| badebay | 07-29-2008 01:47 AM |
The Fall of eBay
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MegWhitman.jpgeBay is going down.
The collapse of its stock price may be followed by the collapse of the entire company. Certainly a fire sale is in the offing.
I can say this with some certainty because eBay has bought itself an enormous political problem with Skype, a fight it can't win because of its diminishing goodwill.
Ross Armstrong was the first to Clue me in on this. He's a senior research analyst for Info-Tech in Canada, which just published a paper telling corporations in no uncertain terms to turn Skype off. It's insecure, it's like peer-to-peer, the report said.
It e-mailed Armstrong, and we had a nice virtual discussion about it. "Skype is now where IM was a few years ago; that is, a blossoming technology with tremendous potential, but with disclosed vulnerabilities that could pose a risk to the enterprise unless it is controlled, not just by technology, but also by policies and acceptable use," he wrote. " So why did eBay buy it? "I don't think eBay even knows..." he wrote back.
Even if Skype were problem free eBay would still face an enormous political battle to get it accepted. Foreign regulators are now working on technical solutions that prevent it from being used (along with peer-to-peer technolgies) and U.S. broadband operators are now demanding control of their networks in order to keep their customers from using it, too.
In fighting this political battle, however, eBay puts its whole company on the line, its entire reputation, and it must stand with people who are, on the whole, out of power. They may have moral and technological right on their side, but this is not the position you like your company in when you've just paid 60 times earnings for the ride. It's like paying for a ride on a cruise ship and suddenly finding yourself alongside the Somali pirates, told to man a gun.
Then we come to eBay's internal problems. Its market reputation has been suffering ever since it bought Paypal, frankly. Each time it allows the auction of something dicey it gets hammered, and each time it bans an auction, or someone is ripped-off in one, it gets hammered. The company just doesn't have enough cops on its internal beat to keep its users safe from one another.
For evidence, we come to eBay's latest ad campaign. Without trying to critique the "It" ads, which assert that whatever "it" is they have "it," let me cut to the chase and ask, "why is this trip necessary?" Amazon doesn't advertise. Google doesn't advertise. You advertise in order to gain new customers, Why is it doing that if it has a "natural monopoly," as MarketWatch claimed just last month.
Let's add it up. You've got a company facing increased churn, a steadily-declining public image, a political battle, and with a 60x stock to protect. I don't think George W. Bush has so many problems. | 
