eBay’s Disruptive Innovation, How’s that workin’ for ya?

by Steve on September 26, 2008 · 41 comments

John Donahoe is less popular than President George W. Bush. The President took years to get to this point, Mr. Donahoe accomplished it in just one. Exactly one year ago this weekend, Mr. Donahoe was a guest speaker at the Legg Mason Capitol Management Thought Leader Forum. The topic was "Disruptive Innovation," and Mr. Donahoe spoke about his plans for eBay. Let's see how he's done. It get's better the farther you go, as I get more frustrated and sarcastic. This is a long post, get a donut. I'll wait. The following contains actual quotes from Mr. Donahoe's speech. At the bottom of this post, I've included the "concept cards" from his presentation that can be found on the Legg Mason Capital Management website. Oh and along with my sarcasm. Feel free to add your own.

The topic of disruptive innovation and the history of eBay have a lot in common. In many ways, eBay itself was a disruptive innovation. All three of the major businesses that are a part of eBay are disruptive innovations. I'd like to spend a little bit of time talking about how eBay got to where it is and then talk about how we approach innovation going forward. Today we're dealing with phase two or phase three of disruptive innovation. We've had the disruption, now we must disrupt our own disruption. That's part of the challenge.

Okay, does he know which phase we're in? Because that seems like it would be important. And this sentence, "We've had the disruption, now we must disrupt our own disruption." reminds me of the guards in Monty Python and the search for the Holy Grail, see what you think:

Other points made by John (can I just call him John?) are found here when he talks about the idea of "disrupting" a successful business (no I'm not kidding):
We set out a year ago to think about how we could change before we are forced to change. We took a good look at ourselves in the mirror and didn't like everything that we saw. We saw a very successful business and a lot of momentum but we saw that our user experience and ability to satisfy our buyers and sellers wasn't what we wanted it to be. By using a real focus on the customer, we embarked on a series of fundamental changes that will ultimately span a three year period. We started by creating a future vision. This was critical because not everyone felt the impetus to change, given the amount of success we were experiencing. There's a real push to keep doing what you're doing because it's working. We dove deeply into an understanding of our customers, their needs, their unmet needs, and their alternatives. We had to confront some sacred cows. These are often some of the most difficult things to handle. They're perceived as values of the company. For example, we talk about the level playing field. We treat every seller the same. Now, the level playing field really means that the little player shouldn't get shut out. It was never intended to mean that we treat a bad seller the same as a good seller. Intermediation is another one. It doesn't mean that we can't intervene to make a better buying and selling experience. We also had to address some of the cultural and organizational dimensions.
Okay, looking back on a year of this "innovation," let's reflect on how things have gone. They completely admit to fixing something that wasn't broken. They just wanted to fix it before it was broken. "A very successful business and a lot of momentum" was pretty much slowed down and made not nearly as successful. He also refers to "our buyers and sellers" which is really interesting, since in this very speech he emphasizes that eBay is just a platform and not a retailer.
And I'm sorry John, those "sacred cows" are not just "perceived" as values of the company. eBay told us those are the values of the company!

Take notice of the part where he says, "We dove deeply into an understanding of our customers, their needs, their unmet needs, and their alternatives." Their unmet needs? I have been saying on this blog that eBay has turned into a company that feels they know what you need more than you do. This proves it. How's that workin' for ya?
Look at the next part, and think back over the last year. Think about how eBay is meeting your "unmet needs" with things you didn't even ask for in regards to "finding." Before you read this - ask yourself: Does this sound like a person that uses eBay? :

One of the most fundamental activities is "finding", or what most people think of as "search", on eBay. Historically, the core part of our business model started with a search and the results came back with time ending soonest-the items that are ending soonest at the top of the list. That makes sense during auctions because at the last minute you want to bid and win. Today over 40 percent of the items on eBay are fixed price. We have such volume that many of our buyers said that there was too much abundance. They just want to buy a Nike watch and instead they get 12,000 results back. That's too many. They want to get to what they want, faster. We agreed. There's a lot of talk around the Internet about relevance engines for advertising. Nobody on the Internet has more close transaction data than eBay or PayPal. We have the opportunity to build the best finding experience there is. We weren't collecting the data in a way that we could use it, so we had to change that. Tinkering with the finding experience is also tinkering with one of the core jewels of eBay. But we recognized that eBay has more product searches than any other property on the net, including Google. We convert single digits from searches to bids or buys-a fairly small percentage of those searches-and all we have to do is move that by a fraction to have a profound impact on our company. Over the last eighteen months we have set out to make a series of incremental improvements in our finding functionality. We bought Shopping.com, which is a great destination site but also brought us great finding and search technology. We experimented with eBay Express and built a separate parallel site to experiment with relevance-based search. We went completely with relevance-based search in Korea. Finally, we began layering in something called "best match" into our core site. Those of you who use eBay, if you look in your search box, you can select best match as an option which will help you get to the items you want more quickly. Finding is a core area that we're going to launch a series of improvements in during the next few months.

I KNOW!!! Here are the roots of the broken finding system on eBay. (By the way, the term "Nike watch" only pulls up 1,804 today.) "Too much abundance"? wow - sorry John, I thought you wanted us to list on the site.

He pretty much admits eBay Express was an experiment to tinker with the search technology. Then talks about relevant search. Relevant search is once again saying, "we know what you want better than you do." How would you like this? You go to Macy's and ask for the necktie section, and instead of the clerk letting you shop, she comes back with five neckties from which to choose. When you ask to see them all, she says "there's just too much abundance over there, these are the Best Match for you."

