eBay revisited

Last month, I noted that Yahoo!, eBay, Amazon.com had all made 52 week lows, and explained why I don’t like to buy stocks in that condition (fresh lows).

Today, eBay is, once again, making 52 week lows. The blame
today goes to Google’s GBuy, the forthcoming competitor to PayPal, eBay’s
online-payments market. Its hardly a secret, as there have been major stories out on this for months. I suspect some of the pending legislation vs. VOIP may also be
hurting eBay, given their recent (expensive) purchase of Skype.

As someone who uses PayPal as a buyer on eBay, and as a seller of research, I cannot begin to tell you
how thrilled I am with this. At the very least, competition in the space will be
a very good thing for buyers and sellers alike, as it will reduce part of the
transaction cost of buying goods and services online. Add to that the less than
stellar history of PayPal’s customer service, and you have a competitor very
likely to take market share away.

Paypal has been a huge cash cow for eBay, responsible for 25% of revenue an even a bigger chunk of profits. That forward P/E of 28 could
suddenly get a lot more expensive if their earnings drop.

And that’s before any anti-trust complaint from Google, if and when eBay refuses to allow a competitive
service for payments on its auction site.

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What's been said:

Discussions found on the web:
  1. advsys commented on Jun 27

    Glad to see some competition also.
    Kudos to the paypal folks for changing ecommerce.
    No matter what happens in the future these guys deserve a round of applause.

  2. BDG123 commented on Jun 27

    I really admire Meg Whitman alot. She’s a sharp SOB and she knows how to build a culture of innovation and one which rewards risk. But, I tend to think eBay’s biggest problem is the earnings quality. Very, very weak. Hence my comments that Sarbox should be chucked or overhauled with more thought given to transparency, shareholder rights and corporate governance as the Brits have done. All Sarbox does is mound more laws on laws which already work.

    You cannot legislate morality with a CEO or an axe murderer. Some will break the law no matter what. Our laws work just fine for offenders. And for those who blather that they want Sarbox, I doubt it. The CEO signing that no hanky panky was done is a good thing but I don’t need reams of senseless hooey to get that done. My experience is Sarbox hurts business and I’ve lived through it. You want a guarantee? Buy a CD. You want reduced risk? Buy a mutual fund. The $13 trillion lost globally in the Wall Street induced bubble of 2000 didn’t see alot of people going to the pokey. How much did people lose with Enron? Was it $13 trillion?

    Oh, one final thing I find hilarious. The knee jerk reaction to defend Sarbox by people who have a huge chunk of their investments in the Jesse James controlled Wild West that we call emerging markets. Yea, that’s who needs Sarbox.

    In addition, I tend to think it ain’t such a good thing to be in a consumer focused retailing business right now. eBay correlates more closely to the momentum retail plays rather than technology.

  3. Bob A commented on Jun 27

    Paypal has very few negatives. I love Google. I use Google for search. But I don’t want them to be everthing for me. My home page remains Yahoo. I won’t give Google my homepage, at least for the time being. I don’t want the friggin Windows logo on my cellphone. Unless Paypal screws up, they will remain dominant in payments.

  4. trader75 commented on Jun 27

    Umm, Bob, why is Paypal automatically going to remain dominant just because you love it?

    This idea of “not giving Google everything” strikes me as irrational. We gave Microsoft everything (in terms of OS and major PC applications), so how many people are really going to balk at Gbuy just because they already use Gmail and Google desktop and Google search etc.

    The only real risk with giving Google “everything” is if the company’s data centers get fragged, and with redundant storage networks spread out over various parts of the country that’s, uh, not exactly a meaningful probability.

    The ability to buy something via one click Google search sounds pretty cool, as does the possibility of combining a Gbuy account with an adsense account. Or imagine if Google perfected a sort of micropayment system, making it easier for writers and musicians to charge $1.99 for their latest essay or song a la iTunes. There are a lot of ‘exploitable synergies’ out there with electronic payments.

  5. jab commented on Jun 27

    Meg Whitman seems like a very nice person but she has not done much to prepare EBAY for the future. Skype was a terrible mistake and one that never made sense. The P/E of 28 is high for a company that is not going to grow and has competitors coming after them, which will cause their market share to shrink. This was inevitable and not her fault. What is her fault is that she has done little successfully to find new growth areas. If the company does not find these that P/E will get cut in half when they start to lose serious market share in their current businesses.

  6. Bob A commented on Jun 27

    aah but we don’t give Microsoft everything do we? They wanted payments, they wanted search, they want cell phones, they want game players, but they haven’t won dominance in any and failed miserably in some. I think Paypal will remain dominant not because I love them, but for the same reason Coke remains dominant in cola and MacDonalds remains dominant in burgers. Google has a chance but I for one like to spread things around and I think Google has a big enough slice as it is.

  7. trader75 commented on Jun 27

    Microsoft wanted all that but they never earned it. They can copy but not innovate, and no one has popped up in those spaces to copy yet. Except kinda sorta with playstation and Xbox.

    Cola and burgers? No comparison. Those are two old-school industries, leveraged to huge defensive brand budgets and real estate holdings (restaurant locations, bottling networks), where minimal change applies.

    If paypal is anything like Mcdonald’s, then it’s Mcdonald’s before Ray Kroc came along. There are all kinds of innovations and improvements that the paypal guys haven’t even tried.

    If Google can get a micropayments model going, or just plain old lower the costs and raise the reliability of digital payment services through better technology and better infrastructure, then for that alone they will be rewarded with huge marketshare. And it’s not like they’re starting from scratch either. A digital payments model is a natural compliment to the adsense business, with similar logistical issues.

    It’s not about whether Goggle’s slice is “big” enough but whether they can offer a better product than Paypal, and / or expand the online payments space enough to prosper alongside paypal. If they pull it off, customers and end users win. There’s no logical reason to root against them.

  8. Richard commented on Jun 27

    google schmoogle. all i ever hear. smells like another netscape fantasy of taking over the world. while i believe google has learned from the missteps of past companies who started out with a hot technology, google to me is still nothing but a one trick pony with no disruptive technologies to tout. that doesn’t mean they won’t find one, but right now their mindshare and stock valuation is more hype than bite.

  9. trader75 commented on Jun 27

    For the record, I have never owned a single share of stock in Google… but I am continuously amused by the level of hostility the Google guys get from folks who brand them as a fad and a farce.

    If they can pull off adsense, they can pull of a micropayments system and a superior digital payments system modeled on adsense… and if they do do it, it would be a pretty damn cool thing–even if the stock turns out to be a crappy investment.

    This isn’t really about stock valuation at all. I don’t care about Google as an investment. What Google is doing as a business model, on the other hand, and the technological capability they have put together, are very interesting.

  10. techy lname commented on Jun 27

    I don’t think any anti-trust complaint from Google would hold water. Type “For Sale” into the Google search box, and you’ll see how much competition eBay has.

  11. donna commented on Jun 28

    Paypal allowed my credit card info to be stolen and used fraudulently. I’ll never use them again.

  12. Michael C. commented on Jun 28

    >>>I don’t think any anti-trust complaint from Google would hold water. Type “For Sale” into the Google search box, and you’ll see how much competition eBay has.<<< I believe they are referring to only Paypal being accepted and shutting out all other payment types.

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