Ebay, the Professor on Gilligan’s Island

Why can’t eBay see the obvious?

ebay, logoOn a radio interview a few weeks ago I heard Sherwood Schwartz, executive producer of Gilligan’s Island, say that he felt that it was entirely rational that the Professor, genius that he was, could never figure a way off the island, when all he had to do was nail some wood on the boat.

“That’s true of mankind,” said Schwartz. “They can do except what they cannot do.”

I thought of that analogy when I think about eBay (NASDAQ: Ebay). eBay reminds me of the Professor, who with all the smarts, advantages and good looks, cannot figure out the obvious solution. With eBay, the issue is that it has to fix its core auction business. In order to succeed, Ebay has to patch up its relations with its sellers, and re-win the confidence of its buyers. I cannot understand why they can’t execute this. Is it pride? Or is it the novelty of its holdings?

Like the Professor, eBay is so enjoying wonderful academic exercises like Skype that it never figures a way to lasting success at auctions. First, lets look at just a few of eBay’s assets, which in many cases would be prized companies on their own:

  • Pay Pal. PayPal is a sort of parallel and sometimes untaxed international currency, and it is now used in a wide variety of small business transactions. In some ways it functions like barter. Some analysts want Ebay to spin it off, even as it is one of Ebay’s crown jewels; but Pay Pal is the central banker and post-modern currency that makes Ebay tick.
  • Stub Hub: How compelling an idea is it that you can get the seat you want?
  • Skype: While Ebay’s purchase of Skype is still criticized, eBay is now bundling Skype technology with IBM’s LotusLive www.lotuslive.com cloud services. IBM is Skype’s gateway drug into the office, where I.T. folks HATE eBay.

Then, there are Ebay’s general advantages:

  • The economy. The recession should be helping eBay. This should be the time when everyone should be unloading all the crap they bought when times were flush. In a recession, people want bargains, and eBay should be able to deliver that.
  • Partners? The newspaper classified has completely lost its role as the spot for selling used goods, but those goods still need to be sold. Do eBay or its subsidiaries have a role in classifieds? What if you could pay a few extra bucks to put your eBay listing in certain newspapers?
  • Antiques Mania: TV has produced a mania for collectibles, home design and antiques, and eBay is the best way for average Joe to offload his own junk and stock up with better junk.
  • Process: eBay has the proprietary processes and patents to dominate not only the selling of used goods, but of any goods-selling. Could Ebay be the cash register back end for antiques retailers?

Yet, if you look at eBay’s stock, it is down close to where it was at the first tech bust. So what does eBay need to do to fix it? We don’t have the exact answers, but management needs to consider the following:

  • The fixed price goods should not be intermingled with the auctions. They ruin the experience. Now, imagine that you go to Sotheby’s, and just outside the door of the auction room, you have a sales room where many of the same sorts of auction items are for sale for a fixed price, all on consignment. The message, the immediacy of the auction, would be lost. There is no harm in Ebay offering a “Buy it now” price but it should be separate from the auction section.
  • They need to find common ground between buyers and sellers, and make both happy. Of course, with as many transactions as Ebay performs, there is no way to avoid complaints. And you can’t keep everyone happy. But they have to fix this.
  • eBay should quit trying to force higher fees on sellers. What makes eBay is scale. You don’t want to bleed the top sellers. Instead, you want sellers to sell more, and more people to auction things off. You want to make it easy for sellers, and always be thinking of fewer steps, and fewer costs. Through volume, you make up the difference.
  • Kijiji, the free classifieds that were supposed to compete with Craig’s List, are not promoted well. But the service could offer so much more. For instance, I looked at Sarasota, where I live. There were only 38 tradesmen registered with the service, yet the want ads are free to anyone. Why can’t eBay leverage its vast customer base to get people to use the service more? If, for instance, house painters used Kijiji to market themselves, is there room for contractor billing through Pay Pal? Can tradesmen set up service billing through eBay’s back end? Could eBay handle payroll taxes?
  • eBay needs to investigate other ways it can use its processes. Are there other Stub Hub opportunities? While Pay Pal’s pre-eBay dalliance with gambling sites has been a problem, are there other legal ways Stub Hub can connect up with attractions to sell tickets?
  • I can’t understand why the whole eBay drop ship retail store is not in every shopping center in the U.S. Americans have lots of crap in their houses that they would love to get rid of, and would love to have someone else take care of it. And Americans, poor as we now all seem to think we are, still have lots of things we want. So that seems to be a market, and I cannot understand why that business model doesn’t appear to be ubiquitous.
  • eBay needs to think of its core business. For instance, Fillz, a British Columbia-based company, sells a vendor-neutral inventory management solution that allows booksellers to manage inventory across Amazon, eBay and the rest of the bookselling sites. It’s a small, tightly focused company, and it is doing the sorts of things that Ebay ought to be doing, namely helping to better serve sellers AND buyers.

eBay is one of the most fascinating companies in the U.S., and it is most certainly worth more than its share price. But that doesn’t mean it can’t screw things up in the meantime.

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