Pierre Omidyar founded a sole proprietorship in September1995Marketing Research and Data Analysis called Auction Web to allowpeople to buy and sell goodsover the Internet. The new venture was based on the idea ofdevelopinga community-driven process, where an organic,evolving, self-organizing web of individual relationships,formed around shared interests, would handle tasks that othercompanies handle with customer service operations. By May1996, Omidyar had added JeffSkoll as a partner and the venturewas incorporated as eBay. Two years later, Omidyar askedMeg Whitman to direct corporate strategy to continue the acceleratedgrowth rate of thecompany. Whitman brought to thecompany global management and marketing experienceandsoon became President and CEO. In almost no time, the companybecame one of the Web’smost successful sites, with233 million registered users. By 2007, the average eBay userspentnearly two hours a month on the site—more than fivetimes the time spent onAmazon.com.117Whitman expanded the company’s operations and spentmore than $6 billionto acquire companies, such as Internetphoneoperation Skype, online payments service PayPal,ticket reseller StubHub, property rental and roommate searchfirm Rent.com, comparisonshopping site Shopping.com,Web site recommender Stumbleupon, and 25% interest inCraigslist. Expansion and diversification provided revenueand profit growth plus stock priceappreciation. Although financialanalysts wondered how all these businesses would fittogether,Whitman argued that she wanted eBay to be everywhereusers wanted to be. At developerconferences, companyrepresentatives unveiled new services that let buyersshop for andpurchase eBay items outside of the coreeBay.com site.
By 2008, eBay was in trouble. Its stock price had lost halfits value over the past three years. Thecore auction and retailbusinesses, which accounted for the majority of revenue, wereshowingsigns of weakness. The number of active users hadbeen flat for three quarters, at 83 million. The number of newproducts listed on the site had increased only 4% from the previousyear. The number of stores selling goods at fixed priceson eBay declined from a year earlier to532,000. The companyhad not done a good job of integrating Skype with its mainbusiness.
Since its acquisition, Skype’s service had actuallydeteriorated.118 Competition had increasedas rival Web sites,particularly Amazon, now provided similar Web services anderoded eBay’scompetitive advantage.
On January 23, 2008, CEO Whitman announced thatJohn Donahoe would take over as thecompany’s CEO. Donahoestated that his first priority would be to revitalize eBay’scorebusiness, even at the expense of investors. “We need toaggressively change our product, ourcustomer approach, andour business model,” announced the new CEO.119
1. What is eBay’sproblem?
2. Which marketing strategy was eBay following: market developmentor product development? Do you agree with it?
3. What decision-making process should CEO Donahoe utilizeto make the decisions necessaryto change the company’sproduct, customer approach, and business model?
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