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Clash of the eGiants
eBay's opening bid on an untapped online shopping market was a winner. The small Silicone Valley startup had virtually no competition in online buying and selling in the mid '90s through the early oughts. Consumers flocked en masse to the website to buy new junk, sell old junk, rate each other with feedback, and buy it now. Success stories popped up all over the world of mom and pop outfits turning huge profits through eBay businesses. Pop culture references were soon to follow. The small site became a huge success story.
Now, the online mega-giant may be feeling its own buyer's remorse. Once a stock market darling, eBay’s reputation has been plagued with negative feedback in recent times. The online flea market was battered in the fourth quarter of 2008, posting its first income decline — a whopping 31% decrease — since it was founded in 1995. The company that in only a few years was on the verge of verb-dom alongside Google is now in danger of having the gavel come down on it.
CEO Meg Whitman’s piloting of the modest trading site is legendary. When she took the controls of the small buying and selling community in 1998, it was just trying to get off the ground with 30 employees and generated about $4 million in revenue annually. When she retired in January 2008, eBay soared as a Fortune 500 company, employed 15,000 people in several countries and was worth $8 billion. Growth of eBay had slowed in the months leading up to Whitman’s departure, but it was her successor who is taking the blame for the death spiral that began that month.
Within hours of his promotion, John Donahoe, the new CEO of eBay, immediately moved the company away from its core business — its auctions platform — to a fixed-price items site, much like rival website Amazon.com. Instead of the marketplace made up of individuals it once was, eBay was becoming a distribution channel for big retailers. That’s where the money was.
Drastic income-minded changes are classic for companies like eBay, says Ron Cenfetelli, assistant professor at the University of British Columbia’s Sauder School of Business. The company’s unheard-of growth in the late 90s had executives thinking about quarterly earnings statements, he said, not the needs of a vast online community of buyers and sellers. “It was a very democratic sort of place,” says Cenfetelli, who teaches classes on e-commerce and online business. “But eventually, these companies become big corporations and they get that sort of arterial sclerosis… and get a bit more short-term focused.”
One of those focuses is seller fees, Cenfetelli says. eBay once charged sellers to list an item, and also a percentage of the final sale price. It was easy enough. But PayPal — eBay’s safe payment subsidiary — later started charging sellers fees for credit card payments. eBay fees have also since increased in complexity and in price, leaving sellers scratching their heads and searching their wallets.
“When you figure that a decent profit margin on an item might be 10 per cent, you’re giving up well over half of your margin to these other people,” Cenfetelli explains. “So, they’re the ones making money and you’re not.”
The buyers, arguably more important than the sellers, have been smearing eBay’s name as well. On a businessinsider.com comment board, one poster with the title “Ghost of Meg Whitman” summed up the frustration many buyers have felt at the company. “eBay is no longer a place where people can go to find inexpensive goods for sale,” they wrote, adding since the site has transformed into a fixed-price sales venue for large companies, they have been able to find equal or better deals from Amazon.com.
With both buyers and sellers objecting, traffic to the website has dropped dramatically in the past year. eBay's total worldwide traffic in 2008 was 25% less than the year before. To put it in perspective, the U.S. website alone was getting around 12 million visits per month. That’s a large drop. Shares in the company have dropped by half since Donahoe's arrival. Though the company's tragic status cannot be denied, executives within eBay seem to be in denial anyways. A list of questions sent by e-mail to a company spokesperson were ignored with the reply, "We are going to pass on this interview."
Despite reluctance to talk from those who get paid to do it, there's still incessant chatter within the company's Burnaby call centre. Much of the talk is gloomy. Times are tough here, says a senior employee who wishes to remain anonymous. "It sounds really lame, but the energy used to be happy and people liked going to work," he says of his first few years at eBay. "Now it's kind of like you still go and it's kind of the same environment... but everyone just f*cking hates it and hates each other."
Amy White, an ex-eBay employee who quit after “too much” in 2007, declares herself bitter at the changes EBay made during her four-year tenure there. People were getting fired for smoke breaks, management wasn't listening to anyone who complained, and one day, an email was sent to all employees saying there was to be no more outside use of MSN Messenger, a program that allowed White to keep in touch with the world while working. That was the final straw. She quit on the spot, that day.
