Donahoe comes out SWINGING – big changes afoot at eBay

It’s been a somewhat quiet Q4 in eBay land.  At the Q3 results, eBay didn’t really talk about 08 at all, but focused on Q3 and re-iterated Q4 guidance.

Then in late November, eBay’s CFO Bob Swan, spoke at CSFB and said a couple of things that were new and potentially telegraphing some changes:

  • Talked a good bit about lower-margin businesses and how they are growing faster and that’s “ok”.
  • For the first time, EVER in 10yrs I’ve followed the company, they had a chart that wasn’t up and to the right. The user growth chart you see here: (page 11 of the preso if you don’t believe me)

Csfb_active_user_chart

  • Bob talked about 08 “headwinds” (slide 33), among which are increased competition (Amazon3P) and the need to do more/better/faster.

Then on Dec 2 without any fanfare, eBay quietly replaced long-time CMO Gary Briggs with Mike Linton (previously of BestBuy)

Finally, John Donahoe spoke today at the UBS internet conference in NYC.  I was able to listen in (although my audio was terrible, not sure if it was the event or my connection so major caveat here that I may have misheard some things) and I have to tell you, I’m still in shock from some of the things John not only hinted out, but downright confirmed are coming in 08.  Here are the highlights:

About 12-18 mos ago became clear to JD that it was time to evolve, hadn’t kept up with competition on Internet

  • First focus on improving buyer experience (“BE”).  Huge historical growth driven by business model that just ‘caught fire’
    • Bunch of stuff here we’ve all heard before, shipping/feedback/ease of use/T+S
    • DSRs, advantage good/punish bad sellers
    • In 2008 we’ll increasingly use this data (gulp)
    • We have 2,000 people in T&S worldwide  (wow)
  • Lastly, playing with pricing model
    • High insertion + feature + lower FVF is historically model
    • Appropriate for value + selection in auction format
    • But in fixed price need to rebalance
    • Best formats have lower up-front, higher back-end fees
    • In last three months we’ve studied how to change fees
    • Will rebalance pricing to charge less up front and more on back end.  Take rate neutral though.

Ok, take a second and re-reated that last part about pricing.  There’s been speculation with the testing eBay is doing they may look at this, but this is the first and hardest statement I’ve ever heard out of them.  Later in the Q+A:

Q: “When will we see new pricing”?

A: Q108 we’ll be talking about our
plans here

I suspect we’ll hear what’s coming either at the eBay ecommerce forum (their venue for largest sellers that is Jan 28) or at the Q4 earnings call, scheduled for Jan 23.

One thing is certain, more is going to be changing on eBay in the past and I have to admit it’s refreshing to see eBay a) admitting there are challenges and b) doing something about them.  Donahoe is starting to act like someone taking the wheel of the eBay bus and steering it in some new directions.

In talking to some friends on Wall St. the new pricing has people pretty spooked. If you go from little/no listing fee, what’s that do to eBays margins and cash flow.  The changes maybe ‘take rate neutral’, but what will they do to GMV.   It’s going to be a risky bet, but given the competitive pressures from Amazon right now, I believe it’s the right bet to make and eBay may have some short-term turbulence, but long-term this is the best way to stay competitive.

eBay Strategies readers, what do you think?