Editorial

As is my wont, I try to wander around various statistics sites now and then, examining traffic data for BuildaSkill and others (such as eBay). Having been rather tied up with all the eBay changes since the spring, it came as a surprise to discover this announcement on Medved this weekend -

NOTE: Starting around 6/23/2008, EBay’s numbers on different pages do not match up. Example:
“Clothing, Shoes & Accessories”

On Category List Page it is around 2,500,000 listings
When browsing the category it is around 3,600,000 listings.

Same with the other categories. Starting 6/27/08 the monitoring will be using a different set of pages that seem consistent.

This seemed a little bizarre, but not unbelievable given all that’s happened this year (especially regarding the Buy.com and Selling dot com listing counts).  However, what I found when looking at the listing count graphs did generate a cry of “WTF!” that had nothing to do with American televised wrestling pantomimes, as the following screenshots show.

In this first graph, the effect of what appears to be a new way for eBay to count listings can be clearly seen in the figures for June.  I’ve added the red lines to show the effect on the median count – roughly a 2,000,000 jump in the count total.

I noticed another interesting change in trend looking at the graph above, and to verify it, I pulled the Medved “all data” graph for eBay listing counts since they began recording the data.  I’ve included the graph below, and again I’ve marked it in red to illustrate what I mean.

Notice that for all years up until the end of 2007, there is a distinct “smile” to the graph for each individual year, due to the “U” shape of higher listing counts in 1st & 4th quarters with a flattening trough in mid-summer.  As the 2008 detailed graph above shows, and clearly visible on the all-data graph below, 2008 is not showing that happy-faced trend.  It’s too early to speculate if the graph will turn “glum” with a downward curve through the 3rd and 4th quarters of 2008, but there is definitely something going on with the way total listing data is being calculated this year.

There is another interesting trend emerging regarding eBay traffic stats too.  As many sellers will attest, and as we’ve blogged here on BuildaSkill before, eBay traffic seems to be collapsing.  Earlier this year, we blogged that Yahoo is now driving more traffic than ebay’s own internal search engines – a fact that was refuted by eBay UK Community Manager James, who posted that Omniture stats are “broken” and that sellers should refer to the “Referring Domains” report rather than the “Search Engines” report in Omniture.  Unfortunately for James, we’re not all gullible and the simple fact is that the referring domains report also includes people who click through from browsing eBay, not just those who search, therefore of course it will show eBay under a more favourable light.

Independent stats providers, in this case I’m using Alexa, show that for both Amazon and eBay, there was a traffic bump in late-May and early June 2008, but that since then, eBay traffic has been in decline whilst Amazon’s remained static.  Alexa’s traffic graphs are not 100% reliable as they rely on browsing individuals with the Alexa tool bar installed, but given that eBay don’t provide this data to anyone, they’re one of the more accurate resources available to those outside the company.  Here’s how the graph looks for the dot coms -

In the following graph, which focuses on the .co.uk’s, the decline in eBay’s and the stability of Amazon’s traffics can be seen more clearly due to the graph’s vertical scale.

This data illustrates several issues for both eBay and the company’s paying customers.

First is that the company has either seen a surge in listing volumes, or they have changed how they account for the listings.

If it is the former, then the sudden increase in choice for buyers (company non-revenue customers) could be contributory to the drop in overall traffic.  At eBay Live in June 2006, then CEO Meg Whitman stated that it was the choice confusion of putting eBay Stores inventory in core that had caused a major drop in traffic and sales volume, and that was why they had reversed the visibility of stores inventory.

Now that “Mr Retail” John Donahoe is CEO, eBay is hell-bent on driving business models that take buyers away from the founding auction-oriented business model, and towards the classical “Buy Now” retail model that is behind all the changes this year.  Included in this is the removal of low-visibility stores inventory in several European marketplaces, and their replacement with a “stores in core” extended duration Buy Now format.  Even in North America and other marketplaces, the extended duration, lowered cost, Buy Now format is widely tipped to make Stores redundant within a year.  This drive therefore reverses and makes a lie of Whitman’s 2006 announcement.

If it is the latter, then questions should begin appearing in national and international media, followed by the same questions appearing at the SEC.  Basically, those questions revolve around the now uncertain accounting and investor information practices that eBay have either historically, or are currently, employing.

One of eBay’s self-confessed key metrics for stock investor confidence is the sales-listing volume across the eBay marketplaces.  Listings volume underscores customer confidence in the site, and therefore future revenues potential.  As such, the listings volume trend is the equivalent of a manufacturing company’s “book to bill” orders metric.  (Book to Bill is essentially a ratio of the number of received orders that have not yet been fulfilled by the company, which can then be measured against billing per period to see if incoming orders are falling, static, or rising – it is a key metric to future profitability and thus dividend forecasts).