"Now EBay is going down the tubes and these turn out to be all the exact reasons why," she says. "I don't know if management refused to listen, or not enough people spoke out about it."
Another anonymous ex-employee claims outsourcing of customer support to international locations where English is not a primary language hurt the company’s standing with devoted buyers and sellers of the site. “There were some good things about EBay,” he says redemptively, “but in general I wanted to quit or take over and run [EBay] properly.”
It turned out quitting wasn’t in the cards for this employee. eBay cut his and 999 other jobs as part of a massive downsizing to effectively save costs. Those jobs amounted to 10% of EBay's entire workforce — many of which came from the Vancouver call centre. Worse, several employees say their job security is in a state of flux, and they feel they could be sent packing at any minute as well. The mood at work is tense and confusing, much like the company itself.
Now, the online mega-giant may be feeling its own buyer's remorse. Once a stock market darling, eBay’s reputation has been plagued with negative feedback in recent times. The online flea market was battered in the fourth quarter of 2008, posting its first income decline — a whopping 31% decrease — since it was founded in 1995. The company that in only a few years was on the verge of verb-dom alongside Google is now in danger of having the gavel come down on it.
CEO Meg Whitman’s piloting of the modest trading site is legendary. When she took the controls of the small buying and selling community in 1998, it was just trying to get off the ground with 30 employees and generated about $4 million in revenue annually. When she retired in January 2008, eBay soared as a Fortune 500 company, employed 15,000 people in several countries and was worth $8 billion. Growth of eBay had slowed in the months leading up to Whitman’s departure, but it was her successor who is taking the blame for the death spiral that began that month.
Within hours of his promotion, John Donahoe, the new CEO of eBay, immediately moved the company away from its core business — its auctions platform — to a fixed-price items site, much like rival website Amazon.com. Instead of the marketplace made up of individuals it once was, eBay was becoming a distribution channel for big retailers. That’s where the money was.
Drastic income-minded changes are classic for companies like eBay, says Ron Cenfetelli, assistant professor at the University of British Columbia’s Sauder School of Business. The company’s unheard-of growth in the late 90s had executives thinking about quarterly earnings statements, he said, not the needs of a vast online community of buyers and sellers. “It was a very democratic sort of place,” says Cenfetelli, who teaches classes on e-commerce and online business. “But eventually, these companies become big corporations and they get that sort of arterial sclerosis… and get a bit more short-term focused.”
One of those focuses is seller fees, Cenfetelli says. eBay once charged sellers to list an item, and also a percentage of the final sale price. It was easy enough. But PayPal — eBay’s safe payment subsidiary — later started charging sellers fees for credit card payments. eBay fees have also since increased in complexity and in price, leaving sellers scratching their heads and searching their wallets.
“When you figure that a decent profit margin on an item might be 10 per cent, you’re giving up well over half of your margin to these other people,” Cenfetelli explains. “So, they’re the ones making money and you’re not.”
The buyers, arguably more important than the sellers, have been smearing eBay’s name as well. On a businessinsider.com comment board, one poster with the title “Ghost of Meg Whitman” summed up the frustration many buyers have felt at the company. “eBay is no longer a place where people can go to find inexpensive goods for sale,” they wrote, adding since the site has transformed into a fixed-price sales venue for large companies, they have been able to find equal or better deals from Amazon.com.
With both buyers and sellers objecting, traffic to the website has dropped dramatically in the past year. eBay's total worldwide traffic in 2008 was 25% less than the year before. To put it in perspective, the U.S. website alone was getting around 12 million visits per month. That’s a large drop. Shares in the company have dropped by half since Donahoe's arrival. Though the company's tragic status cannot be denied, executives within eBay seem to be in denial anyways. A list of questions sent by e-mail to a company spokesperson were ignored with the reply, "We are going to pass on this interview."