In this next quote, notice the philosophy being promoted. Would you like working at a place like eBay? Evidently, according to GlassDoor.com, only 28% like it right now... Oh, and see if you can find yourself anywhere in this equation:

Based on our experience, here's how innovation at the core worked. We had to create a mind shift at our company-we had to think bold and not just incremental. We had to create a vision of the future so people could let go of a very successful past. We had to understand that this wasn't going to just happen overnight. While we're doing this, we're running a successful business. We need to drive these principles of disruption at the same time that we're executing a very successful business. Second, we have to look at all parts of the business model-the whole end-to-end user experience. We're using our global portfolio to test and learn. We're testing ideas in Korea, France, Italy and elsewhere around the world. We're testing various pricing mechanisms. All of this requires new infrastructure, whether it's new data, testing or advertising capabilities. Finally, even I may have underestimated how important organization and culture are. Antonio [Perez] talked earlier this morning about needing to get rid of 70 percent of the people to change a culture. We don't have that luxury. We're growing at 30 percent a year. We need to build on the team we have and help shape the momentum in the right way. We had a bit of a restart with our vision. We set off on this and the senior team was all aligned. But we hadn't invested enough in the rest of the organization. So last year in the fourth quarter we took our entire organization through the process.
"Let go of a very successful past"? Wow. They're delivering on this one.
I also like the part he says about "executing a very successful business" - poor choice of words John.

And they have solved the "growing at 30% a year" problem. Now they can focus on getting rid of 70% of the people to change that pesky eBay culture. A year after this speech, is the senior team all still aligned? Well, now that some have departed, I don't think so. And besides that - aligned with whom? The other members of the senior team? or the community? employees?

Okay, here's another quote. This is the last one I'll share, because you can read the entire speech for yourself if you'd like. This one is cute. It tells how eBay is willing to churn out new products even before a business case has been made for that product. In other words, people dream stuff up, they put it on the site, and we either like it or not. Imagine what cars would look like if automakers did the same thing:

We're providing a forum to bubble-up ideas. We have a skunk works in-house. We're creating lightweight, cross-functional teams. We're giving the teams the freedom to focus on the right user experience and then worry about monetization. If we ask for too firm a business case up front, they'll never get out of the gate. We give them the space and energy to move aggressively and we use user adoption as the metrics in the early days. We talk and listen to customers, but for this kind of innovation, customers don't always know what they want. No one would have asked for a widget, but when they saw it they liked it. There's a real balance between being customer-driven and going with your intuitions. We also put the right people on the team - not everyone can do this kind of innovation. We are acting like internal venture capitalists with our resources. We give them just enough to get to the next round. We also know when to cut them off or keep them going. Finally, we involve people from the core business in these ideas, but not too early in the process. People in the core business typically want to kill these things when there's a tight quarter.
Really John? "Customers don't always know what they want?" How would you know for sure if they can't find it? So let me understand, the customers are saying what they want, not getting it, and leaving. Sellers are unhappy, buyers can't find things they are searching for, and eBay has people inventing new things that haven't been asked for yet? Brilliant! I feel so disrupted.

Does anyone know if John is speaking at the Thought Leadership Forum again this year?

UPDATE: Someone posted a link to this post on the eBay discussion boards early this weekend. Evidently, eBay has deleted the entire thread. If you'd like to see what they found so offensive, you can look at the cached version here: http://tinyurl.com/3lrgac

Here are the "Concept Cards" from the speech (click them to enlarge):



{ 34 comments… read them below or add one }

RoboToyMan January 21, 2009 at 8:23 pm

This man seems like a professional manager. And by professional manager I mean someone who manages a company by reading strategies in college texts on management and implementing what he learned in College XYZABC, without actually looking to see the state of his company and where it is at.

His speech is overloaded with cliches and catchphrases. “Disruptive innovation, impetus to change, bubble up ideas, cross-functional teams.” All phrases which boil down to “we got a whole lot of nothin going on over here,” but sound good to stockholders and other members of the board.

My brick and mortar job is run by men and women like him: men and women who don’t “manage” the business, they sit back and run plays out of a playbook. They don’t address actual problems, they make grandiose plans for fanciful improbable scripted scenarios that never have nor ever will happen, all the while neglecting the actual threats to the company. Then when the company is in shambles, the idiots will sit back, scratch their heads, and go “how did this happen? We planned for everything!” Everything but what was actually happening to the company, something you could have figured out quickly if only you had actually LOOKED at it every once in a while.

Unfortunately people like him will always be around to ruin a good thing.

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OBEY EBAY December 28, 2008 at 8:23 pm

There is little doubt this man works out of a child-proof office with rubber walls. I’d get the large straitjacket ready now…no worries about him slipping his over-sized head out.

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LegendsOfBatman November 1, 2008 at 10:28 pm

John D admits he is killing ebay!

I don’t know how nobody caught this, but, here’s the quote:

“We need to drive these principles of disruption at the same time that we’re executing a very successful business.”

Tim
http://forums.delphiforums.com/boycottebay/start
http://myspace.com/boycottebay

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Tim October 30, 2008 at 5:52 am

