EBay posts first-ever quarterly sales drop

EBay reported lower fourth-quarter profit and its first-ever drop in quarterly sales, as the global economic slowdown and the stronger dollar hurt its business.

The online auction company recorded net income of $367 million, or 29 cents a share, for the last three months of 2008. That was down 31% from $531 million, or 39 cents a share, a year earlier.

Net revenue fell 7% to $2.04 billion, reversing the persistent growth EBay has posted since its founding in 1995. Sales at the Marketplaces unit, which includes its core online auction business as well as Shopping.com, StubHub and other online businesses, fell 16% to $1.27 billion.

The San Jose company's shares fell nearly 6% in after-hours trading, giving back all the gains they made in regular trading, when they rose 73 cents to $13.28.

Excluding some items, EBay reported income of 41 cents a share versus 45 cents a year ago. That beat some analysts' estimates of 40 cents a share. EBay said it expected first-quarter revenue to be $1.80 billion to $2.05 billion with net earnings of 21 to 23 cents a share and operating profit of 32 to 34 cents a share.

For the full year, EBay reported net income of $1.78 billion, or $1.36 a share, on sales of $8.54 billion, compared with net income of $348 million, or 25 cents a share, on sales of $7.67 billion in 2007.

“While the holiday season was tough and competitive, our overall results for 2008 were strong,” Chief Executive John Donahoe said.

The drop in fourth-quarter sales wasn’t a surprise. When EBay ...

... reported its third-quarter earnings in October, it warned that a drop-off in consumer spending that began in August would probably hurt Christmas sales and result in a drop in fourth-quarter revenue.

The company also said that the faltering economy and turmoil in global credit markets probably would continue to weigh on consumer spending in 2009. In a recent report, analysts at Piper Jaffray predicted that online sales would fall 10% industrywide this year "as consumers rein in discretionary spending and significantly increase personal savings." E-commerce sales slid 3% in the fourth quarter, according to research firm ComScore.

EBay said in October that it would reduce its 16,000-person workforce by 10% as part of a turnaround effort launched by Donahoe, who took over as CEO in March when Meg Whitman retired. Most of the layoffs were in the company’s auction business, which accounts for two-thirds of EBay’s revenue.

Growth in active users of EBay’s online auction business “has slowed dramatically,” analyst Laura Martin of Soleil Securities Group noted in a recent report. On the upside, she noted EBay had reduced its dependence on auctions, with its PayPal online payments service, Skype Internet phone operation and other non-auction businesses contributing a growing chunk of revenue.

EBay is the first of the big Internet companies to release results for the last quarter of 2008. Google is due to report Thursday, followed by Yahoo and Amazon.com next week.

-- Martin Zimmerman

Photo credit: Ryan Fanshaw

Comments

[laytonian]

Maybe eBay's increasingly hard-to-use listing formats, silly changes to feedback, give-ins to book publishers that hurt sellers, and similar issues are keeping us sellers away?

In their zeal to become another amazon.com, eBay has demonized their sellers and allowed fake bidders to take over.

Donohue's changes may have worked in a better economy, but all he did was bite the keyboards that fed eBay: the sellers.

[paul]

The main reason ebay has lost money is that members left ebay over the ebay requirement that ebay sellers only use paypal as the sole method of receiving payments from buyers. They have squeezed every penny they could out of their loyal ebay members. Penny wise and pound foolish.

[BW]

Good. eBay has been greedy with their pricing policies of late. May they lower prices and be more appealing to sellers.

[Oliver Chettle]

In response to laytonian, I made one purchase from eBay several years ago. I received threats from the seller for not leaving feedback praising him. I was shocked, upset and disgusted. This is the only time in my life I have been threatened by a vendor: every other vendor I have ever made a purchase from his considered my money thanks enough, but eBay sellers expect something more. They won't get anything more: I have never returned to the site.

