EBay reshapes itself as an easier, cooler place

The buying process could get even slicker in the next few years. EBay is exploring improvements to its search engine and might add product-recommendation systems that can analyze buyers’ preferences. The company also bought some ideas in this direction last month, when it spent $75 million for StumbleUpon, a Web site that lets people rate and share information online.

Here’s the challenge: While the new lures for buyers are designed to help vendors move more products, eBay has to be careful not to upset its treasured community of sellers who earn serious bucks on the site and can be prickly about changes.

“The more buyers they can bring in, we’re going to cheer that,” said Linda Hartman, a longtime eBay “PowerSeller” who offers dinnerware from Bristol, Wis., and worries that a glut of sellers hurts her business. But she added that eBay might be banking too much on fancy Web adornments that will have little overall effect.

“The enhancements are great for techies,” she said. “But my average buyer is probably a little old lady in Des Moines.”

EBay has rarely required such strategic reformations. After Omidyar set eBay loose in 1995, it ballooned with relatively little corporate effort, a rare example of a cool new thing that could not have existed before the Internet.

As people clambered into their attics to find junk to sell to strangers, pretty much all that eBay executives in San Jose, Calif., had to do was make sure their servers could handle deluges of Web traffic, charge sales commissions and listing fees, and then get out of the way.

In 1999, eBay’s revenue was a tidy $225 million. By 2002 it had sprung to $1.2 billion. Last year it was $6 billion, with $1.1 billion in profit.

But that trajectory can’t last forever. In one telling sign, eBay recently stopped having “category managers” recruit and nurture buyers and sellers in most of its particular niches, such as coins or gardening. By now, because of eBay’s wild success, there are plenty of traders, and no more new categories to add. Instead those managers are focused on wider-scale issues like improving eBay’s overall buying and selling experience.

In the first quarter of 2007, users offered 588 million items for sale, but that was up only 2 percent from a year earlier. EBay’s count of “active users” rose at a healthier clip — 10 percent — but that rate has been shrinking steadily since 2003. The growth in U.S. revenue — half of eBay’s business — has slowed for four of the past five quarters. Although international growth is stronger, typically around 38 percent, eBay has struggled in the exploding markets of China and Korea.

Add it all up, and it’s clear why the company is trying to “reignite the core,” in the words of Bill Cobb, who heads eBay’s North American business.

“They’re not really screwing up, and it’s not that Meg Whitman needs to go or they’ve gone in the wrong direction,” said Martin Pyykkonen, an analyst with Global Crown Capital. “It’s just that there’s some finite limits to growth, and they’re reaching that.”

More information
You can see some eBay changes at:

• EBay playground
• Windorphins

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