It should be clear, I am a wholesaler and not a good writer or a stock expert, but I have a first hand inside look having been a powerseller almost from e bay start, for over 10 years, 1.7 million per year sales and account for $156,000 paid to e bay per year for seller fees, this is the bases in which e bay shows profit or loss in a great way for there core business, this does not account for paypal fees charged, seller manager pro, e bay stores. Buyers and sellers are leaving e bay, this can be proved by http://www.sellerdome.com/
It is interesting how the 1500 employee lay off received so much attention, however, OVER 10% of total powersellers were laid off/suspended because of flawed aggressive policy poorly implemented has not had a placement. This is proved by http://blog.sellerdome.com/?p=16 between 15k-30K e bay powersellers who account for $3000-$20,000 in seller fees paid each month for each of those sellers. This seems a larger story than a simple layoff of e bay employees. Ebay saves money by laying off paid employees, but e bays profit takes a hit by getting rid of partners who contribute to e bay profit. For example: 20,000 powersellers/partners laid off/suspended that account for an average of $5,000 per month seller fees = $100,000,000 each month in seller fees not received by e bay. That is $1,200,000,000 per year in revenue given up for aggressively flawed policy by current management. The idea current ebay management had was by getting rid of 10% of its selling partners was going drive back 32% of its buyers, however, that has clearly not been the case, because the policy change was flawed and implemented with such aggression over a short period of time, 6 months total, 3 months aggressively. Ebay seems to have driven away buyers by this and the new search method that sellers or buyers don’t like with no concern of management. The company has managed to drive its investors away in the same motion as stock prices show a drop since new management put in place 6 months ago, before market crash. Ebay management charged its sellers/partners for decline in its core business and seems not to have taken into account the increased competition of walmart, best buy, circuit city and many others putting marketing dollars into the online sector of business. Ebay pushing away its partners, sellers and buyers, is only going to make profit softer and push away investors. With 70% more competitors in the market e bay only dropped 30% seems a strong market hold for e bay and a reason to support its partners in a currently working policy rather than place blame partners and will prove to decline its future market share which is pointed out by many market analysis.

Ebay, through the wild west style new management, took a look at itself and realized it had a drop in the number of sellers buying on its site. It decided it was because of bad “buyer experience” and immediately, it seems without full thought of backfire, decided it was the sellers fault. In some cases, this may be true, but it is most likely because of the additions to online retailers such as walmart, bestbuy, circuit city and the lis t goes on that were not competitors before and had not sunk the marketing dollars into the Internet sector of there business plan before. The more big sellers the less customers for ebay. It is widely known that e bay has blamed sellers rather than external forces for the slow in sales. Instead of working within the community, that once believed that people are basically good, took on a policy that made its community fell like criminals and strong feelings of dislike for the symbol that was once regarded. Ebay has aggressively pushed away its partners will prove to decline its future market share and a relationship that may go un repaired when new management is called upon.
Ebay has withstood the .com storm because of a superior system and its ability to hold steady to the working core business policy. Its customers fell that is no longer the case and many companies like bonanzle.com and OLA.COM (onlineauction.com) are rushing to try to meet seller and buyer demands that ebay seems unwilling to meet. Many small auction sites have tried to compete in the past but been successful in driving traffic. Now a once complacent audience of e bay buyers and sellers are seeing the changes and the likely hood they are being driven away through aggressive, unfair, flawed policy changes and are taking note to change to someone with the old values that made ebay a community that worked. You can see from the chart below the demand that is being driven to for example.
http://www.quantcast.com/bonanzle.com
This is a small amount of buyers and sellers compared to e bay, but it does show a market who is hungry to meet the demand of current buyers and sellers, and what is maybe most important that buyers and sellers are finding the ability for change.

When e bay was a “venue”, now it is felt by many of its sellers that it acts as an employer or landlord by design of new policy, it was profitable for sellers and a great value for buyers. Sellers drove traffic to the site because buyers knew they could get many of the items for a large percentage below retail, at or below wholesale. E bay is a follower now and is trying to make itself like Amazon and other .com retailers. Ebay sellers who use Amazon report little to no sales. E bay has a niche (wholesale products) and Amazon has a niche (books, CDs with unmatched distribution etc) and both worked independently of each other, this is why Ebay sellers are not successful on Amazon and Amazon sellers are not successful using ebay. New ebay management has had a hard time realizing Amazon is a different market plan. Many e bay sellers are leaving to do Amazon but it is feared this will not prove successful for them. The e bay system worked and most were satisfied, buyers and sellers could realize other bad buyers or sellers.
Buyers and sellers are not happy anymore and the numbers will continue to show as long as this management stays. Economy will play a roll, that is why ebay can’t afford to gamble with management that has proven to drive its partners, sellers and buyers, away. The company is large enough it will be around for a long time, maybe not in the online auction sector effectively as it was before, but it is still a mystery to many who use or used to use the site why this management has been allowed to make this aggressive of a change. If this is where they wanted to go, it would takes years to change a company this size effectively, it can’t be done in 6 months times and certainty not given a slow in the economy.
Things are not happy under new management/John Donahoe management has made no one happy, sellers or buyers or its investors. It has been a 6 month meltdown since new management fumbled a working system.
I talked to the owner of onlineauction.com 1-800-900-2828, Rowen Grisham, a previous e bay powerseller who seen improper change coming long before many sellers and buyers realized. He said he had seen a flood of sellers and buyers calling to learn about the site in the last 4 months. Rowen Grishamw says they are about to roll out a goggle search program that will make it more visible. This is just one example of where e bay buyer and seller base is going. Grisham seems to want to supply its sellers and buyers with a fair service, as when the ebay site was born and acted as a venue rather than an employer. Small companies that are hungry and taking advantage of a situation where ebay is not satisfying its demand.
Anyone considering investing or putting time into future sales may want to take a look at the aggressive, flawed policy’s they have put in place, there are little to no direct policy as there has been. Sellers, buyers and investors wouldn’t be leaving if there was any good reason to stay.
E bay has done a poor job or emplaning the new changes to its buyers, sellers only after a few months of effect, some loosing there e bay business because of improper, unmonitored data, is still learning and it seems no one knows the answers even at the top account managers level. Its buyers do not realize that the DSR DETAILED SELLER RATING, the 5 stars under the feedback rating is not based on a 100 point scale like every other system in the free world. For example, from 1 to 5, 1 is poor, 3 is average and 5 is excellent. With e bay, 4,5 is average and 5 is good, I am glad they didn’t have my math teachers in Collage. So many times buyers rate a 3 when they don’t realize they are giving the seller a unacceptable rating that could potentially suspend his/her account from e bay as so many has been suspended in the last 3 months because of improper data that has been now used as the bible of e bay to rate seller performance. It should also be noted that a flaw in the data of the 5 star DSR is that if a customer is happy, they fell that leaving positive feedback served its purpose and they have caused a positive vote to the seller, e bay has not educated the buyer, so they do not leave a star rating at all, and are not required to and a large % do not, but leave a positive feedback as it is not required. But the buyer who is mad and is leaving hasty feedback will be more than motivated to leave a 1 or 2 for all stars. For this reason, good sellers offering great service and products are being suspended from e bay by record numbers, this cuts the life cord of the seller as well as core business at e bay and the reason buyers come to the site and investors invest in the company.

