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John Donahoe | Red Ink Diary

Posts tagged “John Donahoe”.

Divide and Conquer

One of the major effects of John Donohoe’s disruptive innovation on eBay has been a polarization of eBay sellers. He used the divide and conquer tactic and for a while it worked. I wrote about it in early April as the first cycle of ‘decreased and adjusted’ billing completed.

In the days when eBay was a community, experienced sellers, many of them very high volume volunteered in the Answer Center and helped beginning sellers become good sellers. I know this because I was once one of those beginning sellers who was trained to do it right. I have always believed “What goes around comes around” that thought can also be found in the beautiful language of the King James Testament, Galatians 6:7 “..whatsoever a man soweth, that shall he also reap”. Years later when I actually knew what I was doing most of the time I too volunteered in the Answer Center.

That ended when eBay ‘fixed a system that wasn’t broke’ with what, with 20/20 hindsight was a precursor of the Detailed Seller Rating system. The search function was ‘weighted’ to return threads that had been voted on as being helpful or not helpful. How do you think a slightly crooked seller would vote after being roundly told that his listing was in violation and business practices unacceptable?

Soon responders were registering ‘posting IDs’ to protect their eBay business from malicious buying just to give negative feedback. Both the good guys and the bad guys gamed the votes and eventually ‘finding’ was corrupted beyond redemption. If you are volunteering and the job is no longer rewarding the incentive is soon gone. Many of the good guys went away and eBay’s customer service suffered.

Fast forward to October, six months after PowerSellers started eligibility for discounted Final Value Fees. Many smaller sellers left in May, they were the ‘disgruntled noise’. Since then a trickle of sellers, business people who analyzed eBay and found it an increasingly unsustainable venue have quietly (for the most part) formulated an exit strategy, implemented it and gone.

The Brews News wrote twice this week on the subject, Thursday about the effects of lowered fees on their business and today about eBay’s seller shrinkage and what the prognosis is for Q1-09. Insightful commentary and I recommend reading it.

What lessons can we learn from this experience? Please add your comments so we may all have food for thought.

Y’all come back!

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Why Do You Hate eBay So Much?

A fellow seller asked me the other day “Why do you hate eBay so much?” I could have made a wisecrack answer, but the question was thought provoking and deserved consideration. I have thought about it and this is my response.

I don’t hate eBay.

eBay is a corporation and is perfectly entitled to move in whatever direction it’s CEO and Board of Directors approve. I am equally at liberty to do likewise.

Consumers always have choice and the most basic of those choices is not to consume. eBay had shown me, personally, in 2006 that it was an unreliable service provider. I am referring to the Stores Inventory in search implementation and subsequent abrupt reversal without warning a few months later. Like many others I had invested a substantial amount in inventory. Unlike many others I have always had a firm policy of not buying on credit. I own my stock and two years later I still own some of it! Strike one for eBay.

Shortly thereafter eBay kicked me while I was down. Store insertion fees doubled. I had begun the (for me) long and difficult process of building a website. My capital was tied up in stock so I could not pay someone to build one for me. I did not want to be at the mercy of another instant e-commerce solution, therefore a stand alone website seemed the intelligent solution. Strike two for eBay.

Auntie May (the fictional dumb small seller of fleamarket junk) & I are fond of aphorisms. You may roll your eyes at this point (although I would bet money you can’t do it as well as the Good John does) but there is often a lot of truth in them. this applies to the person who, as Auntie May would say “done me wrong”.

Once, shame on you, twice, shame on me.

In the corporate culture employees take their cues from the top. I wrote about this here and here in May. As John Donohoe was preparing to take the reins from Meg Whitman in December 2007 he gave an interview to the Financial Times. There are clear indicators of Donohoe’s attitude towards sellers in that article,

Mr Donahoe has cast an outsider’s dispassionate eye over some of the site’s practices and found them wanting. During an interview at Ebay’s headquarters in Silicon Valley, he talks with the clear and untroubled certainties of the consultant, and has the prescriptions to match.

John Donohoe subtly conveys an inner certainty of his absolute superiority in every way to the sellers who pay fees to utilize eBay’s services. This contemptuous attitude was absorbed and magnified by lower level employees, aided by Usher Lieberman of the PR department, and now it permeates the entire company.

My colleague at the Brews News commented on this last week and again here. Please note that The Brews News are not hysterical noisy boycotting ex-sellers. They are a group of multi identity PowerSellers who are still trying to run their businesses on eBay. Key phrases in the post are

He immediately became belligerent
he was insistent
he was adament
he was rude
asked me what I wanted to discuss with the TSAM
the rep grilled me and told me to explain

Does this sound like a Customer Service Representative assisting a valued and high volume paying customer? No? More like a self important busy junior executive dealing with intolerable interruptions and inefficiencies from an incompetent subordinate?

