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<span style="font-family: 'Arial Black'">Amid the Gloom, an E-Commerce War</span>
<span style="font-style: italic"> Stuart Isett for The New York Times (Bezos); Peter DaSilva for The New York Times (Donahoe) </span>
<span style="font-style: italic">By BRAD STONE
Published: October 11, 2008 </span>
WHEN the e-commerce giant eBay emerged from the last recession seven years ago with an aura of invincibility, its chief executive, Meg Whitman, boasted that “eBay is to some extent recession-proof.”
Ms. Whitman, now co-chair of Senator John McCain’s presidential campaign, retired from eBay earlier this year as the company struggled with stagnation. Amazon, meanwhile, has emerged as one of the most vibrant and reliable retailers in the country.
And in an unmistakable sign that Internet companies are indeed exposed to the gathering economic storm stemming from the credit crisis, Ms. Whitman’s successor, John J. Donahoe, laid off 10 percent of eBay’s 16,000 employees last Monday.
Mr. Donahoe noted that eBay was already feeling the effects of the downturn. “This looks like it is going to be a more typical economic cycle that impacts consumer spending,” he said. “We are not immune.”
That the economic crisis is washing up on Silicon Valley’s shores shouldn’t, perhaps, come as a surprise. Most tech companies are defenseless against waning advertising, business spending and consumer interest in big-ticket items like computers. Over the last three months, investors have punished tech companies like Google, Microsoft and Apple, extracting a fifth to a half of their market value.
E-commerce, though, was once thought to be a refuge from economic storms. People who stay away from the mall might actually be more tempted to shop online and hunt for deals, or so the thinking went.
But analysts are now revisiting that assumption. Many consumers, citing an uncertain economy, say they will clutch their wallets tightly this holiday season regardless of where they shop: 48 percent surveyed recently by eBillme, an online payment service, said they planned to delay purchases.
Traditional, brick-and-mortar stores had wrenching, double-digit declines in September sales and are bracing for a bleak holiday season. No one is certain to what degree online retailers will feel that same pain, because digital vendors have never endured a deep, protracted economic slump before.
“We still feel pretty good about this year, but I worry about next year and beyond,” said Brian J. Pitz, an analyst at Banc of America Securities. “Are people going to spend when they can’t get home equity lines of credit, a student loan or a car loan?”
For eBay and Amazon, the twin giants of e-commerce, the financial meltdown has arrived at a particularly crucial time. After years of claiming that their businesses were complementary, not competitive, the companies are now on a collision course.
Amazon has accelerated its courtship of small online vendors, allowing them to sell on its site — becoming more like eBay. And eBay, desperate to revive itself, has decided to emphasize traditional, fixed-price sales of both new and old merchandise — becoming more like Amazon.
AT stake is more than e-commerce bragging rights. On the Internet, size matters. Larger companies can collect more information about consumers, negotiate better deals with partners and use that leverage to expand their dominance (for example, Google versus Yahoo in search).
“This is a pivotal holiday season for eBay,” said Jeffrey Lindsay, a senior analyst at Bernstein Research who has covered the Internet for a decade. “What people fear is that Amazon is basically building a bigger sales base than eBay and will use that knowledge to sell people more and more of the things they want to buy online.”
Indeed, the balance of power in e-commerce seems to be shifting faster than anyone expected. Just three years ago, eBay had 30 percent more traffic than Amazon. Today, its total of 84.5 million active users is barely ahead of the 81 million active customer accounts that Amazon reported in June.
Amazon has exceeded eBay in other measures as well.
EBay’s market capitalization was three times Amazon’s in 2005, back when Wall Street loved the fact that it carried no inventory and generated huge profits. This year, eBay’s stock has lost over half its value and, in July, Amazon’s valuation surpassed eBay’s for the first time.
In a series of interviews, Mr. Donahoe acknowledged that eBay, based in San Jose, Calif., didn’t adapt fast enough to shifting e-commerce winds. He now embraces a “turnaround mind-set” and is refocusing its Web marketplace toward shoppers who don’t want to waste time in online auctions.
“There are times when I wish we can close this store and just open a new store, but we can’t,” he said. “We need to make bolder, more aggressive changes to the eBay ecosystem even if they are unpopular.”
Up in Seattle, meanwhile, Amazon’s chief executive, Jeffrey P. Bezos, says that after years of failed experimentation, third-party vendors — the foundation on which eBay was built — now account for about 29 percent of sales on Amazon. The company has endured and outlasted critics who long complained about its high fixed costs.
