eBay losing its 'magic'

Has the shine come off online auctions? eBay chief Meg Whitman has acknowledged that the site has lots some of its "magic", as the balance tilts away from home sellers to professional retailers.

Not that eBay is grumbling too much. The company reported profits of $310m on turnover of $1.4bn for 2Q 2006 yesterday. eBay also has $4bn cash in the bank. $9bn worth of trading went on under its roof in the period.

But revenue growth is faster than profit growth, which rose only one per cent sequentially, and this brought a frank admission from Whitman.

The marketplace has been overwhelmed with identical, often poorly-priced items that have diluted the magic of the eBay experience," she said.

This has resulted in fewer return visits, higher exit rates and fewer bids per listing. In turn, conversion rates and successful listings have declined and eBay's GMV growth has not been as strong as we would like.

To remedy this, she said, eBay will raise the profile of the auctions and raise prices for stores. That won't be popular.

eBay said that is has 78 million active users, 20 per cent more than a year ago, and there are 35 per cent more listings. But as a sign of its changing nature, fixed price listings - usually tagged "Buy It Now" - are up 35 per cent year on year.

The company offered no clues on how to turn Skype, which cost eBay $1.6bn, from an expensive albatross into a money spinner.The "communications" revenues grossed only $44m revenues in the period. ®