Ebay may have ruined their market flair for both buyers and sellers forever. Too many restricting rule changes, increased charges, paypal demands, seller ratings. This has ultimately destroyed their bottom line.
Don’t think eBay and its payment system engage in unfair, at the very least unethical or even illegal business practices? Retailers are asking for congress to crack down on organized computer crimes, but eBay, said “they would be unfairly targeted in the proposed legislation” Read article from link below:

http://news.moneycentral.msn.com/ticker/article.aspx?Feed=3 DAP&Date=20080922&ID=9174700&Symbol=EBAY
http://www.ronpaulwarroom.com/?p=1751

Many sellers, buyers and investors alike have a dedicated special interest and hope they turn themselves around, but it is going to take some quick and correct policy change back to the system that worked to undo what has been done in what would be considered by many as well as a powerseller account manager in a telephone conversation said that this is “the most aggressive change e bay has ever done” it is costing sellers there business and driving buyers away from the site. The Best Match search is fatally flawed and $0.35 listings are not going to fix that.

Sellers of the unique items that made eBay famous (and who paid listing fees) are leaving in droves, while eBay brokers deals with corporate sellers of new stuff you can get anywhere who don’t pay listing fees deteriorate the profits. And their buyers are following them. Watch the Q4 and Q1 figures. A company of this size can keep up appearances for some time, but its customers, its customers customers, that is sellers and buyers, are speaking up and cannot be ignored in the long term, the leader of these policy’s are and continue to drive away the core business of e bay and investors are taking notice.

E bay bought Bill Me Later, I would have been surprised just 6 months ago, but I am unhappy to report that I am not at this time, the reason is this management has taken down the tread that holds e bay together as can be seen by its buyers and sellers everywhere complaining about the flawed aggressive policies that have taken place over the last few months, maybe you have heard some of them or are one of them. Every comment citing that the previous system was not broken. E bay has had community and trust, this 13 year trust has been violated and has failed both sellers and buyers in just a few months of unfair, faulty policy change that has taken a ship this size and turned it so fast that it is out of control and is facing a challenge to bring the ship back to course as it was before in the core business, although still ignored by management at this time, this is just in the core business, this shows the danger of a lateral move like credit right now. Take into account there could’t be worse timing as the world economy will not view this favorably given recent events. This policy change was over a short aggressive period, but the negative impact will make it difficult to navigate back in position, if this venture is not successful, it will be even worse for ebay, its investors, and20the management that follows. The core business has taken a great hit world wide, now it is committed to a market that is new. A new market during the time when its core business is in jeopardy due to flawed policy and a slowed economy with management proven only to drive away customers. This will prove a challenge that may take years to repair relationships of its sellers and buyers when it has been realized by investors concerned on top of unpopular credit service. Migration back to the system with effective proven 12-15 record, built by previous management over 12-15 years, seems to be the only way to save the future profits and stability the company once enjoyed.

So, e bay wants its investors to trust it in a huge risk buy, when the investors are clearly concerned and most can see that e bay can not run its core business in a way that is satisfying to its customers, causing them to leave, look for other suppliers that will eventually be able to meet demands of the once complacent sellers and buyers. Sorry, it would be hard for anyone with basic knowledge of the problems with recent policy of the core business to buy this, having been a seller and buyer for 10 years, it makes it even harder to buy. I can say, I am happy to report my family, who bought stock when they=2 0seen my success on e bay, sold there stock when I explained the new managements flawed, unfair, and aggressive policy handed down. The stock has followed since this and many are betting with there dollars fell it will continue to fall. Maybe Jim Cramer, hyper as he is, has a point when he said he could not get behind the company, and that someone should buy the company “and put them out of their misery.” It is hard to argue with him, stock sold back in march, when these policies were being talked about, not yet implemented agressively, sold ebay seems to be the smart move. Stock was $30-$32 per share at that time, March 2008, it dropped every since as can be tracked from any stock quote chart. Yes, the economy took the abrupt hit, stock price had already plummeted by 1/3, $19-$22 per share, before it happened that our country was in trouble from bad credit/debt. Some say they wouldn’t want to touch this a credit market at this time. I would also not want to answer to shareholders when they learn what long time sellers and buyers have seen in the past few months. Good thing for golden parachutes I guess, maybe that will soften the fall?
I think this report on NYtimes has some good in site of the problems facing the company with the current buy:
http://bits.blogs.nytimes.com/2008/10/06/ebay-plays-warren-buffett-buys-online-lender/#comment-55807

Maybe enough people will sign to make it worthwhile?
http://www.petitiononline.com/jdonohoe/petition.html

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Frawley October 22, 2008 at 10:51 pm

Search the internet for the following title for the petition at petitiononline.com:

“Ebay Stockholders and Sellers Calling For Immediate Termination of John Donohoe CEO Petition”

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MV October 16, 2008 at 5:38 am

This guy as well as the others who ruined eBay before him have NO ABSOLUTE CLUE AT HOW TO MANAGE A BUSINESS.