A monolith like eBay Inc. makes the decision to follow a course of action and implement policies which are contrary to the interests of it’s users. When eBay refuses to engage in a two way conversation with it’s customers or listen to their concerns (”we hear you” does not mean “we are listening”) the only option is to vote with your feet; I made the decision to not use eBay, either as a buyer or seller, and I sold my stock.

I repeat, I do not hate eBay. This blog is a chronicle of eBay’s destruction of the brand. How eBay lost ITs groove. It says so right up top on the header.

eBay Inc opened on the Nasdaq exchange this morning at $18.50 and as I write this has dropped to $16.90. Today eBay announced two classified site acquisitions in Europe and the purchase of the US second largest online payments system Bill Me Later; which will merge with PayPal increasing eBay’s near monopoly on online payments.

Y’all come back!

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How Low Can You Go?

Shah King of Limbo
Picture courtesy of Shah King of Limbo

I am NOT a stock market analyst. I had shares in eBay which I bought mid January 2001. I bought them for all the usual wrong small investor reasons. I was in love with eBay, it was a wonderful thing, nothing but good times ahead. I sold them this March at $30. I broke even, taking into account capital gains tax, commissions, and the decline in spending power of the dollar between my purchase in 2001 and eventual sale 89 months later. eBay shares have never paid a dividend. How could this be considered a good investment?

Using the MSN Money Central chart, I checked eBay stock prices on the first trading day each month between April 1st (when John Donohoe took over) and October 1st, 2008.

Other than a one week ‘honeymoon’ when the stock rose a whole $1.02 from $31.42 to $32.42, it has been pretty much down hill each month all the way for six months.

Apr 1st $31.42
May 1st $31.78
Jun 2nd $29.31
Jul 1st $27.74
Aug 1st $24.58
Sep 2nd $24.07
Oct 1st $20.85

Auntie May (the fictional dumb small seller of fleamarket junk) & I calculated this is a 33.67% drop under Donohoe’s stewardship. Not small potatoes but we didn’t even have to take our socks off.

At what point are the institutional investors going to join the sellers in being ‘disgruntled’ & ‘revolting’?

I am no longer an eBay shareholder.

Y’all come back!

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The Road to Ruin Has No Speed Limits

In April at the ChannelAdvisor Catalyst Conference Stephenie Tileneus General Manager of eBay North America, gave a speech in which she promised even bolder and faster changes at eBay, stating that eBay’s goal is to deliver a more retail-like experience. She indicated that ensuring buyer confidence in every eBay transaction and taking care of its customers was the company’s first priority. She also made it clear that the concept of an annual price change no longer existed at eBay and that further pricing adjustments could come at any time.

She is also quoted recently on the subject of power

Those with true power share the ability to influence, inspire and, ultimately, lead people to pursue a common goal and vision.

Almost exactly six weeks ago my Australian friend Kevin wrote

Surely a company that attracted sellers by using the dynamic pricing model that competitive auctions creates, and, importantly does not invest anything in merchandise for their site, is not trying to set themselves up so that they are offering the cheapest mass volume merchandise on the internet.

That may explain the shift from treating the seller (who actually pays eBay’s fees) as being the customer, to now treating the buyer as their customer. In this environment, the customer is indeed never wrong - they are protected from criticism while being *encouraged* to criticize the seller they have bought merchandise from.

In his reading of the July 16th eBay Q2 2008 Conference call transcript Kevin focused on a question from Brian Fenske of Lehman Brothers

.. there had been discussion about rolling out category specific pricing. In the U.S., you’ve rolled out media. Is there any sort of time line for rolling out more category specific pricing in the U.S.?

And secondly, can you comment .. more about the deal you are doing with buy.com and how the economics work there .. how you manage that with other power sellers?

answered by John Donohoe (bold emphasis is mine):

on category based pricing .. we did roll out specific media pricing in the first quarter .. it’s our intention to move in that direction, .. most likely in the second half of the year .. sellers make very different margins in different categories .. so we think over time that our pricing has to reflect that .. the buy.com relationship is one that really symbolizes what we want to do going forward, which is really incent and reward sellers to provide low prices to buyers and great service

He then went on to explain that

the movement to .. reward great prices and great service to buyers is not limited to larger sellers .. we have many small sellers who are achieving very high DSRs and are providing great prices and great service to our buyers, under these conditions, as well as larger sellers .. we intend to continue to incent and reward that across sellers large and small.

There it is again “our buyers” so, while increasing their profits by 22% and continually seeking growth on those profits, eBay is “incenting” the businesses that use their service to trim their profits in order that Ebay can “sell” cheap goods.

In other words Ebay and buyers should profit from Ebay transactions, good sellers should NOT.

How is this business model sustainable?

Y’all come back!


PS The BrewsNews also had a very thoughtful and well reasoned post on the subject of lower prices from a seller viewpoint.