Are Big Changes Coming To EBay?

February 1, 2008 · Filed Under Recent News, Technology · Comment 

January 23rd was a big day at EBay; Whitman publicly announced her coming departure, and the EBay Board of Directors voted unanimously to appoint John Donahoe to replace her. 

Donahoe has been in charge of EBay’s Marketplace Business Unit since March 2005.  In the 3 years since he arrived the revenue and profit of the unit, which accounts for more than 60% of the service’s total earnings, has more than doubled.

No stranger to management, he sits on the Board of Trustees for both the Stanford Graduate School of Business and Dartmouth College. 

He’ll need to hit the ground running, as Whitman doesn’t leave small shoes to fill. How effective has she been at what she does?  Time Magazine called her one of the world’s most influential people, which isn’t surprising when you take into account Forbes Magazine listing her estimated worth at $1.4 billion last year.

Since becoming CEO of EBay in March of 1998, Whitman guided a small company headquartered in San Jose California with less than 50 employees into an international phenomenon that today runs a global business consisting of over 11,000 employees and earned net revenues of $7.67 billion in 2007. 

Talk about having a full plate. Not only has Whitman been managing EBay into an international corporate giant the past decade, she’s also on the Board of Directors for Proctor & Gamble as well as DreamWorks Animation, the movie studio responsible for such hits as Shrek and it’s sequels, Over The Hedge, Madagascar, The Prince of Egypt, and Chicken Run.  In fact, before she ever worked at EBay she made her way up to management through both Proctor & Gamble and the Walt Disney Company.

Whitman will remain as a member of EBay’s Board of Directors. 

Seeking to allay concerns over the change of management, Whitman released a statement to the press, in which she commented: “During
the last three years, John and I have worked very closely together to arrive at this day, and we’ll continue to work together through the transition.  I’m extremely confident in John’s skills and the abilities of John’s veteran management team.  eBay and its millions of users are in great hands as they head into the future.”

Why would the highly successful CEO of a company that earned gross revenues of over $7,000,000,000 in the last year suddenly decide to step down? 

Such a move makes sense now because it’s hard to see how EBay could go anywhere but down from the plateau to where Whitman has guided it. Several sources mention rumors that the reason Whitman is stepping down now instead of later is because she intends to run for Governor of California in 2010.  Two years would give her plenty of time to build up her political machine and prepare to run as a candidate. 

What does all this mean for people who depend on EBay’s services?  Can EBay buyers and sellers expect any changes to the on-line auction house giant now that there has been a change of CEO’s? 

The only changes Donahoe has discussed publicly thus far were experimenting with new pricing frameworks that would cause more of the items listed on EBay to be purchased for a fixed price rather than from bidding on auctions.  He also mentioned dropping the rates charged to to the sellers for listing their items on EBay’s website. 

These changes may not be welcomed by Ebay investors as warmly as sellers.  But in the eyes of the users they should be welcome.  In recent years ebay consumers (both buyers and sellers) have bridled over cost increases and fees. The user base has degraded a bit due to these increases.  Combine these losses with the missteps made by management in buying Skpye (which Ebay is rumored to be shopping to buyers) and it becomes clear that some change is needed.

Both moves seem geared to increase consumer use of the service, as buyers can be confident in obtaining an item being offered for a fixed price since no one can log in at the last minute and outbid them as the auction is expiring, and lowering the rates for listing items for sale will encourage regular sellers to post even more items with the service. 

Several market watchers noted that EBay didn’t show the same robust growth after the aqquisition of Skype, an internet telephone service for which there were high expectations. 

Looking at the growth the company has enjoyed the past 10 years, other market observers think after such long, dramatic growth such a dip in profit is nothing to be concerned about. 

Taken as a whole, Whitman has handed off a company to her successor that has been outstandingly successful, and based on what he’s done in the short time he’s been there, there’s no reason to expect any major changes or negative impact from this development. 

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