I’m a member of eBay and have been a member since 1999. From 1999 to beginnings of 2004 selling on eBay was a blast! policies were enforced which are extremely important for sellers, the search engine was simple for the average Joe to search for what they were looking for, even the no computer savvy, the home maker and practically ANYONE could find anything on eBay without having a degree in computer software. All that started to get ruined in mid 2004 when the first changes started. From that point on ebay has being going downhill and none of the so called “business professionals” that are managing eBay know why because they lost the business core of eBay, SIMPLE AUCTION HOUSE.

EBay’s customers are NOT buyers are SELLERS and all the CEO’s and heads on eBay with all their degrees they still haven’t figure this out. The business rules for customers are put in place by each and every store/seller on eBay, NOT by eBay. EBay is just a venue for sellers, a giant online mall, and every store in the mall is responsible for their own policies, rules, etc. But no, the BRILLIANT HEADS of eBay wanted to change that and we have now the crappy place eBay is. Ruined, destroyed and even worse with not even a glimpse of getting better.

To all those morons who manage eBay, who think are brilliant because have a degree in business, I just have to tell them to stop and go back to the eBay BEFORE 2004, that was the successful site, the simple site with an effective search engine. Stop reinventing the wheel because you might get something that won’t work. Stop with the widgets and all the crap, reinforce your own policies and take out all the fraudulent sellers you know you have, simplify the site and it will recover for everyone’s benefit.

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dorian October 15, 2008 at 11:57 am

If anyone still thinks there is not an ulterior motive here, PLEASE take notice of the fact that Meg Whitman, who is STILL an ebay employee, meets regularly with John Donahoe and still holds a seat on ebay’s board, has deliberately inserted herself into John McCain’s campaign.

ALSO, take note that John Donahoe’s WIFE is now the chairwoman of the National Women for Obama finance committee (search “Obama’s $150 Billion `Cleantech’ Pledge Lures Deal-Hungry VCs” found at bloomberg.com).

ebay/Donahoe has interjected ebay inc. into BOTH political arenas, without a doubt and as always, to influence ebay’s own agenda.

How else would anyone explain ebay inc. getting away with it’s corrupt policies under the guise of “just a venue” for ebay and “not a bank” for ebay owned Paypal?

Instead of sleeping with the enemy, the government should be investigating ebay inc., along with Meg Whitman and John Donahoe!

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robert wagstaff October 9, 2008 at 10:08 am

For the ultimate “disruptive innovation” one only needs to harken back to the 60′s. It was in China and then it was called the “cultural revolution”.Chaos is the vector to purge counter revolutionary thought and Chairman Donahue will beam down upon the masses telling them how the state can only progress when the people have been transformed

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implog October 6, 2008 at 5:36 pm

My understanding of this tragically flawed mess is that Strip Mall Johnny and Ms. Whitman are from the Boston business consulting firm Bain. They were paid well to muck around in businesses who had contracted Bain’s services for months, note perceived problems, pump out paper, make presentations suggest changes then disappear, aftermath be damned.

Whitman arrived at eBay when the site was rocketing skyward on its own inertia. She made Bainish changes, many of them silly some just plain silly. Ebay users objected but everyone was making money.

Bain was a part of how Whitman ran eBay. She said on the Bain alumni page while heading eBay;

“I use the Bain tool kit to frame strategy at eBay, every day.”

Donahoe continued the Bain mucking around making changes appproach but as our Uncle Griff said about all the “enhancements”, “Times have changed.” Ebay has slowed dramatically since the Whitman gilded age. Donahoe has to really produce and can’t hide behind giddy investors, crazy mad market growth and virgins on toast.

Add to this Donahoe’s slavish worship of business guru Clay Christensen who writes of “disruptive innovation” as a way to the top of the corporate heap. Sad thing is, Christensen wrote about “disruptive innovation” in manufacturing processes not in technological processes and said on September 27, 2007.

“Even though people think I’m an expert at technological innovation, my own instinct for technology was frozen in place in 1982.”

So we have Donahoe, a Bain muckerarounder at the top of eBay being advised by a fad business consultant who is technologically in the 80′s and an eBay headquarters in San Jose full of sycophantic employees more concerned with career and politics, mortgage and car payment than the eBay rabbit hole in which they descend, disrupting innovatively all the way down.

Such a sweet sweet Harvard Case Study.

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Jenny September 30, 2008 at 3:17 pm

The worst ever business decision made by a CEO although it was planned well ahead and calculated.

Since the future is uncertain for so many, some are joining a new international auctions site and starting fresh at http://www.auctions8.com

First 1000 to register as a VIP get everything free for life as well as 1000.00 USD credit to use for optional extras only after 1 Dec.

Imagine not having to pay any fees regardless of how much you sold!.

http://www.auctions8.com is owned and managed by determined & hard working group of members to become a permanent and safe home for all.
Site is only for genuine sellers.

It is worth a look.

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Kevin_T September 30, 2008 at 7:58 am

QUOTE: “If anyone wants to see the “offensive” page, you can see the cached version of the page here…”

That wasn’t offensive, it was disruptive!

Kevin

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KPA September 30, 2008 at 4:46 am

Some people just have this thinking that they have to change something. Donahoe’s mantra of “change” reminds me of this same mind set I see in our upcoming elections in the U.S.

When minds lacking common sense think their version of “change” is better, always good or what THEY think people want without finding out what we actually do want, then the “change” to something vastly different as Down-a-hole’s fiasco so vividly reveals isn’t always for the betterment of those having to live through it.

I have no doubt some issues on the site needed to be addressed but to punish all sellers for the sake of “change” to deal with a small minority of bad ones is overkill and that is exactly what is happening…overkill.

What that idiot doesn’t get is that change doesn’t have to be so dramatic that it ruins people’s lives. Change can be very good when done the right way. With each “change” Down-a-hole makes I stand there briefly scratching my head then I get busy building my seller presence on other venues and let eBay continue to spiral down a hole.

