Ebay To Talk Up PayPal As Analysts Key On Marketplace Unit
10 Mars 2009 - 1:30PM
Dow Jones News
Ebay Inc. (EBAY) is expected to talk up its portfolio of
businesses at its Analysts Day meeting on Wednesday, but Wall
Street is hoping to hear more about the steps the e-commerce
company is taking to jump start it troubled marketplaces
operation.
In particular, Chief Executive John Donohoe is expected to
highlight eBay's PayPal payments unit, through which consumers can
pay for products without having to expose their credit-card
information to online merchants.
Donohoe, who will appear at the company's first analysts days
since he was appointed CEO last year, recently argued that Wall
Street is not fully appreciating the value of the company's
portfolio, which also includes Internet telephony service
Skype.
But analysts were most likely to focus on steps the company is
taking to stabilize its marketplaces business and re-accelerate
growth.
"We continue to believe that eBay is structurally challenged as
it fights a shifting e-commerce landscape that has increasingly
moved away from auctions & demands a superior user experience,"
said Barclay Capital analyst Doug Anmuth in a note this week.
The Internet auction pioneer has struggled to regain its footing
ever since online shopping habits began shifting away from auctions
to fixed-price purchases on sites such as market leader Amazon.com
Inc. (AMZN). Investors have fled in droves, driving eBay shares
down 69% from their 52-week high.
Ebay last year launched a series of initiatives to promote
fixed-price transactions aimed at attracting top quality sellers
and creating a shopping experience that is more similar to
Amazon's. But the company has so far failed to reverse the erosion
in its auction business, which accounts for 51% of the value of all
products sold on eBay's trading platforms.
Ebay's core marketplace transaction revenue, which accounted for
about 55% of the company's total sales in 2008, grew just 1% last
year and actually fell 18% year over year in the fourth quarter.
Citigroup is expecting marketplace revenues to fall 18% in 2009,
compared with an industry-wide low single-digit decline.
Citi analyst Mark Mahaney questioned in a recent note whether
the plummeting value of sales on eBay's auction site has become an
anchor weighing down the company's growth potential.
Ebay in January reported its first-ever quarterly revenue
decline, while Amazon said fourth quarter sales surged 18%. Ebay
shares are down more than 26% since the beginning of the year after
plunging 58% in 2008.
On Monday, eBay shares fell 1.5% to $10.27.
Barclay's Anmuth said eBay must address the company's
controversial sellers rating system, which makes it harder for
sellers to list their products unless they have an extraordinarily
high rating from shoppers. Sellers have also complained that the
opaque rating system grades them on shipping, over which they have
little control.
In addition, Anmuth worried that the preferential rates given to
large retailers could drive lower volume sellers off eBay to other
competitors or to their own Web sites.
In a move highlighting that concern, a software company that
helps vendors sell goods on eBay this week said it was rolling out
a new platform to help those merchants also sell their products on
rival Amazon.com and other sites.
Vendio Service Inc., a Silicon Valley ecommerce software maker,
said the move reflects widespread discontent among eBay sellers
with the changes the company has introduced.
"We listen to our customers and they are saying: "We want to get
off eBay'," said Vendio Executive Vice President Michael Levit.
Anmuth also argued that eBay's new search algorithm is still far
from optimal, with a number of unrelated listings still showing up
even after the roll-out of the new search.
Sandeep Aggarwal, analyst at Collins Stewart, said he hopes eBay
might reveal what metrics it is using to measure the progress of
its marketplaces transformation and provide an update on how
successful it has been in reaching its internal targets.
Aggarwal and other analysts are also looking for signs as to
whether Donohoe intends to spin off Skype, which he said in January
has not generated synergies with the rest of the business.
-By Scott Morrison; Dow Jones Newswires; 415-765-6118;
scott.morrison@dowjones.com