U.K. Journal Calls for Break-up of eBay
Wednesday, November 26, 2008
Paper says it's time to focus on the future - PayPal
With a disaffected consumer base and a falling stock price, eBay is in the midst of some tough times. It's all still relative compared to, say, the fortunes of Chrysler, but with its share price down 65%, one newspaper is calling for the break-up of eBay.
For a piece titled "Sell It Now" in Tuesday's edition of the U.K.'s The Guardian, Tanya Cordrey opined that with the horizontal integration of disparate enterprises like Skype, Half.com and Stumbleupon, eBay has simply become too unwieldy to return real value to investors.
"Little binds these diverse business interests together. Once, eBay framed its vision in terms of communities, built on trust. But many commentators and users feel that current management do not value - or even understand - the power of online communities. They shake their head and say those days have gone," she wrote.
Cordrey suggests that the sum of all of these parts may be greater than the whole. She goes on to assert that eBay may be prime for a takeover, with any new owner likely to spin-off some of the holdings. Rather than waiting for that inevitability, she recommends that current eBay management act proactively and beat potential suitors to the punch.
"Skype, acquired in late 2005 for $2.6bn, has always felt like a distant cousin in the eBay family. Ebay negotiated down the huge earn-out due to Skype stockholders last year because of disappointing financial performance and took a $1.4bn one-time write-down around the transaction. A potential suitor - probably the most discussed - is Google, which has been moving steadily in the voice space and recently added voice and video chat to Gmail.
"The core eBay marketplace, meanwhile, appears to be focusing on a 'me too' strategy, where eBay tries to become Amazon. It is unlikely that eBay can 'out-Amazon' Amazon. If this is the right strategy, then surely the best folks to do this are the executives at Amazon.
"Without the eBay marketplace and Skype, PayPal would remain the only sizable interest. For years it has struggled to escape the shadow of eBay. Indeed, its initial fantastic growth was due to its adoption by the eBay community. But last quarter, PayPal payment volumes at just under $15bn were larger than those from eBay's marketplace for the very first time."
The goal, in her view, is "growing a world-class financial company that goes beyond online auctions..."
We won't present her entire thesis here but it is worth a read. If you are an investor, you'll want to consider what Cordrey presents. Yet those who have invested in eBay by becoming members of its original community will also find much that rings true. It seems evident that by courting Wall Street eBay has, over time (and certainly in this past year) estranged itself from Main Street and mom-and-pop consumers, especially sellers.
With a disaffected consumer base and a falling stock price, eBay is in the midst of some tough times. It's all still relative compared to, say, the fortunes of Chrysler, but with its share price down 65%, one newspaper is calling for the break-up of eBay.
For a piece titled "Sell It Now" in Tuesday's edition of the U.K.'s The Guardian, Tanya Cordrey opined that with the horizontal integration of disparate enterprises like Skype, Half.com and Stumbleupon, eBay has simply become too unwieldy to return real value to investors.
"Little binds these diverse business interests together. Once, eBay framed its vision in terms of communities, built on trust. But many commentators and users feel that current management do not value - or even understand - the power of online communities. They shake their head and say those days have gone," she wrote.
Cordrey suggests that the sum of all of these parts may be greater than the whole. She goes on to assert that eBay may be prime for a takeover, with any new owner likely to spin-off some of the holdings. Rather than waiting for that inevitability, she recommends that current eBay management act proactively and beat potential suitors to the punch.
"Skype, acquired in late 2005 for $2.6bn, has always felt like a distant cousin in the eBay family. Ebay negotiated down the huge earn-out due to Skype stockholders last year because of disappointing financial performance and took a $1.4bn one-time write-down around the transaction. A potential suitor - probably the most discussed - is Google, which has been moving steadily in the voice space and recently added voice and video chat to Gmail.
"The core eBay marketplace, meanwhile, appears to be focusing on a 'me too' strategy, where eBay tries to become Amazon. It is unlikely that eBay can 'out-Amazon' Amazon. If this is the right strategy, then surely the best folks to do this are the executives at Amazon.
"Without the eBay marketplace and Skype, PayPal would remain the only sizable interest. For years it has struggled to escape the shadow of eBay. Indeed, its initial fantastic growth was due to its adoption by the eBay community. But last quarter, PayPal payment volumes at just under $15bn were larger than those from eBay's marketplace for the very first time."
The goal, in her view, is "growing a world-class financial company that goes beyond online auctions..."
We won't present her entire thesis here but it is worth a read. If you are an investor, you'll want to consider what Cordrey presents. Yet those who have invested in eBay by becoming members of its original community will also find much that rings true. It seems evident that by courting Wall Street eBay has, over time (and certainly in this past year) estranged itself from Main Street and mom-and-pop consumers, especially sellers.
posted by Chris and Frank at 7:31 PM
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