Despite reluctance to talk from those who get paid to do it, there's still incessant chatter within the company's Burnaby call centre. Much of the talk is gloomy. Times are tough here, says a senior employee who wishes to remain anonymous. "It sounds really lame, but the energy used to be happy and people liked going to work," he says of his first few years at eBay. "Now it's kind of like you still go and it's kind of the same environment... but everyone just f*cking hates it and hates each other."
Amy White, an ex-eBay employee who quit after “too much” in 2007, declares herself bitter at the changes EBay made during her four-year tenure there. People were getting fired for smoke breaks, management wasn't listening to anyone who complained, and one day, an email was sent to all employees saying there was to be no more outside use of MSN Messenger, a program that allowed White to keep in touch with the world while working. That was the final straw. She quit on the spot, that day.
"Now EBay is going down the tubes and these turn out to be all the exact reasons why," she says. "I don't know if management refused to listen, or not enough people spoke out about it."
Another anonymous ex-employee claims outsourcing of customer support to international locations where English is not a primary language hurt the company’s standing with devoted buyers and sellers of the site. “There were some good things about EBay,” he says redemptively, “but in general I wanted to quit or take over and run [EBay] properly.”
It turned out quitting wasn’t in the cards for this employee. eBay cut his and 999 other jobs as part of a massive downsizing to effectively save costs. Those jobs amounted to 10% of EBay's entire workforce — many of which came from the Vancouver call centre. Worse, several employees say their job security is in a state of flux, and they feel they could be sent packing at any minute as well. The mood at work is tense and confusing, much like the company itself.
But it’s more than just analysts, customers and employees dirtying eBay’s reputation. Craigslist, a simple online classifieds website which EBay owns 25% of, is embroiled in a bitter battle with the online giant over stock price sabotage.
No one could have predicted Craigslist, created in San Francisco by Craig Newmark as an email list of events happening around the city, would explode the way it did. Since its creation in 1996 it has expanded to more than 550 cities worldwide, including Vancouver, and provides locals with a free venue to buy and sell goods, find romance, and even hunt for jobs. It's an unusual success story characterized by the site's continued claims that it is an anti-corporate company uninterested in turning profits, despite its move from a non-profit site to a for-profit one in 1999.
More than 50 million people use Craigslist each month, it claims, although it still pales in comparison to Ebay's 151 million registered users. But the major difference between the two sites is the people they appeal to. While EBay is globalized — buyers can look up sellers from China and purchase from them, although they pay for shipping too — Craigslist has made its mark by providing a local website for various cities. Think of going to a flea market in your town and informally chatting up sellers there, without having to enter into any sort of sales agreement. That's Craigslist. And it appears that more and more people are opting to shop in this sort of environment.
More than half a million people posted on Craigslist’s Vancouver site in January 2009. That’s 12,000 more posts than the year before, and the company’s Vancouver presence shows no signs of slowing down. On a broader scale, the company is soaring espite recent economic woes, according to Craigslist spokesperson Susan MacTavish.
“Craigslist is wildly popular with the public during gloomy economic times. We’ve seen astonishing growth in areas such as our roommates, bartering, and for sale section,” she says in an e-mail. “The site is super useful for folks who are trying to save money or make a few spare dollars, hence the popularity during such times.” Stacked up against eBay’s continual fee increases, it may be easy to see why Vancouverites are relying further on Craigslist for their online commerce needs.
Though eBay may not admit it, Craigslist is a prime competitor in the lucrative online shopping market. A lawsuit filed by EBay last April may be hard proof of that. The company accused Craigslist of "unfairly diluting eBay's economic interest in Craigslist by more than 10 per cent," in a written statement. Feeling the heat, Craigslist retaliated one month later, filing a countersuit alleging eBay has repeatedly made its best efforts to control Craigslist through business interference and free-riding. Craigslist is now asking a California Superior Court to give it back eBay's holdings. Both companies refused to comment on the issue, which is currently before the court.
As eBay argues with Craigslist over who hurts whom, users say they’ve been pained in their own right by the online auction site.
