Listing Numbers Cast Doubt on eBay's Growth Plans
Millions of people spend hours searching eBay (EBAY) for treasure. Some others are scrutinizing eBay itself -- and finding anything but treasure.
In fact, recent studies of prices, listings and users cast a cloud over the uniformly bullish case that investors and Wall Street analysts make for this company. The danger? Key statistics derived from these studies suggest that stellar growth rates in use, sales and profit will be tough to maintain. eBay's pricey stock isn't factoring in a slowdown.
Here's what eBay monitors have found out.
Perhaps most important, new goods sold on eBay, particularly electronics products, are frequently more expensive than identical goods sold on retail sites, data from an ongoing study suggest. The risk for eBay? That it will lose out as it tries to compete with e-commerce sites that offer simpler payment systems and faster delivery. What's more, the company could lose its reputation as a place to find bargains, something that has been a large part of the appeal for its buying community. At the same time, the company has resisted efforts by other sites to include eBay in search engines that compare prices across a broad range of retail and auction sites.Meanwhile, collectibles -- the catchall term for anything from cute Beanie Babies to grim Nazi memorabilia -- are falling in price, according to two surveys. This could eat into eBay's listing fee revenue if auction numbers stall. And there are signs that a slowdown may be coming: An analysis of eBay's main U.S. site shows that the growth rate of auction listings is a third of what it was at the beginning of the year.
The GoodsSo what are eBay watchers coming up with? According to an as-yet-to-be-published study conducted by AuctionBytes.com, an online newsletter for auction users, practical goods being auctioned on eBay often end up selling at a higher price than other retailers are offering.
Listings remain static on eBay's U.S. site
|Source: Medved Quote Tracker|
Collecting Dust?Another notable trend is the falling prices for collectibles, a phenomenon that eBay readily admits is taking place. If the drop in collectibles prices is accompanied by a slowing of listings growth, then revenue from this source might get hit.
|A Bid Down
Year-on-year listings growth on eBay's U.S. site
|Source: Medved Quote Tracker|
Comparing eBay prices with those elsewhere
|Best e-tail price elsewhere (site)|
|Sandisk 128 meg compact flash||$108.51-$109.88||$102.95 - Buy.com|
|Linksys 4-Port Cable Router||104.50-105.46||99.95 - Computers4Sure|
|Epson 64OU scanner||86-88.59||135.94 - Amazon.com|
|Handspring Visor Deluxe PDA||160.59-172.50||177 - Buydig.com|
|Sonicblue Rio Volt (MP3/CD Player)||142.61-143.28||139.89 - eCost.com|
Sampling of ongoing pricing study, as of June 14
Going OrganicPerhaps more pertinent is that eBay is getting a good chunk of its user growth through acquisitions. There's nothing necessarily wrong with that; eBay's stock is priced richly, making it a valuable currency for acquisitions, and the company has plenty of cash as well. Also, Dutta says acquisition growth can be simpler and quicker than building a site from scratch. He says eBay hasn't overpaid. But eBay makes it tough to see whether organic growth is dwindling, especially in its fast-maturing U.S. market. eBay's failure to break out a U.S. user total arguably puts investors at a disadvantage. The key to predicting whether the company can reach its goal of bringing $3 billion of annual revenue by 2005 depends on how sticky customers and sellers are over time and whether initiatives to push into new product areas in the U.S., like real estate and autos, are paying off. With eBay's stock trading at a lofty 134 times this year's estimated earnings, this should give investors reason to pause.
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