Word: ebay
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Although you'd think that eBay's flagship marketplace business, a site where people go to buy and sell stuff, would flourish in a downturn, it has stopped growing. It's still unclear how badly the credit crisis and buying slowdown will affect an e-commerce value site like eBay, which does half its business outside the U.S. During the 2001 recession, eBay's marketplace continued to thrive because of its Web dominance and discounted goods. Whitman at the time even crowed that "eBay is to some extent recession-proof...
Today that statement seems wishful thinking. In the third quarter, for the first time, transactions on eBay's marketplace, a key metric of growth, fell 1%, to $14.3 billion, from a year ago. The strength and popularity of Google's search, Amazon's sales and the sheer number of other Web retail sites have eroded eBay's dominance, making it harder to compete with the same business model that steered the firm through its first 10 years of jaw-dropping growth. Three years ago, eBay boasted 30% more traffic than Amazon, but today its 84.5 million active users scarcely best...
Whitman, a.k.a. Blondie, her eBay nickname, had an impressive 10-year run, but when eBay's slowdown began, she tried to buy her way out of the problem, acquiring companies like PayPal, Skype, Shopping.com and StubHub to generate growth. Many were profitable but distracting, as problems like lack of trust and shoddy search technology continued to ail the auction site, the main revenue driver. "Meg was reluctant to expand things like customer service because it would eat into eBay's margins," says Jeffrey Lindsay, senior analyst at Sanford C. Bernstein...
That's why Donahoe, a Whitman hire at both eBay and Bain, where he spent more than 20 years, eventually becoming its CEO, carried out a series of rapid-fire changes. He emphasized, for example, fixed-price sales over auctions and got his mitts on the hands-off approach that has defined eBay for years. Many wonder whether the 12-year-old auction giant will emerge with the same DNA once Dennis the Menace departs. "Donahoe has introduced more changes in the last six months than we've seen in the last six years," says Jack Sheng, chief executive...
That's where Donahoe's tough love comes in. First, he's acquiring companies like Bill Me Later, a payment system, and Danish classified-ad sites that have synergy with eBay's brand. He's also re-evaluating whether to spin off Skype, the voice-over-IP phone-system acquisition that was Whitman's biggest mistake, not to mention a $1.4 billion write-off. eBay overpaid for a company that doesn't directly benefit the core business. Donahoe also launched a new search platform to better catalog the 120 million live listings...