggling with revenue growth also due to the recession, but not everything has gone wrong. While marketplace revenue declined 16 percent in the last quarter, PayPal's grew 11 percent, so right now the one redeeming quality of the online auctioneer is its payment system.

While the recent moves indeed show a shift in the company's focus, they are also creating a buzz about a company that hasn't been much in the limelight lately. But all the buzz can't help eBay's auction business if it doesn't redesign its site, come up with some innovations and court sellers back into its midst (after pushing so many away). More than anything, though, eBay needs consumers to come flocking to its sites again. Otherwise, no matter how many deals it makes, or how much buzz it tries to create, growth could be limited.
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