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Steve September 29, 2008 at 9:20 pm

Wow! Thanks Marcus. If anyone wants to see the “offensive” page, you can see the cached version of the page here: http://tinyurl.com/3lrgac

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Marcus September 29, 2008 at 7:41 pm

There was a thread about this posted Saturday on the ebay.com Discussions, “Seller Central” titled, “A Definite MUST READ = DONAHOE’s Plan!!!” Ebayers posted on it so frequently that it remained on the first page of the discussion nearly every minute, all weekend long.

For some reason, ebay felt so threatened that Donahoe’s 2007 speech had reached ebayers, that ebay DELETED the entire thread and “pink slapped” the person who started the thread!

FREEDOM of Speech is DEAD on ebay, but then again, there is no FREEDOM left on ebay, ANYWHERE!

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Mike September 29, 2008 at 3:49 pm

Perhaps the problem is that John CEO Donahoe is so far removed from the reality of the situation that he does not know that he is “killing the goose”. In an attempt to help him see reality I think it would be a good idea for all concerned readers to contact him personally and voice their concerns.

To contact John Donahoe’s office at eBay do the following:

Dial: 1+408-376-7400
Press: #0
Dial: 3662463
Press: # Key

This will connect you to either John Donahoe’s voice mail or to his assistant. Be sure to let him know your feelings and ask for a return call.

To send John Donahoe a fax use this number:
1+408-376-7514

If these measure fail or if you would just like to be sure that your message was delivered, try sending him a Certified Letter or one delivered via Federal Express.

Use this address:

John Donahoe, CEO
eBay Inc.
2145 Hamilton Avenue
San Jose CA 95125

If these measures fail or if you would like to make sure that your message is VERY clearly received I suggest the following:

Send John a a book from Amazon!

I think the very best book would be “The Goose That Laid The Golden Eggs“.

For less than $20 you can send this book and have it gift wrapped.

What could be better than John Donahoe getting dozens of boxes from Amazon delivered to his doorstep just in time for the Q3 Report?

Mine is on the way!

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Marty September 29, 2008 at 1:47 pm

What a bunch of ****. These people live in their ivory towers and they ruin company after company, just like we watch everything unfold in the markets right now. I am sure the CEO of these bankrupt companies made similar speeches about their innovative products. 20% down was and old concept, they came up with new bold initiative. Just amazing. Where is common sense? OMG. Mr. John…please step down…from an eBay PS with almost 70K FB

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Jim September 29, 2008 at 12:26 pm

Just because a person is a CEO of a large company, doesn’t mean he can’t have mental illness. Mental illness knows no bounds, and JD is proof of that. I’ve read the writings of some really brilliant people over the years…John’s plan is obviously not one of those.

He rambles and jumps all over the place as if lacking any real focus or plan (sane plan) that is.

I’m sure Charlie Manson, or someone equally disturbed, could write up a comparable business plan…except they are forced to be on medication. John, if you are not taking your medication, please start. If you haven’t been prescribed one…go to a doctor and get treatment. My God, the man is nuts!

I’m sure he clings to the fact that genius is often misunderstood. Trust me, John — it madness, not genius.

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Michael H. September 29, 2008 at 9:36 am

No doubt about it – John Donahoe is utterly insane.

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Anne September 29, 2008 at 9:12 am

It has just gone to HQQ in a hand basket since JD has been at the Helm!
I closed my sellers account after 5 years of great business. His disruption in the company tanked my sales and made it to difficult and time consuming to make it as profitable for me. Moved on to Amazon where things stay steady and there are NOT non stop changes to deal with and relearn daily.
Will wait and see what happens to ebay over the next year before I ever even put a toe back in the waters again. I also stopped buying at ebay.

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Beth September 29, 2008 at 4:28 am

I have some “disruptive innovation” I’d like to try at eBay – let’s each (every seller there) but one share of stock and VOTE THE IDIOT OUT!

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Lisa September 29, 2008 at 3:49 am

We’re all giving John Donahoe too much credit. This man is an ego maniac. History is full of men like him that for one reason or another, are able to implement their “disruptive” plans on a mass of people. On the one hand, from the Legg Mason speech, he describes wanting to be brilliantly innovative in a mad genius sort of way. But the Glassdoor comments tell us another story: He’s trying to model Ebay after Walmart and/or especially Amazon.

Ed in his coment above made the most sense to me. Finish up this year the best you can while similtaneously building presence on other sites or your own.

I call this the “Wasted Year.”

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Mark Classic September 29, 2008 at 1:45 am

Just some thoughts on “Best Match” and “DSR’S”…

With the current “invisibility” of the Best Match algorythm, Ebay can do what they please.

They could favour any large seller as a sweetener to get them onside.

We have already seen Ebay do this with Buy.com with a “special rate” for listing.

Now if Ebay are prepared to give a special rate, who is to say why they would not give a “special” placement in search.

The invisibility of “best match” is a concern, and until it is transparent, there is going to be this distrust of Ebay.

Why keep it hidden other than to benefit someone?

Keeping it hidden does not benefit the seller that is for sure.

Keeping it hidden does not benefit the buyer (if it does I cannot figure out a reason). I know they can argue the best listings can get the best sales, but who defines what the “best listings” are and for who’s benefit?

That is an irrelevant argument for the buyer, they just want to buy something based on their criteria, but Ebay have decided to set the criteria, which ultimately has to be in their best interests.

If it were open, then sellers and buyers would know why there is success in some quarters and not others and respond appropriately.

Keeping it hidden so that Ebay can favour corporate clients benefits Ebay, a wonderful sweetener, if that is indeed happening.

“We will give you the best fees and the best placement if you put all of your inventory on Ebay, are you interested?”

This is the only logical reason I can think of for having “Best Match” closed to scrutiny.

Something that is hidden by nature is trying to hide something.