Kathy, who wished to remain anonymous, once sold Canadian Olympic toques from the 2006 Winter Games on EBay to great success. She says she has used both websites extensively. “At the moment, because of the high fees on EBay, if you do succeed in actually selling something, I prefer Craigslist,” she says. “The market just isn’t there with the current economy and I have lost interest because of the high fees,” she says of eBay.
Amongst all the detractors, Peter Crisp is the only person to stand up for the website he’s used for a decade. Crisp, an engineer, family man and self-described baby boomer, says it’s the easiest way to get cheap goods from south of the border. “I just bought new lower control arms for my Dodge Caravan. Even with shipping and exchange, they were a bargain compared to sourcing from Canada,” he says.
Whoever sides with who, the companies' fates are intertwined for now. It's unclear who the big winner will be after eBay's and Craigslist's legal tensions come to a head. But it's revealing that the best way to find out what people think about either online commerce site is by posting an ad soliciting their feedback. On Craigslist.
No one could have predicted Craigslist, created in San Francisco by Craig Newmark as an email list of events happening around the city, would explode the way it did. Since its creation in 1996 it has expanded to more than 550 cities worldwide, including Vancouver, and provides locals with a free venue to buy and sell goods, find romance, and even hunt for jobs. It's an unusual success story characterized by the site's continued claims that it is an anti-corporate company uninterested in turning profits, despite its move from a non-profit site to a for-profit one in 1999.
More than 50 million people use Craigslist each month, it claims, although it still pales in comparison to Ebay's 151 million registered users. But the major difference between the two sites is the people they appeal to. While EBay is globalized — buyers can look up sellers from China and purchase from them, although they pay for shipping too — Craigslist has made its mark by providing a local website for various cities. Think of going to a flea market in your town and informally chatting up sellers there, without having to enter into any sort of sales agreement. That's Craigslist. And it appears that more and more people are opting to shop in this sort of environment.
More than half a million people posted on Craigslist’s Vancouver site in January 2009. That’s 12,000 more posts than the year before, and the company’s Vancouver presence shows no signs of slowing down. On a broader scale, the company is soaring espite recent economic woes, according to Craigslist spokesperson Susan MacTavish.
“Craigslist is wildly popular with the public during gloomy economic times. We’ve seen astonishing growth in areas such as our roommates, bartering, and for sale section,” she says in an e-mail. “The site is super useful for folks who are trying to save money or make a few spare dollars, hence the popularity during such times.” Stacked up against eBay’s continual fee increases, it may be easy to see why Vancouverites are relying further on Craigslist for their online commerce needs.
Though eBay may not admit it, Craigslist is a prime competitor in the lucrative online shopping market. A lawsuit filed by EBay last April may be hard proof of that. The company accused Craigslist of "unfairly diluting eBay's economic interest in Craigslist by more than 10 per cent," in a written statement. Feeling the heat, Craigslist retaliated one month later, filing a countersuit alleging eBay has repeatedly made its best efforts to control Craigslist through business interference and free-riding. Craigslist is now asking a California Superior Court to give it back eBay's holdings. Both companies refused to comment on the issue, which is currently before the court.
As eBay argues with Craigslist over who hurts whom, users say they’ve been pained in their own right by the online auction site.
Kathy, who wished to remain anonymous, once sold Canadian Olympic toques from the 2006 Winter Games on EBay to great success. She says she has used both websites extensively. “At the moment, because of the high fees on EBay, if you do succeed in actually selling something, I prefer Craigslist,” she says. “The market just isn’t there with the current economy and I have lost interest because of the high fees,” she says of eBay.
Amongst all the detractors, Peter Crisp is the only person to stand up for the website he’s used for a decade. Crisp, an engineer, family man and self-described baby boomer, says it’s the easiest way to get cheap goods from south of the border. “I just bought new lower control arms for my Dodge Caravan. Even with shipping and exchange, they were a bargain compared to sourcing from Canada,” he says.
Whoever sides with who, the companies' fates are intertwined for now. It's unclear who the big winner will be after eBay's and Craigslist's legal tensions come to a head. But it's revealing that the best way to find out what people think about either online commerce site is by posting an ad soliciting their feedback. On Craigslist.