eBay’s Future – Could Auctions be a Good Option for Yahoo?
The starting premise is that eBay is going downhill, and has been for a long time, losing their core community support, increasing fees, changing rules, and making it more difficult for small sellers to run a successful business on the site. eBay is slowly changing its old model and focus, and it probably will not be long before it “re-invents itself” in the image of amazon.com and begins to do its own retail sales in combination with direct business partnerships and associated listings from small sellers. I would expect auctions to eventually become a “one tab” region of the eBay website (like Amazon), and the company begins selling a wide range of products, from books to computers, clothes, MP3s, and personal electronics directly as a discount mass-retailer.
The reason I expect this eventually is because of the huge opportunity it represents for eBay – by a conservative estimate, they could easily pull 20 to 25% of online sales from Amazon in one year. No doubt they have the financing and partnership opportunities available to make it happen, and with eBay’s stock at around $14 vs. $78 for Amazon… in terms of market cap it is $18 billion for eBay vs. $34 billion for Amazon. For the fiscal year 2008, Amazon reports nearly $20 billion in income vs. $8.5 billion for eBay – but eBay made $1 billion more in profit over the same term. There is a much higher margin in commissions for software transactions where there is no warehousing involved (eBay sellers fees, PayPal percentages) than in Amazon’s massive inventories and free shipping.
So what would be the advantage of eBay scrapping their traditional business model and taking on online retail sales in the same manner as Amazon? The upside is growth – eBay’s model is shrinking and Amazon’s is massively expanding. Point two is competition – Amazon has none and eBay has none currently. No one else begins to have the scale, market volume, history, and user base of Amazon in ecommerce…. except eBay. Despite eBay’s attempt to turn-off nearly the entirety of its user base and community, there is still no viable international auction alternative to eBay. The company that develops it will look to make huge gains if it can attract millions of daily users (small sellers) from eBay stores.
To date, Amazon’s auctions are probably the most popular alternative to eBay, but previously Yahoo! had a semi-successful auction site in their portal for a few years. Yahoo! has the size, scale, and financial resources to actually challenge eBay in the auction sphere, where really few other companies could manage a direct challenge to eBay, “the institution,” in this way. But Yahoo! also appears to be sliding heavily, quickly, expensively, etc. downward in the same manner as eBay, and they have already failed at auctions. With all of the talk of market consolidation, of merging of the big IT companies, of Microsoft and Yahoo! and so on…. isn’t eBay and Yahoo! together the best of the match?
This is again based on the premise of turning eBay into an online retail sales challenge to Amazon in the long run, the combined resources of Yahoo! and eBay (+ PayPal, Skype, & the whole Yahoo suite of domains/apps) synergize very well with little to no overlap in territory. eBay and Yahoo! combined would be a much more solid player in the sector, able to keep up with Google, Microsoft, etc. much better revenue-wise than solo. They are also old school, web 1.0 sites that many people associate together from practical user experience.
Yahoo! just announced 700 layoffs and a decline in profits of 78%… eBay and Yahoo! are about equally valued in terms of market capital, but again eBay rakes in over a billion USD in profit more per year vs. Yahoo!. Compare the Microsoft – Yahoo! merger model and the eBay – Yahoo! merger model and which would the stronger company be? I am of the opinion that Microsoft would basically be the end for Yahoo!, turning it into another AOL. On the other hand, I think a merger with eBay could be a dynamic change that gave both companies energy to transform and compete with Google & Amazon. Otherwise, will Google, Facebook, or Twitter be able to build a marketplace that takes on eBay’s core auction model?
The situation at eBay now is similar to old time residents getting pushed out of a neighborhood, their houses bought up, torn down, and rebuilt into new office buildings, condos, and malls. Rather than a flea market or open bazaar (which was so interesting for a while), a more successful business plan for eBay in the future looks to be re-building it as a social network with direct access to brands, labels, and franchise stores. If companies see eBay as the premier web address for ecommerce, allowing them to sell internationally to the public directly at high volume, they will increase their presence there. Which is more attractive now for a business, Amazon or eBay, in terms of sales and professional web presence? Yahoo! and eBay seem to be as good of a fit together for the long run based on current circumstances as Oracle and Sun, if not better, but the equal weight of the two companies makes the situation quite different.
Related Posts:
Comments are closed.
Recommended by Web Dev News
