Here's some perspective, courtesy of the WSJ -- note the portion I've highlighted in red in the article below, e.g., what eBay perceives is the inefficiency of eBay stores vs. "core auctions."
It told the WSJ that eBay store items take 14 TIMES LONGER to sell than auction items -- and admits its decision to increase store fees is to force sellers back to the auction format. Growth in "core auctions" has slowed, resulting in fewer return visits by buyers and "fewer conversions to sales" -- which -- in sum, have "diluted the magic of eBay." This is eBay's perception of how BUYERS feel about the eBay experience, NOT sellers.
-koose.
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WALL STREET JOURNAL
EBay Posts 14% Drop in Profit
But Raises Full-Year Forecast
By MYLENE MANGALINDAN
July 20, 2006; Page A2
EBay Inc.'s second-quarter profit fell 14% while revenue rose 30%, as the Internet auctioneer generated less money per listed product, a sign of its maturing growth.
But the San Jose, Calif., company forecast higher full-year profits and announced its first stock buyback, totaling as much as $2 billion over the next two years, in an attempt to highlight its long-term confidence in the business.
EBay's financial results matched Wall Street expectations, giving the market a chance to focus on the forecast and the buyback. The company's shares jumped about 6% in after-hours trading.
Still, in a troubling sign of eBay's growth prospects, revenue per listing declined 10% in the quarter from a year ago, according to estimates from Goldman Sachs.
Revenue per listing is a measure of eBay's profitability, which has come under pressure as more rivals have entered the Internet auction business and as some sellers have gravitated to competing sites.
EBay has also faced other challenges as Google Inc. has encroached farther onto its turf, and as several top executives have left the company, sparking fears of a brain drain.
For the three months ended June 30, eBay posted net income of $250 million, or 17 cents per share, down from $291.6 million, or 21 cents, in the year-earlier period.
The quarter included stock-based compensation expenses, which the company began including this year to reflect new accounting rules.
Excluding stock-based compensation of $60 million, or four cents a share, eBay earned $310 million, or 22 cents, up 6% from a year ago. Operating income rose 14% to $351 million, or 24 cents per share, matching Wall Street's forecast.
Revenue rose to $1.4 billion from $1.09 billion, in line with Wall Street's forecast of $1.410 billion.
EBay reported results after the market close. At 4 p.m. on the Nasdaq Stock Market, its stock was at $25.93, down 66 cents, but in after-hours trading, the stock rose to $27.40.
Tellingly, eBay's store and fixed-price listings -- which generate lower revenue and profit -- grew faster than the company's core auction listings over the quarter.
Store listings take 14 times longer on average to sell than auction listings, which typically sell in about two weeks, according to Bill Cobb, who operates eBay's North American auction-marketplace business.
Store listings also cost the company more to host on its site.
As a result, eBay said yesterday that it would raise some fees for store listings in order to encourage sellers to post more auction listings.
"The core auction growth has not grown as fast as we would like," said eBay Chief Executive Meg Whitman in an interview.
Not only has the buyer's experience suffered, with fewer return visits and fewer conversions to sales, she said, but "it has diluted the magic of eBay."
Still, she said the problem wasn't systemic and she was confident that the steps the company is taking to promote auctions will work.
EBay also modestly raised its 2006 earnings forecast to 69 cents to 72 cents, up from a range of 65 cents to 71 cents previously. The company said it expects full-year operating income of 98 cents to $1.01, up from a previous forecast of 96 cents to $1.01.
The company didn't change its 2006 revenue forecast of $5.7 billion to $5.9 billion. However, it said it expects third-quarter revenue of $1.36 billion to $1.43 billion, below the current Wall Street forecast of $1.434 billion.
