How Does the Boycott Impact eBay?

posted on: February 22, 2008

In response to the big question, "Will a week long boycott have an impact on eBay (EBAY)?" I have decided to respond with this article.

I am very curious where eBay ranks when it comes to the number of times they have been boycotted, compared to other companies. It seems every year eBay is being boycotted. Unfortunately, these boycotts have never worked. Analysts have debated this and have determined the reason is because it's a week-long strike.

I have considered the reasons, and have determined that while an open-ended strike would have longer term effects, the main reason is that boycotts have been word of mouth, and without planning, strategy and a united front.

In an interview last week, I was asked "How can you tell if the boycott is working?" Thanks to sites such as Powersellersunite.com we can see hourly updates as to how many auctions are live. For the most part, eBay was hovering in the 15-16 million listing range the weekend prior to the boycott. As word spread of the boycott, people began an early boycott, and listings fell below 13 million.

On a conservative determination, we will call it 2 million auctions. eBay's lowest insertion fee is 20 cents. Based on that fee, eBay would have lost $400,000 just on listing fees alone. This does not include any extras that range in price for 15 cents for each addition photo, to double listing fees (which includes any extras used), bold lettering, borders around the listing, which adds $1 or $5 per listing (and again, if listed in two categories, that can be as much as $10) or any number of other extras. Just the minimal 20 cents and eBay is down $400,000.

But, let's take a more realistic look at the bottom line. Insertion fees are as high as $4.80 for the typical auction. Autos, and real-estate are different. So, let's take a more average $1.20 listing fee, which is for the $25-49.99 pricing. Based on that fee, we still have not hit the real numbers of eBay's losses. But, it is still quite astonishing! At $1.20 for a conservative estimate of 2 million auctions eBay is down, that translates to $2.4 MILLION dollars.

Again, these numbers do NOT reflect extras, that will certainly add an extra million or five. This number does not include the number of stores closed at $9.99 per month. Or those listing fees, Final Value Fees. Nor does this reflect the Final Value Fees of the auctions not listed. But, just the basics, what company is happy to lose a MINIMUM of 2.4 MILLION dollars a day?

Usher Lieberman, media spokesperson for eBay was quoted as saying that the boycott had little effect, because they jumped from about 12 million auctions to 16 million auctions by Wednesday.

True. But, what the spin does not show is at what cost? eBay had to do two promotions last week to get back to where they were before the word of mouth boycott efforts took effect. One of the promotions was to have a 20 cent listing day, which most items will end tomorrow. By doing this second promotion, eBay forfeits fees of up to $4.80 per listing. While most sellers take advantage of these promotions to list higher ticket items, not everyone is listing items over $500. Regardless, most items are definitely between $1.20 and $2.40 to list. My best guess is that eBay had to lose an average of $1.00-$2.20 to artificially inflate their numbers. By Usher's own words, that is about 4 million auctions, meaning it is realistic to conceive it cost eBay between 4.8 million dollars and $8.8 million dollars. Possibly more. But, a good number for ball-park figures.

eBay can spin all they want. These numbers are just fast and ugly rough estimates, and they are minimal. What happens when eBay sees the 20 cent listings (that helped sellers list items before the strike took effect) fall off the charts? eBay is already down to the 14 million mark. By today it is conceivable that eBay will be at or under 10 million listings. NOW we are talking real money lost. 1.2 times 6 million a day is painful.

Now, consider this. The boycott is simply because the community at large is opposed to the changes. Contrary to the spin, the majority of the eBay members are opposed to the announcements Donahoe is proposing. We DO agree things need to be shaken up. BUT, we do NOT agree that these changes are the answer. All Donahoe is doing is shifting the balance away from the sellers (leaving retaliatory feedback) to buyers who are already reportedly extorting sellers.

Consider that this boycott could be avoided if eBay would just listen to the community as a whole, and not just the top 200 US sellers.

eBay has been target of many boycotts before. But never has eBay been targeted BEFORE the incoming CEO has taken over.

What eBay, and Mr. Donahoe, have to realize is that while they look to the past, unorganized, unsuccessful scattered boycotters with no direction, no purpose, no unity, we are uniting, becoming stronger and are purpose driven. Thanks to the MySpace.com/boycottebay pages and the http://forums.delphiforums.com/boycottebay/start forum, we are able to organize ourselves, and grow stronger each day. According to stats within the control panels, that venue alone is showing message views in excess of 10,000 over the weekend. Numbers that exceed only the most popular and long term forums.

While Mr. Donahoe is not yet CEO, his leadership is angering many of the community, and far worse than outgoing Meg Whitman ever did. With a potential second boycott being planned, one has to wonder if Mr. Donahoe will slide by so easily, as being the reason eBay strikes twice within three to four months time. His already questioned incoming may lead investors to question his ability to turn things around.

Well, we see he is turning things around. But, I don't think that is the direction investors are hoping for.