[Greg]

In response to Oliver Chettle: I'm sorry that you feel that way. I have bought and sold occasionally on eBay for several years now. I've never coerced feedback from anyone who bought from me, nor have I ever been "threatened" as you say from a vendor. I'm sorry that you let one bad seller keep you from the site.You've "tarred all sellers with the same brush" as the saying used to go.

As to the other comments, I agree, eBay has made the buyers and the shareholders their priority. OOPS!

[mike]

Here's an example of how absurd their feedback system has become. Even if a buyer refuses to honor their bid, and neither communicates with the seller or responds to an ebay unpaid item notification, you still can't give the joker a negative. Very balanced of ebay. If Meg Whitman dares to run for California Governor, she'll have a lot of disgruntled ebay sellers and ex-sellers looking to expose her disdain for the people who helped build the company.

[Ann]

Ebay not only treats their sellers like crap (for instance, not allowing them to leave negative feedback for deadbeat buyers), but for sellers like me, they place restrictions on designer listings. I have 100% feedback and have sold a few designer items; when I tried to list a pair of Chanel sunglasses I received a message that I was on a 30-day listing restriction. Check the ebay boards.....this is happening to many good sellers. I can't understand why ebay is shooting itself in the foot, and I'm glad to read that they are experiencing drops in their sales and revenue.

[A Rothman]

If Meg Whitman becomes governor, I will leave. The last thing this state needs is another Republican governor with no political experience. As for my eBay selling account, I have noticed lower final sale prices. Too bad. I will hold off on selling.

[Billy]

Everyone who sells on eBay knows how bad management has screwed it up over the last few years. The real comparison will come when Amazon reports and you compare the two.

The luckiest thing that happened to Donahue and the others at eBay was the horrible economy. It gives them an excuse for their terrible mismanagement.

[Bob]

A friend of mine who used to do a lot of listings on eBay finally got fed up with their predatory practices, such as charging for their on-line store feature, even after repeated requests to stop doing so. He finally got his bank to block eBay from siphoning money from his account.There are other sites now that offer much of what eBay does for far less cost and hassle, and as more people discover them, eBay will be forced to become more user-friendly and less greedy. Competition in the free market is a wonderful thing.

[Gene Venable]

Ebay has made many enemies out of its former customers, among buyers and sellers. I am not the only one who is cheering its demise.

[jim c]

this is from someone who has sold over 8,000 items on ebay.

They have raised their fees to be roughly equivalent with amazon - this is a substantial raise over the last two years. I would think their decline in sales has something to do with this as one has to be more selective about what is put on ebay to make a profit. The paypal requirement is not a problem. It just means you cannot advertise you take checks or money orders; however, i still take them from anyone who asks. Ebay is the only major site that allowed sellers to give feedback to buyers so they change to a more buyer friendly system is not surprising and not at all difficult from a seller point of view. . I sell in the Toys and Hobbies category year round. It is still the best place for auctions because of the audience they have. I started selling on Amazon recenlty. Their process from a sellers point of view is more seamless in that they handle the collections and just send you the money. My limited experience indicates people may be willing to pay a bit more for toys on Amazon than on ebay. I believe ebay would do well to lower their auction fees while keeping their fixed price fees as is. I think it would increase their profit and revenue.

[jim c]

i do think that ebay has entirely too many people working for it. Useless phone calls from their staff telling you what they have already told you via email and on their site. The contstant change of categories and user interfaces is unecssary and is brought about by too many employees justifying their existence. I have a feeling you could cut 20% of the staff from ebay and they would be a much improved company.

[alison]

The door is wide open for eBid.net

[Dave Mikkelson]

Not surprised to hear this.

As one who has been primarily a buyer, and only recently became a seller, I have thoughts on it. Mostly negative. For years I went round and round with them because they would not set up a sellers account via the phone. I will never enter a credit card number or primary bank info through this home based machine. The conventional anti-malware for us is insufficient and its all after the fact protection anyway. I always paid with postal MOs. Only recently was I able to set up a paypal without our bank or CC as the ID verification as they were somehow able to do it through your email address (I probably really don't want to know how they do this... likely to irritate me) ... and I had to open a special bank account for them as I was not going to give them or anyone hacking their system access to our main accounts.

