The only thing saving eBay is no competition

eBay has decided to restructure and downsize. Don Reisinger believes eBay is in serious trouble and must do something quickly if it wants to survive.

There once was a day when the great eBay commanded respect and considerable power in the world of tech. Since then, the company has been relegated to a mere shadow of its former self that's barely hanging on to a shred of relevance. And the only reason for that is the company's lack of competition.

Let's face it -- eBay is nothing more than an outdated, bloated company that lost its way years ago. And with the news coming off the wire today that suggests eBay is restructuring its worldwide operations and cutting jobs, things don't look too good for this ill-fated firm.

Of course, the company doesn't see it the way I do. Instead, a company spokeswoman claims this news is a "globalization and centralization effort" to ensure it's more prepared to enter the Web 2.0 fray.

But I have some news for eBay -- unless some major changes are instituted, the end may be near.

There's no debating the fact that eBay is still a major force on the Internet. According to the company, it currently adds 6.7 million listings per day and about 60 percent of those originate from Web services that have helped eBay expand its business beyond its own walled garden.

eBay is also a financial powerhouse that has heretofore maintained its standing as an extremely powerful company. According to its latest filings, the company enjoyed a profit of about $348 million in 2007. And while that may seem fine, why is a company that's performing this well, experiencing so many problems?

Sadly, it's because the company's management team is awful and the firm has become a bloated mess that has actually witnessed an $800 million loss in profit since 2006. Some may call it an anomaly (and I'm sure its executives would), but the fact remains the same -- something is wrong with eBay.

Of course, eBay knows this all too well. In it's latest annual shareholder filing, eBay admitted that there are a number of growing risks it will need to confront going forward. Sitting atop that list is its belief that "changing customer demand" is a key contributing factor to the issues the company currently faces.

"We face challenges in the U.S., U.K., and Germany, which are our three largest markets, as growth of listings, active users, and Gross Merchandise Volume on the eBay.com platform in those countries has slowed," the company said in the regulatory filing.

And although eBay's revenue is still expected to grow by about 14 percent this year, the company's once formidable revenue growth of 30 percent to 40 percent has dwindled considerably. On top of that, the company's controversial decision to lower listing fees and increase commissions was met with a significant amount of user unhappiness and its choice to no longer allow sellers to criticize buyers started a firestorm that it has yet to overcome.

At its core, eBay has always been an auction site. In fact, the company made a name for itself because of that single service. But during the last few years, the firm has lost its way and allowed the grow-happy executives to change the way the company is run and perceived.

For example, why did eBay think Skype was such a great acquisition? And what about Shopping.com? How does that pertain to auctions? And although some enjoy using the "Buy it Now" feature, I think it was a foolhardy decision by a group of overzealous executives grasping for a money grab.

eBay is an auction site much like Christies is an auction house. Do you see "Buy it Now" features promoted at the Christies auction? Can people attending the auction make VoIP calls during it? Do they really want buying advice?

eBay has lost its way and the only reason it's able to enjoy these profits is because there's no company out there that's willing to compete on such a grand scale. But why not? eBay is obviously worried about the future and auctions are still a viable way to buy products. If a company came along that finally revolutionized online auctions, the entire landscape of the business could be changed forever and eBay would be long forgotten.

eBay is poised to enter the junk heap of tech if it doesn't do something quickly. It may seem like a company that has longevity written all over it, but trust me, the chances of eBay staying around for too long while maintaining this strategy are slim.

Sadly, it'll only take one competitor.

 

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