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Finally, after 7 months, a notable author at a highly respected financial web site took the time to write something pointing out exactly what has gone awry at eBay… John Donahoe. The writing was on the wall for any savvy investor had they taken the time last May to check the SEC filings from the eBay high rollers. The major changes began on May 15th as Donahoe’s convoluted concepts became a reality. As early as May 2nd, Michael Jacobson, Senior VP of Legal Affairs at eBay sold off 1.26 million dollars worth of stock. Later, Meg Whitman, the Grand Wazoo, 22.52 million sold on the 15th, the day the first changes took effect. Major sales of stock continued. Why? What did these people see? My guess would be that they saw in John Donahoe, the “Peter Principle” incarnate. In essence, this man has risen to his level of incompetence. This is clearly demonstrated in the fact that eBay shares now dog paddle around the 14 dollar mark and will certainly go even lower just as soon as 4th quarter results are announced. What exactly does a CEO do anyway? Of course you can do as Mr. Donahoe does and blame the economy, but with a bad economy, people should have been bidding on and buying more merchandise off of eBay than last year. Facts are facts; you want it cheap, you buy it off eBay. Facts are facts; they didn’t. Now is Mr. Donahoe responsible for the fact that buyers weren’t opening their wallets for eBay sellers? Certainly they were opening them somewhere, just not that much on eBay. Whats in the numbers? Is it the number of sellers vs. buyers perhaps? There is no sense in even talking numbers when it comes to the amount of buyers vs. sellers, because there is no way to get accurate figures. Many people register and buy, perhaps, once or twice and that’s it! People who both buy and sell; multiple ID’s; registrations just to use chatrooms; people who register and NEVER buy…you are just not going to get accurate figures. I can give you one thing that is accurate; sellers have been leaving in droves, lowering the overall selection of merchandise and with decreased competition, higher prices have ensued. Accurate: EBay really never had any competition. Those sellers which have left, and those willing to start auction houses based on eBay’s original formula, have created competition, albeit minor at this time. Amazon is seeing it’s sales increase, finally. Other good competitors which will only continue to grow; Online auction.com, SeeAuctions, Overstock, ECrater, the list goes on. Add to this the plethora of specialized auction/sales sites, and you start whittling way at the legs of the giant. One of my favorite examples is overseas. In Australia, ex-eBay Powersellers banded together and started their own site, Bang4bucks. These people are giving eBay.Aus a run for its money! And lest we forget, tens of thousands of sellers AND buyers are eagerly awaiting the announcement that Google will open its own auction house and rid us of this miserable priest. Ebay business logic is that if you thin out the sellers, you create stronger competition, while forcing sellers to become more accountable, thus luring in more buyers. Hence the DSR’s (Detailed Seller Ratings), no negative feedback for buyers, and quick eviction of any seller who violates any one of eBays 1001 ways to violate policy. With DSR’s, let’s look at the dumbest policy in the “4.3 Plan” that came to Donahoe on a pilgrimage to Bountiful, and which was personally delivered by Elijah. Remember, in this missive from the powers that be, Donahoe was instructed to throw any seller off of eBay who fell below a 4.3 rating – out of 5 – on any of his or her DSR’s. The dumbest? Tossing someone for low ratings on shipping time, and lowered search results for sellers who come near the edge. This is the most ludicrous DSR of all. Everyone wants everything tomorrow, not to mention the fact that one person’s idea of fast is another person’s idea of slow. Not to mention, a lot of sellers are – or were - elderly retirees, who aren’t going to be that fast for, primarily for health reasons. None of this can possibly be taken into account in the Donahoe 4.3 plan. While we are on the topic of dumb, Donahoe’s new feedback policy. First off, a word about feedback. If people want something bad enough, they are going to buy it. Less than 60% of buyers even read feedback, and those who do rarely go beyond the first page. They usually opt simply to look at the number of positives and negatives a seller has received. Simple enough to understand; not taking a poke at Pierre Omidyar here. In the past sellers could look and see how many negatives a buyer had received and cancel their bid, thus cutting down on the chance of their receiving unwarranted negatives from a loon. As well, mutual feedback reduced the number of people out there who would attempt feedback extortion; I’ll leave you a neg if you don’t do this or that. Well now, sellers cannot leave any negative feedback; no seller has any idea of what kind of person is bidding on or buying their items. Feedback extortion is through the roof, destroying many a good seller who refused to go along with a less than stellar buyer. That alone caused many sellers to leave. It gets better!!! On another pilgrimage, this time to Desolation, Donahoe had another spiritual visitation, not Elijah, but the ghost of Howard Hughes. Watching eBays stock taking a fall, Mr. Donahoe had to make up for it. Mind you, this is a man who cannot admit he made the mistakes which led to this fall; it was the economy, stupid. Apparently Howie had this great plan; since eBay already owned PayPal, why not force buyers to pay through PayPal, and make the sellers accept it, or get thrown off of eBay. Ever mindful of his own troubles with anti-trust laws, Howie came up with this brilliant idea to allow buyers and sellers a choice in electronic payment methods, by throwing in some stooge company that would make it appear as if there was some competition in payment methods. Never mind that Google checkout had been around for awhile, well established and used for millions of purchases; they were left out of the mix. Accident or coincidence? I suppose that will eventually be decided by the courts. For now, the court of public opinion will have to suffice, and if the loss of sellers AND buyers are any indication, along with continually falling stock prices, I would say that eBay has lost this battle, just as they lose every battle they fight… Look at the daily growing list of prohibited items; all a result of lawsuits or the threat of lawsuits, except, maybe the sale of drugs, illegal or otherwise. In the end though, public opinion, court opinions, everyone’s opinion really doesn’t matter to Mr. Donahoe. His resigning, taking a job at Jack In The Box as a fry cook, and eBays going back a step in time, would bring an instant rise in stock value. As for who would run the company, hell, Meg Whitman isn’t going to come back, and you can forget Pierre Omidyar, who as we speak is probably building a 12 story, state of the art video game center and hospital somewhere deep in the Congo. So then, who? Anybody but Donahoo.