Bronte Media

I don’t have any money anymore, putting it into Homethinking.com instead, but when I did I liked to dabble in a few stocks, one of which was eBay. The stock has been beaten down from its Google-like Halycon days but still continues to impress me.

Take this for instance, in the latest quarter:

“EBay’s U.S. marketplace business totaled $527.2 million, up 30%. Its international marketplace business totaled $493 million, up 25%. Payments revenue was $335.1 million, a 44% rise.”

That is quite a feat: eBay’s US marketplace grew more strongly than Yahoo’s US Search business and is larger in absolute terms. It wont have grown more strongly than Google’s US Search business (we’ll find out more on that soon) but it will be a close second.

The street looks disappointed on the full year outlook. But eBay likes to play coy with investor expectations, always setting them very low.

The international revenue growth is probably the most disappointing. eBay has particularly missed the boat in Japan (second biggest online media market outside of US) and in China (will be the biggest in 10 years).

One interesting business challenge of eBay is that it is in effect stuck with static pricing (I mean the fees it charges to the merchants). Everytime it wants to raise fees it has to do it itself. This pisses off merchants. Compare this with the exquisite irony of Google, whom merchants pay more and more with each click delivered (and doubly when the price per click goes up).

eBay is caught up in a centrally managed pricing environment (Russia) while Google feeds on the dynamic pricing environment set by its customers a la pure capitalism (America).

Google has been able to raise its pricing a lot faster than eBay has but the latter has taken hits to its reputation and the former still lauded nearly universally.

That’s why eBay will be behind Google as the greatest Internet company, but not enough reason that it hasn’t taken over Yahoo as the second greatest Internet company.