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Decline and Fall of eBay

I believe that we have seen eBay’s heyday - it was a few years ago. Even though it was cleverly masked financially, it eventually caught up with eBay’s unrealistic stock price which is again on the downward trend. eBay’s market growth could never continue at the frenzied levels seen a few years earlier. There are no untapped markets to be discovered that don’t already have entrenched competitors e.g. China’s largest auction site is Alibaba, Japan’s largest auction site is Yahoo. Also there is a real move by previous eBay buyers to buying direct from websites (removing eBay as middleman a.k.a. disintermediation). I know that for many sellers, website sales have been steadily rising over the past few years, while their eBay sales have done just the opposite.

So the question, “are we witnessing the decline and fall of eBay?”, can be answered, “long term - yes, short term - no”, that is unless eBay management do something radical to address the fundamental problems facing eBay. It is still a place you can sell stuff, but it is like an aging shopping mall. It is becoming shabbier and a less pleasant place to shop, plus since there isn’t much in security you may get mugged by PayPal (or a chargeback scammer) if you aren’t careful.

Final thoughts. These were some of the most popular items on eBay in recent months: Clothing, Coach, Cigars, Rolex, Engagement ring, Continuous Positive Airway Pressure, Louis Vuitton, Tiffany, Gucci, and Sony PSP (XBox didn’t make the cut). Now, given what we seller's know about the large influx of fakes and counterfeits, not to mention ever present danger of hijacked accounts, ask yourself - “Would you still buy a brand name/expensive item on eBay?” I suspect that in time if eBay continues to ignore these problems it will see a backlash as ever increasing numbers of buyers new to eBay are defrauded, and the name eBay becomes synonymous with fakes, knock-offs and junk.

eBay’s Future: Skype VOIP

eBay’s response to date has been best summed up as, “Hey, let’s seek out to other markets that don’t know us” and was illustrated by their controversial 2005 acquisition of Luxemburg-based Skype - a Voice Over Internet Protocol (VOIP) gateway or VOIP service provider with little customer service (so it’ll be a good fit with PayPal’s and eBay’s CS). VOIP provides cheap telephone calls over the internet, and VOIP is widely expected to be the “next big thing” provided all the regulatory hurdles can be overcome. Competitors in the VOIP market include Vonage, Telefonia VOIP, and ATT VOIP. PayPal is another example of a questionable purchase since it creates a virtual payments monopoly, yet both companies still offer little, if any protection to sellers who generate all PayPal’s and eBay’s income. Should enough PayPal and eBay sellers wake up to the reality of the current buyer-biased arrangement (usually after their first taste of fraud-by-PayPal), there could be a huge backlash for both companies.

eBay’s strategy for future growth is artificial, but may temporarily mask the financial impact of the shrinking older eBay markets. Unfortunately, it will not do anything meaningful to “fix” eBay’s core problem - remaining a viable marketplace and giving adequate returns to share- and stake-holders alike. Our take on the Skype purchase is that it makes as much sense as did Time Warner’s purchase of AOL - looked so-so at the time, but later became a financial black hole. Also eBay’s key competitor, Google, has their own killer app - a competing VOIP project created in-house for a few million (not billion) US dollars, and another project, Google Money/GBuy, aimed at the P2P and micro payment market i.e. PayPal.

We invite your comments on this ongoing discussion on eBay’s Future.