Have you also noticed that DSR’s calculations are hidden…

Now Buys DSR’s sit there at a comfortable 4.8 across the board.

Could it be that DSR ratings are hidden to benefit corporate clients?

Could it be that Best Match algorithm is hidden to benefit corporate clients?

While it is all so hush hush, how will we ever know?

Now if you were trying to bring a big seller online to replace all the small sellers, without alienating those small sellers, how would you do it?

Would you create a system whereby you could do the following:

1. Move out the small sellers that clutter the site with low value items.
2. Give the corporates lower rates.
2. Protect the corporates from buyer discontent with a weighted hidden feedback system.
3. Favour the corporates in searches.

That would work, wouldn’t it?

And remember, the current changes are just the first year of a three year plan according to J. Donahoe (the MD of Ebay).

A three year plan to achieve what exactly?

The corporate selling hub of the internet?

Thoughts?

Mark

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marla September 28, 2008 at 8:00 pm

I am a Powerseller that has lost my power to the J.D. control. To try and sell on eBay now is like a punishment.

It amazes me that the stock holders are not up in arms over his outright plans of destruction to the demise of what was once a little empire. He laid out the plans and is following them to a T.

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Richiemagoo September 28, 2008 at 3:46 pm

Nadine said:”Richiemagoo, do you believe all the leaders of the Soviet Union intentionally planned to destroy it? ”

Good point- but a nation’s politcal-economic system is much more complex, and the results of it’s leaders actions are not as readily (or speedily) discernable. And since communism is not just about economics, but is also about social control and philosophy, it is not as readily comparable to a corporation in a [supposedly] free-market economy.
By contrast, the changes being made at Ebay are having immediate and obvious consequences, which could be observed by a five year-old.
Just reading the first round of changes back in January was enough to make me abandon my 6 year successfull selling career on Ebay- and now, 9 months later, all the effects I had feared the new policies would create, have indeed come to pass. (and I’m a High-school drop-out!). Now it is to the point where many sellers and stockholders are even realizing the gravity of the situation- but yet, the Ebay execs keep forging on with their diabolical plans.
I refuse to believe that they can be THAT stupid- or THAT commited to a business philosophy, that it would make them ignore all the obvious facts.

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ele September 28, 2008 at 1:32 pm

Ebay have missed one important principal…its business is only as good as its customers…Ebays customers are the Sellers who pay them….not the Buyers. The buyers … eBay continually pamper…permitting them to blackmail sellers with feedback extortion and unreasonable demands..We are fools we have funded eBay so it believes it’s beyond question and can dominate us…but even us small worms can turn…
We all should have the strength to say…enough eBay…no more listings till you respect us ….your Customers… You won’t have any of those people you believe are your Customers without us Sellers.
I am a Powerseller who has paid ebay £££££ over the year …but had enough I am walking….
Someone asks whats wrong with this man John Donahoe …tell me apart from loving the sound of his own voice whats right with him……

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nadine September 28, 2008 at 9:54 am

I believe that no group of human beings could watch a thriving and popular company be reduced to rubble,

Richiemagoo, do you believe all the leaders of the Soviet Union intentionally planned to destroy it? That’s not how things work. Once the system is set up where autocratic leaders make decisions based on bad information, ruination is set in motion. With eBay, we can see what ‘visionary’ decisions made in the absence of market knowledge or common sense lead to.

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Ash September 28, 2008 at 4:02 am

What is wrong with this man?
Does anyone have information on his background?

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nadine September 28, 2008 at 2:25 am

It’s not just the sellers who are reacting this way. It’s just as bad for the employees. Here the most recent eBay employee review from glassdoor.com:

“Was a great place to work when it was eBay instead of Amazon Jr. or Walmart.com Lite”

Project Manager in San Jose, CA (United States) Current Employee

Pros

It pays better than market, or used to. I’m not sure if I’d get offered the same salary I currently have if I were applying for the job now.

Cons

Crazy hours doing crazy things that are alienating everyone – employees, sellers, buyers, shareholders, analysts. Anyone with a stake in eBay is wondering what the hell is going on, or we would wonder if we weren’t so exhausted. We do things, people get upset, we change them, and upper management keeps asking us to make the same mistakes.

Advice to Senior Management

Stop. Take a deep breath. Listen to all your customers, sellers and buyers. Listen to your employees. Stop trying to pound eBay into an Amazon hole; it doesn’t fit. Figure out eBay’s best niche going forward, what value we really bring to the buying and selling public, and help us make it the best eBay possible instead of second-rate Amazon.

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Ed September 27, 2008 at 10:51 pm

OK ….. the most salient point of all from where I’m sitting is the dates and duration. According to what JD said, we’ve just come to the end of Year 2 of a 3 year plan. So there’s another year of this chaos ahead?

This leaves me dreading what else they have in store for us, remembering that during the first 16 months of this 36 month schedule, JD was not even in charge at eBay, and the extremely eBay experienced executives (ooh the alliteration) were still around – Meg, Bill, Rajiv et al.

We’ve seen what’s happened during JD’s official 6 months at the helm (effectively 8 months though since Meg drifted off at the end of January). He’s got another 12 months before his “wisdom” is fully implemented.

It sounds to me like the strategy for any sensible seller is to maximise what they can from now to Xmas from eBay and simultaneously build presence on other sites and own websites, then stay off eBay completely next year, before re-evaluating it at the end of 2009 between Christmas and New Year with a large plate of mince pies and a bottle of Sherry to hand.

What continues to astound and infuriate me is that the shareholders only took the official vote on his appointment to CEO in June 2008 – five months after he was named as Meg’s successor at the Washington ecommerce conference … surely the vote should have come before the announcement?

Methinks it’s time for the SEC to investigate the non-corporate shareholder roster and see which senility homes and asylums they actually live in, or if they are all offshore nominee holdings.

