EBay Fights Competition Through Better Ratings, PayPal Expansion
In a time of cutthroat e-commerce competition, eBay is pulling out the stops to keep users happy, even at the risk of upsetting sellers short-term, Marketplace President John Donahoe said Tuesday at the UBS investor conference. The company’s fixed-price transactions now account for 41 percent of all sales, and eBay has been testing a new pricing formula for fixed-price sellers the past three months, he said. Donahoe also defended eBay’s purchase of Skype, which came under fire when the company took a $1.4 billion writeoff for it.
Sign up for a free preview to unlock the rest of this article
Export Compliance Daily combines U.S. export control news, foreign border import regulation and policy developments into a single daily information service that reliably informs its trade professional readers about important current issues affecting their operations.
About $58 billion in sales passed through eBay in the past year, Donahoe said, and eBay’s revenue is growing 25 percent a year. The original business model “just caught on fire,” but about 12 to 18 months ago “it became quite clear to me that we needed to evolve,” because the eBay user experience was faltering in comparisons with those offered by competitors. Next year will feature “more bold and aggressive” follow-through on current efforts, but “we aren’t necessarily going to spend more money,” Donahoe said. High- growth, low-margin businesses -- the opposite of its core auction business -- are in eBay’s sights, he said.
Buyers’ biggest complaints have been high shipping prices, the prospect of “retaliatory feedback” from sellers if buyers give poor ratings, and the ease of use of the site, Donahoe said. That’s why eBay is letting buyers rate sellers in a “blind” way. For example, buyers can submit ratings on shipping prices. “We now have very good data on the quality of our sellers that we can begin using in search results,” starting next year, by de-emphasizing sellers who show higher-than-normal shipping prices, Donahoe said. The company is also providing a direct phone number for the most active buyers to call to report problems, a major shift in its customer-service practices, he said. On the sellers’ side, eBay is helping some less insightful merchants learn what buyers want, Donahoe said.
Use of eBay-owned PayPal on the auction site is growing 18 percent a year, but eBay is also marketing PayPal to other companies to use for checkout, Donahoe said. Southwest Airlines and Dell are customers. They have found a “distinct pickup in incremental volume” of sales on their sites by using PayPal, he said. “We're only beginning to scratch the surface” on PayPal’s use by other companies.
“We continue to think Skype is a strong brand, a great product,” Donahoe said, adding 300,000 users a day and accounting for 4 percent of the world’s long-distance minutes. With Skype’s “brilliant” founders out of the company, it’s natural that eBay should be taking a pause on Skype’s future direction, he said. Social networking sites are clamoring to license Skype for their users, and eBay expects another surge in Skype use when Wi-Fi enabled phones arrive in force next year, he said.
Over the past year, eBay has toyed with what makes its use fun and has decided that offering a “funky browser experience” isn’t the only way to provide entertainment, Donahoe said. “Good value” and “great selection” are top priorities while “fun’s third,” though the eBay brand “has an element of whimsy to it,” he said. Outside the U.S., eBay is number one in consumer-to-consumer selling, while Craigslist is on top domestically, he said. EBay owns 25 percent of Craigslist but founder Craig Newmark “has been clear he wants to keep the other 75 percent in a nonprofit trust in perpetuity,” he said.
EBay is combating fraud on several fronts, monitoring last minute bids from zero-feedback users and screening offerings for counterfeit products. Some of the changes are in response to a suit by Tiffany, which claimed the online auction house was enabling the trade and sale of fake versions of its luxury jewelry, he said. A new program lets companies like Tiffany verify the legitimacy of items, and the site also keeps close watch on sellers hawking large quantities of sought-after items, such as Tiffany pieces, he said.