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July 2004

July 22, 2004

The Life and Times of Stupid Web Sites
Ebay continues to aggravate users, stock flops
posted by Don Bravo

Daily Drift for Thursday, July 22, 2004

Since this column should concern itself primarily with media, magazines, and the collecting, buying and selling of such, the recent selling spree of ebay shares over the past three weeks is of some importance, since ebay is seemingly everyone's top buying and selling destination.

Not to get too technical, but ebay is one of the most overvalued stocks available. Even today, roughly 20% off it's June 28 high of 92.81, it's price/earnings ratio is around 90. For perspective, the overall long-term p/e ratio for all stocks over the past 70 years is about 15. So, it's no surprise that investors are selling.

On Wednesday, July 21, ebay released their second quarter results, and investors began dumping shares in earnest in after-hours trading. When the market opens today, shares of ebay will open 4 to 5 points lower than they did on Wednesday, in the 71-72 range, as opposed to the 76.60 closing price yesterday.

Wall Street analysts have their reasoning for the selling spree, but none of them offer any insight as to why ebay lost 16 points in the three weeks leading up to yesterday's lackluster earnings announcement. I shall endeavor to do so.

Ebay has been the dominant leader in auction commerce on the internet, but the company has blundered so many times, in so many different ways, that users are now accustomed to glitches, gaffes, poorly designed new features and outright stupid ideas. Of late, however, ebay seems to have outdone even themselves, as their latest blundering is costing them loyalty and landing them in court.

In March, ebay rolled out it's new billing system, which was an immediate disaster. Some customers were double billed, others not billed at all, while most simply could not either access their accounts or were totally in the dark as to which figures on their account statements actually mattered.

The billing nightmare continues to this day. For instance, I am supposed to be billed shortly after the end of the month and my fees deducted from my bank account, but here we are three weeks into July and I still don't have my June invoice. As for prior months, I was never billed for March, but managed to pay it through PayPal, and April and May were billed together, around the third week of June. I am just one user, but multiply by the millions my kind of astonishment over ebay's handling of what are, in reality, very important finances, and you get an idea of just how large a problem this is. The problem became so large that two sellers filed a class action which will include all sellers should it become certified.

It's about time this kind of thing happened. Ebay has long been playing fast and loose with fees, rules, refunds, offers, suspensions and the financial welfare of more than 50,000 Americans who sell on ebay as a primary source of income. It's about time they come under closer scrutiny from regulators, judges and the media. They've been a darling of Wall Street and the internet community for a long time, though just under the surface users have been screaming bloody murder about higher and higher fees, site instability, poor search functions, constant changes to the site structure and confusing and/or poorly designed additional features nobody ever wanted.

To add insult to injury, ebay did some rolling over the past months, specifically, the roll out of My Ebay 2.0, which is supposed to allow users to easily track their buying and selling on the site, and the roll-up of quite a few categories, replacing them with what they call "item specifics" and eliminating the enjoyable and popular browsing of categories nearly completely.

Buyers and sellers alike have complained about My Ebay 2.0, which is clogged with cutesy icons, has no intuitive navigation to it, is far too complex and is generally overkill. As for the category roll-ups, while the verdict is still out, most sellers feel that the inability to browse (much like going into a bookstore and having a clerk stand over you demanding to know just exactly what it is you're looking for) has and will continue to hurt sales. The outcry was so vehement in the glass and pottery categories that ebay was forced to restore them, just to quell the rebellion from dealers worldwide.

In addition to these abominations, ebay foists upon its users: unfriendly chat boards with report buttons attached to every post; a completely arcane and bloated listing form which can run to seven or eight pages; their new non-paying bidder resolution system (which has been confusing and non-functioning since it's implementation a week ago); industry worst customer service (try finding a customer service 800 number on ebay's site - it is virtually impossible); rules against just about everything that a business would do to promote themselves, particularly, an outright ban on links to one's own web site on auction offerings (my long-held hope is that someone would institute a class action on restraint-of-trade grounds); search functions which are confusing or non-functional; a never-ending stream of pop-up ads, cookies, multiple logins, and other distractions, all of which diminish the goals of users, which is simply to buy and sell.

Still, buyers flock to ebay and sellers continue to list items at near-record pace. Ebay is still #1 in the auction business (thanks to Yahoo and Amazon pretty much abandoning their auction efforts three years ago), but the site function problems and continual tinkering with the system may be beginning to take its toll. As the internet evolves, there will be more competition from all sides - most notably from individuals with their own e-commerce sites - and ebay will languish as the biggest, but sadly, the worst solution.


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