Several times this year, eBay listings-volume has come under scrutiny.  There was the SDC or “sell dot com” phoney listings that ran into the millions, then there was the stealth introduction of the Buy.com listings – the outcry about which led to the announcement at eBay Live that a new PowerSeller level had been introduced that would allow the seller to negotiate fees with eBay.  There was a second wave of allegations about phoney SDC and Buy.com listing-count paddings in early summer (I can’t remember if it was at the same time as the curve jump in the first Medved graph above).

All of this leads to the questions, “Has eBay been accounting inaccurately for their book-to-bill listings count figures for years, or have they just (this year) started to do so?  If previous figures were accurate, why change the methodology now, and if they weren’t, have they declared it to the SEC and Wall Street for independent auditing and historical record adjustment.”

Second, for eBay’s paying customers, what this illustrates is that the first Medved graph shows a roughly 15% jump in competitor listings in mid-June, during the midst of a similar valued drop in visitor traffic on dot com, and a 20% drop in traffic on the UK (eBay’s largest non-American marketplace) during the six months to September 2008.

This represents a very real threat for the tens of thousands of small to medium sized businesses that rely on eBay for part or all of their revenue.  These changes in marketplace performance co-incide with recessionary pressures in North America and Europe, with the previously strong and stable UK reported as expected to be in official recession during Q3 or Q4 2008.

Currently, the UK’s Sterling is trading at historic lows against the US Dollar and the Euro.  eBay advice to sellers earlier this year (to US sellers to leverage the weak dollar by selling overseas) now applies in a reverse flow – that Britons should be selling to Europe and the USA with the weak Pound making their goods look cheaper.  Unfortunately this exchange rate also arrives at a time when eBay UK are cutting trans-Atlantic visibility (again) via the switch from Stores Inventory Format to new-BIN, which has no International Visibility Fee (IVF) option.  The result of this will be the need for British sellers to list directly onto the US site, porting visibility back to the UK via payment for the IVF available on the US site.

That contains both good and bad news for the “nation of shopkeepers”. At current exchange rates, for sellers with either a “Basic” or “Featured” eBay Shop subscription, standard like-for-like new-BIN insertion fees are cheaper on the US site, and it is organically a larger marketplace with theoretically more chance of finding buyers.  Additionally, the US parent site has retained the old-style Store and store format listings, which again are substantially cheaper than they were on the UK site.  Brits can therefore migrate their shop listings (that they don’t want to put into new-BIN on either site) onto the US site, which has demonstrated that it attracts buyers worldwide (possibly due to undeclared cross-border visibility retentions, possibly due to browsers habit of always appending dot com to typed URLs).

For a British eBay Shops subscriber this has a double benefit.  The UK Shops subscription will kick up the shop name in the UK Shops hub when buyers search via that route, and the US hosted shop listings will do the same for it on the US site.  Unlike having the shop subscription and listings all on one site, which would then only reveal its existence on that one site.  Win-win, but keep a close eye on the exchange rates that eBay and PayPal utilise.  They claim to be charging a 2.5% spread over retail exchange rates, but this does seem to vary, as does their source of the retail rate – normally they use XE.com, but have been known to change when it is to their advantage to do so, catching sellers out particularly when the USD was wobbling very close on either side of the 2:1 ratio against the GBP.

How this increased competition / shrinking market in recessionary economies scenario will play-out is anyone’s guess.  Certainly this time next year there will be fewer sellers using eBay as a primary business channel and that could lead to further shrinkage in the buyer population (due to reduced choice).  The insertion of mass volume commodity sellers is already bringing to fruition John Donahoe’s prediction (in January 2008) that “within a year you won’t recognise eBay for what it is today”.  The site is already heading in the direction of a giant catalogue ordering portal, with “drop shippers for eBay sellers” proving one of the most consistently popular search terms that brings readers to the BuildaSkill Blog.

It is sad to see the uniqueness of eBay being gouged away.  The loss of the fun, the funky, and the quirky, will deteriorate the site into yet another bland generic products shopping mall, and my belief is the results of that are already being seen in the traffic figures.

If JD crashes the darling of the dot com revolution, will he ever be employable again?  Will he care if he’s in line to get a similar golden handshake to the one Meg Whitman allegedly got?  Or should all the company’s customers, damaged by his policies, take up the baton now, and report suspicions of what is increasingly looking like Enronesque activity?

EnronBay … eBaygate … HaliBayton …  ?

You decide – tell us what you think in the comments box.

Ed