Cashing in on the online-payments business may not be as easy as
The online auctioneer wrestled this past weekend with a computer glitch that overbilled thousands of users to the tune of millions of dollars. The problems arose just days before eBay agreed Monday to acquire its big rival in the lucrative and growing field of online payments,
eBay said it is in the process of making good on its mistakes and is paying interest in some cases. But the error serves as an unwanted reminder that the closely scrutinized, highly regarded tech company isn't itself immune from technical problems. The faux pas also could serve to further alienate the company's smaller users, who once made up the core of eBay's business but have lately complained of being snubbed by the fast-growing etail company. eBay rose $1.12 to $57.36 Tuesday afternoon.
Over the extended July 4 weekend, many sellers on eBay found that their checking accounts were debited double the amount they owed the auctioneer for certain fees to list and sell items. About 85,000 to 90,000 users were affected, confirmed an eBay spokesman, who put the cost of the glitch in the millions of dollars. eBay wouldn't be more specific.
"The issue itself has been resolved, and we're in discussions with those who do our banking services to rectify the situation for those whose accounts have been affected," said Kevin Pursglove, eBay's spokesman.
The glitch infuriated many smaller users, who registered their gripes on eBay's discussion boards. As of Tuesday morning, some -- but not all -- had been paid back.
Pursglove said eBay plans to post an announcement on its site Tuesday saying that all accounts should be rectified within 24 hours to 48 hours. He said all overdraft fees and associated bank charges will be paid back immediately. eBay will address, on a case-by-case basis, those users who seek to be paid lost interest payments, he said.
Check It Out
With the most recent glitch, eBay once again risks the wrath of its small users, who have long charged that the company has abandoned them to cater to large, corporate sellers. In one notable example, late last year eBay announced a new
Checkout feature, a move that many sellers complained took the settlement process out of their hands. (eBay has since revised the feature, and the furor died down.)
eBay has sought to smooth relations with the smaller sellers who were once the company's bread-and-butter, and recently held its first so-called "community celebration," called eBay Live. The event brought users together with company managers in Anaheim, Calif., to swap stories and advice.
One toy seller in Michigan who uses eBay but wasn't overbilled was nonetheless concerned. "Do I now want these people in charge of my payments from buyers?" this person asked, referring to eBay's acquisition of PayPal, which handles auction payments for many sellers.
The Tech Edge?
On Monday, eBay announced it was
acquiring PayPal in an all-stock deal valued at roughly $1.5 billion. The deal was widely praised by Wall Street analysts, as it now gives eBay control of a company with a wide presence on its site. Also, the deal illustrated eBay's dominant stature; few, if any, tech outfits these days could use their own stock to buy out a competitor.
Still, from time to time, eBay has suffered from technical problems. In some cases, such as in late 2000 when the company switched servers, causing some functions to stall and slowing the site, the problems even weighed on the stock.
That wasn't the case Tuesday, as eBay shares, after dipping about 7% on the heels of the PayPal deal, were up 2.5%. Indeed, how the stock will perform likely will hinge on whether the company can meet its ambitious growth targets and if investors continue to shrug off eBay's rich valuation.
The company has made a much-publicized goal of reaching $3 billion in revenue by 2005, which implies roughly 50% annual growth. Analysts say that is in reach, but many are not bullish on the stock because, at roughly 74 times this year's estimated earnings, it is anything but cheap.