eBay Gets No Respect

In sports, the superstars always seem to get the good press, while the solid utility players rarely get noticed.

That is, until they make an error.

Now, given the response this week of Wall Street analysts and investors to Amazon.com and eBay’s quarterly reports, I’m beginning to think that the same double standard applies to the e-commerce arena.

After all, an adoring press touted Amazon.com as a winner because its revenue beat analysts’ estimates — even though the company reported a loss of $197 million (US$), or 49 cents per share.

On the other hand, eBay’s report was panned by the media with such lackluster phrases as: “It beat earning expectations, but investors are worried about its costs.”

Another Profitable Quarter

If you didn’t read eBay’s quarterly report, you would have sworn the company had lost more money than Amazon — when it actually earned $1.4 million, or 1 cent per share.

Additionally, eBay earned $461,000 during the previous quarter, giving the company back-to-back profits.

Nonetheless, by the end of trading on Wednesday, eBay’s stock slipped more than $13 per share and lost more than 9 percent of its value. At the same time, Amazon.com shares lost $5.31 per share, or about 7 percent of its value.

Judged By Other Factors

Based solely on the two companies’ latest quarterly reports, I asked myself why Amazon.com is being treated with kid gloves while eBay is getting sucker punched and kicked in the ribs.

I’ve come to the conclusion that this disconnect has to do with several factors that have nothing to do with eBay’s performance over the last two quarters.

Separately, these events don’t appear that significant, but together they pack a potentially powerful punch against the number one online auctioneer.

First, German media titan Bertelsmann AG staked a claim to the burgeoning European online trading market with the August launch of its own Internet auction site.

The new site, known as Andsold, is operated through a partnership with its Gruner + Jahr and Bertelsmann Multimedia units. At the time, the move seemed to be in direct response to eBay, Inc.’s June purchase of a German online trading company.

Then in September, Woburn, Massachusetts-based FairMarket, Inc. teamed up with Microsoft, Dell, [email protected] and other e-commerce portals to stage an all-out attack against eBay.

The mighty alliance administered by FairMarket operates a network of more than 100 auction Web sites. This arrangement means that an antique for sale on Microsoft will automatically be posted on Lycos and Excite as well.

The company already operates an auction network for Lycos, Dell and CompUSA.

And Then There Were Outages

Most significantly, eBay experienced some memorable outages this year, including a 22-hour shutdown in June.

However, since that time, the company has taken strong measures to make sure such a debacle doesn’t repeat itself. In fact, it has been reported that eBay is considering switching its Sun Microsystems computers for IBM or Hewlett-Packard PCs, just to make sure.

No Respect

I believe that what happened to eBay this week has little to do with its continuing ability to turn a profit. Instead, it has everything to do with the inherent uncertainty of the current Internet-driven stock market.

The bottom line is that eBay has been elected the poster child for that element of risk.

On Wall Street, risk is a dirty word. That’s why I think eBay doesn’t get the respect it deserves — even though it’s in the black.

What do you think? Let’s talk about it.

2 Comments

  • eBay deserves no respect. Amazon seems to have a long term plan and understands the business it is in. Amazon attempts to provide its customers, for the most part, the Ebay deserves no respect. Amazon seems to operate with some long-term vision. They seem to understand the business they are in. They pay attention to their customers and offer the products they demand, and back it with a good level of service. eBay, on the other hand ignores its’ customers and makes only short term fixes in an attempt to back the asinine promises that have been made to wall street. Everything they have done in their fee changes and “Policy changes” is designed to squeeze more money out of the pockets that feed them. Extremely little has been done to truly improve the service they provide. Talk to the people who use ebay, and you’ll quickly understand that they still use ebay because they have to, because it is the biggest thing out there, not because they enjoy the experience. The customers are not happy, and the press has probably found out. On one hand ebay is still posting good numbers so they deserve credit for their bottom line, but at some point their profit driven/customer unfriendly policies are going to drive more and more customers away. The poop’s gonna hit the fan for eBay.

    • I couldn’t agree more with you; however, eBay US is a little better than eBay UK. The UK site has to be the worst on the web. We all wish someone would start a decent auction site in the UK. Jean

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