Now, as a seller, and a former non-electronic buyer I really do believe their primary losses are due to the loss of about 1/2 of the potential buyers that used to buy but not electronically. They eliminated them from the running. That hurt everyone.

You need happy camper on both sides... sellers can't sell unless there are buyers, buyers can't buy unless there is sellers. The form of payment should be up to the seller.... he is the one at risk. Not mandated by eBay.

Unless they change and allow postal MOs as a normal payment option, I doubt I will continue as either once I sell the few items I need to.

[Linda]

eBay sales are down because the increase in fees, feedback changes, Hiltler rules on what to sell and what payment type to use and their arrogance and ignorance of their own business. They are too ignorant to know what made eBay fun to trade on both for the seller and buyer and too arrogant to care. They have made eBay a hostile trade site with their rules, fees and unfair treatment of the sellers. Forcing sellers to accept Paypal and not allowed to advertise other payment methods on the listing is criminal of eBay since they own Paypal. Their excuse to make it a safer place is a thin veil at eBay's attempt to hide the real reason they made this Hitler rule which is simply greed. I agree completely with Billy. Their sales are down because of mismanagement. I am thrilled to see in writing what was clearly evident on the site-eBay's business is down and they are riping it up for another site to take over what they destroyed.

[Kirk Zimmerman]

eBay's own changes to policy have hurt them more than anything else. A loyal customer since 2001, I no longer buy there. I used to be able to use standard search logic to find what I wanted - no more. I used to be able to find rare and unique items not sold anywhere else - no more. I used to view each transaction as a cooperative effort to achieve a positive transaction between me and the seller, with the changes to feedback and DSR's - no more. - I used to be able to find fantastic deals on price - no more. Congrats, eBay. You wated to be like Amazon, you have succeeded in becoming a cheap and clumsy imitation. I never shopped there, either.

[dave faler]

At the risk of sounding like a typical disgruntled maniac here's my experience. I Sold a helmet on ebay in Jan.. The buyer filed an SNAD with paypal. ( I fully accept his right to do that) He then returned an empty box to me and got a refund of $165.00. It took 9 weeks 14 phone calls and a Police report to get my money back. I sent the empty box to paypal's Omahe return center at my expense. The buyer then sold my helmet for $284.00 on ebay. ebay and paypal were notified as the auction was in progress and nothing was done. Profit for the buyer $449.00 less feees. He has sent over 60 e-mails filled with taunting, bragging and vile language. ebay's response " We don't control peoples language"Long story short, the system is now geared for thieves. I would not deal with these two companys for any reason. It will eventually happen to you, guarenteed.

[kris thompson]

I currently both buy and sell on ebay - auctions only, no store.

My experiences have been positive so far overall. However, the increasingly hostile attitude exhibited by eBay towards sellers makes me wonder how much longer I will be doing business with them.

Of particular concern is the inability of sellers to leave feedback - the buyers are as much a part of the transaction as sellers, and there are plenty of ways they can cause problems even if they don't blatantly rip people off. As is, I have no way to screen for these folks and am stuck with dealing with slow pays, with people who refuse to contact me through ebay (they will only use my email), and several other annoying things.

After thinking about it why ebay would be so negative towards their own sellers lately, I realized that eBay is probably actively trying to reduce the number of sellers. As economic conditions decline, there are more people who want to sell things and less who want to buy, which causes the sale price of items to decline, meaning that those hefty final value fees decline as well. Their ideal set-up is to have limitless buyers, but to control the number of sellers so that items maintain their value. Many, many people who shop on eBay don't even bother to shop around elsewhere so whatever it's worth on eBay becomes what it's worth period.

It is more than a little ironic that eBay doesn't realize that there is no such mechanism at work when it comes to their own competition...they're gonna have to change their ways or they won't have any sellers left.