Last year, it impressed investors with accelerating growth, and its stock price revisited the highs of the dot-com boom, before waning euphoria and market pessimism erased more than half of those gains this year. Mr. Bezos credits Amazon’s tolerance for risky, expensive bets like the Kindle electronic reading device.
http://www.nytimes.com/2008/10/12/busine...amp;oref=slogin
<span style="font-style: italic"> Stuart Isett for The New York Times (Bezos); Peter DaSilva for The New York Times (Donahoe) </span>
<span style="font-style: italic">By BRAD STONE
Published: October 11, 2008 </span>
WHEN the e-commerce giant eBay emerged from the last recession seven years ago with an aura of invincibility, its chief executive, Meg Whitman, boasted that “eBay is to some extent recession-proof.”
Ms. Whitman, now co-chair of Senator John McCain’s presidential campaign, retired from eBay earlier this year as the company struggled with stagnation. Amazon, meanwhile, has emerged as one of the most vibrant and reliable retailers in the country.
And in an unmistakable sign that Internet companies are indeed exposed to the gathering economic storm stemming from the credit crisis, Ms. Whitman’s successor, John J. Donahoe, laid off 10 percent of eBay’s 16,000 employees last Monday.
Mr. Donahoe noted that eBay was already feeling the effects of the downturn. “This looks like it is going to be a more typical economic cycle that impacts consumer spending,” he said. “We are not immune.”
That the economic crisis is washing up on Silicon Valley’s shores shouldn’t, perhaps, come as a surprise. Most tech companies are defenseless against waning advertising, business spending and consumer interest in big-ticket items like computers. Over the last three months, investors have punished tech companies like Google, Microsoft and Apple, extracting a fifth to a half of their market value.
E-commerce, though, was once thought to be a refuge from economic storms. People who stay away from the mall might actually be more tempted to shop online and hunt for deals, or so the thinking went.
But analysts are now revisiting that assumption. Many consumers, citing an uncertain economy, say they will clutch their wallets tightly this holiday season regardless of where they shop: 48 percent surveyed recently by eBillme, an online payment service, said they planned to delay purchases.
Traditional, brick-and-mortar stores had wrenching, double-digit declines in September sales and are bracing for a bleak holiday season. No one is certain to what degree online retailers will feel that same pain, because digital vendors have never endured a deep, protracted economic slump before.
“We still feel pretty good about this year, but I worry about next year and beyond,” said Brian J. Pitz, an analyst at Banc of America Securities. “Are people going to spend when they can’t get home equity lines of credit, a student loan or a car loan?”
For eBay and Amazon, the twin giants of e-commerce, the financial meltdown has arrived at a particularly crucial time. After years of claiming that their businesses were complementary, not competitive, the companies are now on a collision course.
Amazon has accelerated its courtship of small online vendors, allowing them to sell on its site — becoming more like eBay. And eBay, desperate to revive itself, has decided to emphasize traditional, fixed-price sales of both new and old merchandise — becoming more like Amazon.
AT stake is more than e-commerce bragging rights. On the Internet, size matters. Larger companies can collect more information about consumers, negotiate better deals with partners and use that leverage to expand their dominance (for example, Google versus Yahoo in search).
“This is a pivotal holiday season for eBay,” said Jeffrey Lindsay, a senior analyst at Bernstein Research who has covered the Internet for a decade. “What people fear is that Amazon is basically building a bigger sales base than eBay and will use that knowledge to sell people more and more of the things they want to buy online.”
Indeed, the balance of power in e-commerce seems to be shifting faster than anyone expected. Just three years ago, eBay had 30 percent more traffic than Amazon. Today, its total of 84.5 million active users is barely ahead of the 81 million active customer accounts that Amazon reported in June.
Amazon has exceeded eBay in other measures as well.
EBay’s market capitalization was three times Amazon’s in 2005, back when Wall Street loved the fact that it carried no inventory and generated huge profits. This year, eBay’s stock has lost over half its value and, in July, Amazon’s valuation surpassed eBay’s for the first time.
In a series of interviews, Mr. Donahoe acknowledged that eBay, based in San Jose, Calif., didn’t adapt fast enough to shifting e-commerce winds. He now embraces a “turnaround mind-set” and is refocusing its Web marketplace toward shoppers who don’t want to waste time in online auctions.
“There are times when I wish we can close this store and just open a new store, but we can’t,” he said. “We need to make bolder, more aggressive changes to the eBay ecosystem even if they are unpopular.”
Up in Seattle, meanwhile, Amazon’s chief executive, Jeffrey P. Bezos, says that after years of failed experimentation, third-party vendors — the foundation on which eBay was built — now account for about 29 percent of sales on Amazon. The company has endured and outlasted critics who long complained about its high fixed costs.
Last year, it impressed investors with accelerating growth, and its stock price revisited the highs of the dot-com boom, before waning euphoria and market pessimism erased more than half of those gains this year. Mr. Bezos credits Amazon’s tolerance for risky, expensive bets like the Kindle electronic reading device.
http://www.nytimes.com/2008/10/12/busine...amp;oref=slogin
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