"There is no denying the sheer power of the mom and pop trader let loose online," Alexander Zacke told me a month or so back. "On the day after 9/11, I remember the rest of the world froze, but eBay still turned over hundreds of millions."
Zacke has a fascinating investor perspective on making money selling stuff on the Web. He's now CEO of Auctionata, a Berlin online art auction house that last week set a Web sales record of $2.4 million for an Egon Schiele watercolor. But back in the day, Zacke cut his Web selling teeth by rising to become a so-called titanium powerSeller dealing art and antiques on eBay.
"I did $10 million a year starting in 2000 for seven years," he said. "What you learn is how much sheer cash is out there on this network."Starting all the way back in 2008 down through fiscal 2012, both operating and net margins at eBay stayed locked in at around 25%. There is simply none of stench of out-of-control expenses that stink up the financials of Amazon (AMZN), Google (GOOG), Facebook (FB), Netflix (NFLX) and all the rest of the pure-play Web. In fact, eBay makes so much money so consistently that Uncle Sam waddles over for his cut. In fiscal 2012, for example, the taxman took a healthy 15% bite out of the $3.1 billion of before-tax income. All these earnings makes eBay's balance sheet so stable that Father Luca Pacioli, the genius who invented the concept back in 1494, would be proud. Starting again in 2008 up through 2012, total current assets -- you know, cash, receivables and other stuff a business really needs to make money -- grew consistently by 150-some-odd-percent. And from a cash flow perspective -- no lie -- Bernie Madoff couldn't cook up sexier figures. In 2008, eBay threw off $2.3 billion in cash from operations. By the end of last year, it tossed off $3.8 billion; that's more than 27% of revenue. Go try to find a Web outfit healthy enough to make those kinds of margins, pay those kinds of taxes and stash that kind of cash. And let me know how that works out for you.
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