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.

How many active users actually exist on eBay is another key number, but one that is hard to gauge. The real figure, however, is likely a lot smaller than the user figure eBay provides along with its quarterly earnings. One study suggests the user number could be half of eBay's advertised figure of 34 million. And, after excluding users picked up by acquiring other auction sites around the world, it appears that growth in eBay's user total is also decelerating.

Make no mistake: These findings don't show that earnings growth is imminently set to tumble from its rip-roaring pace. But they could be early indicators that sales and profits won't meet market expectations at some point in the next 18 months.

The Goods

So what are eBay watchers coming up with?

According to an as-yet-to-be-published study conducted by, 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

Preliminary results of the study, which was given a first glance at, suggest as much as 60% of new goods sold at auction on eBay can be found cheaper or at a comparable price elsewhere -- and without going through the cumbersome auction process, says David Steiner, the publisher of AuctionBytes. (For a sample of such prices, see the table below.)

In an interview, eBay's chief financial officer, Rajiv Dutta, says he is unaware of the particulars of the study but stresses that eBay is an efficient marketplace, one where buyers can find the best prices.

"eBay is actually defining what the market price is for a lot of these items," he says.

Steiner also charges that eBay has stifled any attempt to provide a comprehensive search engine so that consumers can compare prices at the click of a mouse. Many sites, such as now-defunct Price Radar, used to offer such a service. But as eBay's clout grew, it was able to use its dominant position to dictate terms to such search engines. For example, AuctionWatch, an auction management company, dropped eBay from its search engine as a condition of a deal to provide services to eBay's large volume sellers, according to Millie Lee, a spokeswoman at the company.

Says Steiner: "The point is people should be cost conscious, and people should be able to navigate the entire Internet, not just eBay."

Dutta says eBay is not against such search engines, but wants control over how its items are formatted, something no company that operates such engines has agreed to do. For example, eBay wants its items shown as a block, rather than interspersed with goods for sale from other sites.

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

A survey of collectibles prices by, a site on which dealers sell collectibles, shows pricing coming down. Comparing a total of 18,500 eBay auctions that took place in the first five months of this year with the same period of 2000, the survey found that the average selling price dropped some 40% over the past year, to $50 from about $84. At the same time, the dealers being monitored were listing 63% more items.

The price decline needn't reduce revenue if completed sales keep going up. But the increase has to be hefty.

eBay's Dutta counters that the company continues to see collectibles as a growth area. He notes that eBay accounts for between 4% and 8% of all U.S. collectibles trading, according to a 2000 study commissioned by the site.

However, eBay's own numbers show some slowing in listings growth. Total listings grew 10% to 98.7 million in the second quarter from 89 million in the first. Last year, the change over the comparable periods was 17%.

And data compiled by Mike Medved at show a more pronounced deceleration. He measures the number of listings many times each day on eBay's U.S. site. The charts below show that daily listing numbers have stopped rising at the exponential rate of last year and even have started to flatten out. Annual increases of more than 100% were the norm at the beginning of this year, compared with between 30% and 40% now. (The spike in late June is attributable to a free listing offer.)

Bargain Basement?
Comparing eBay prices with those elsewhere
Item eBay average
closing price
Best e-tail price elsewhere (site)
Sandisk 128 meg compact flash $108.51-$109.88 $102.95 -
Linksys 4-Port Cable Router 104.50-105.46 99.95 - Computers4Sure
Epson 64OU scanner 86-88.59 135.94 -
Handspring Visor Deluxe PDA 160.59-172.50 177 -
Sonicblue Rio Volt (MP3/CD Player) 142.61-143.28 139.89 -
Sampling of ongoing pricing study, as of June 14

eBay's Dutta is unfazed by these listing numbers. A decline in auction length is the main cause of the decline in the growth of the listing numbers, he says. The shorter duration is the result of two recent developments. First, the introduction at the end of 2000 of the Buy It Now function, which allows buyers to accept a named price and complete the sale without any bidding. Second, in February, eBay started charging sellers more for auctions that are more than 10 days long.

eBay's user number, displayed prominently in its earnings release, warrants a closer look. Due to people registering with more than one alias, the real number of active users may be a lot lower. AuctionByte's Steiner believes it could halve the 34 million shown. And eBay won't disclose exactly what qualifies someone as a user. As a substitute, Dutta refers to unique visitor numbers tallied by Media Metrix. The July total for unique visitors to the URL was 19.1 million, up 52% over the year-ago period.

Going Organic

Perhaps 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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