Something about the Meg to JD handover stinks worse than rotting kelp on the foreshore.

Ed

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Kevin_T September 27, 2008 at 3:08 pm

Thank you for this enlightening article. Overall I am extremely cynical about Ebay’s direction and mismanagement, but I am surprised to say that I can actually see *some* reasonable ideas in the excerpts you have quoted above. As Nadine points out though, the problem lies in how badly they have been planned and implemented. Add to that the alienation of Ebay’s paying customers (sellers) and general trashing of Ebay’s brand through this poor implementation and we arrive at the state that Ebay and it’s reputation is in today.

However, Ebay remains a successful marketplace IN SPITE of it’s management and not because of it. If you understand the Ebay marketplace, it is still lucrative and results in many cases can be over the top prices. It is not a retail market, and in spite of management’s efforts to turn it into a discount retailer that doesn’t have to buy the stock it discounts, it never will be, and the model that they are using is not a sustainable business model for sellers who follow this charted course.

What I do not understand about the concept of “disruptive innovation” is how disruption can enhance a commercial marketplace. It has a tendency to undermine productivity (thus Ebay reaps less listing fees), the ability for buyers to confidently and/or competently use tools and find the items they are wanting to buy (thus slowing fixed price sales, or reducing the prices on competitive auctions, and reducing FVF income for Ebay). None of this is healthy for either Ebay’s own bottom line or those who use Ebay’s tools or infrastructure for income. Buyers that I talk to face to face, find the constant change and adjustment downright frustrating and tend to reduce how much they use Ebay due to it.

The problem is though, that as a marketplace it really is too lucrative to walk away from. I can still sell items for prices that I wouldn’t dream of asking a third of, if I was trying to retail them. However Ebay is trying to interfere with this, discourage high prices (and encourage reductions in profit for their customers while at the same time increasing their own profit margins). I have my plans for when the site becomes unviable to me, or just so intrusive that I can not run my own business model successfully – at that point I can walk away and start trading differently off-line. However that time has not yet arrived, and while I fight the frustration and aggravation, I am still happy with the prices and turnover that I can achieve on Ebay. I have not yet found an on-line alternative which will attract competive international bidding for the eclectic mix of collectibles and ephemera that I sell, so walking away from Ebay is not yet an option or a necessity.

There are many individual quotes that I could comment on, but this will become an unwieldy post. Instead I will point out, as an Australian, just how detrimental to livelihoods, Ebay’s use of the “global portfolio to test and learn” really is. The Australian marketplace, being a small population with a good take up rate, has meant that they use the site to test on a fairly insulated market. Australians have been treated with contempt this year, and the market has been punished ruthlessly. They either overlook, or simply don’t care, that every time they do this, they are interfering with real people’s livelihoods.

The other comment that was revealing above was about the purchase of shopping.com – as far as I found by Googling a little while ago it was not owned by Ebay, however if you go onto the Australian site, and pull up individual completed auctions you will find a block of listings that encourage Ebay buyers to go to shopping.com to buy. Sending buyers off site made absolutely no sense until now. I suppose that if Ebay is in decline due to draconian tactics that make sellers either unproductive or leave the site, they may as well use Ebay to help the growth of their other subsidiary, shopping.com.

Bah! Kevin

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Richiemagoo September 27, 2008 at 10:32 am

I still believe there is some hidden agenda behind all of this. Much like GW Bush has destroyed our country, whilst playing dumb (As it’s better to be thought of as merely dumb, than to let it appear obvious that one is a treasonous traitorand criminal), so to I believe that no group of human beings could watch a thriving and popular company be reduced to rubble, as change after negative change is implemented, unless that, for some reason was their goal- to destroy the company.
Even if they had believed that the changes would work- after seeing the results after each new change is implemented, any sane person would reverse course.
No- there is an ulterior, covert motive. Perhaps they are aware of changes that are coming to the internet (with the new IRS reporting crapola) or they are privvy to some political/economic news which will mean the collapse of Ebay in the future anyway- so they are gutting the company now for personal gain? I don’t know….but what I do know, is even a psychotic moron can see that Ebay’s plans are a recipe for failue, and even such an one would know that no rational person with IQ above 3 would persue such a course of action and think that it could succeed.

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Lisa September 27, 2008 at 5:12 am

“We saw a very successful business and a lot of momentum but we saw that our user experience and ability to satisfy our buyers and sellers wasn’t what we wanted it to be.”

The mind of an egomaniac. He saw, he came, he conquered. Job done. Now, he’ll just float away with his golden parachute.

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nadine September 26, 2008 at 10:46 pm

You doubted it was a deliberate plan, Henrietta? I never did. But then I worked as a consultant for many years. Nothing more catching to consultants (Donahoe is from Bain) than the latest buzzwords and theories, all of which sound inspired in theory, “theory” being the key word.

If you have a stodgy, “play it safe” corporation that refuses to adapt to its changing environment and seems determined to ride its cash cow straight to the knacker’s yard, then an approach as risky as disruptive innovation might make sense for them, the key word being “might” and the ability to evaluate the utility of whatever the skunkworks teams come up with being critical.

The problem with eBay isn’t that Donahoe has changed finding and feedback and made new rules. The problem is that all the changes have been for the worse, and have been badly planned and badly implemented with no working feedback loop from the field, so that selling on eBay now feels like living in the USSR and waiting for the commissars to bring you the next Five Year Plan, which you must obey or pretend to obey, all of which interferes with your ability to get a living but you have no choice.

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Henrietta September 26, 2008 at 6:07 pm

I am completely and utterly gobsmacked. People said this was a deliberate plan and I was unable to believe it. I thought it was a joke. I still can’t believe the institutional shareholders would allow the deliberate destruction of something that was not broken. What ever happened to common sense? They pay people millions of dollars a year to do this stuff?

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