Pierre Omidyar founded a sole proprietorship in September 1995 called Auction Web to allow people to buy and sell goods over the Internet. The new venture was based on the idea of developing a community-driven process, where an organic, evolving, self-organizing web of individual relationships, formed around shared interests, would handle tasks that other companies handle with customer service operations. By May 1996, Omidyar had added Jeff Skoll as a partner and the venture was incorporated as eBay. Two years later, Omidyar asked Meg Whitman to direct corporate strategy to continue the accelerated growth rate of the company. Whitman brought to the company global management and marketing experience and soon became President and CEO. In almost no time, the company became one of the Web’s most successful sites, with 233 million registered users. By 2007, the average eBay user spent nearly two hours a month on the site—more than five times the time spent on Amazon.com.

Whitman expanded the company’s operations and spent more than $6 billion to acquire companies, such as Internet phone operation Skype, online payments service PayPal, ticket reseller StubHub, property rental and roommate search firm Rent.com, comparison shopping site Shopping.com, Web site recommender Stumble upon, and 25% interest in Craigslist. Expansion and diversification provided revenue and profit growth plus stock price appreciation. Although financial analysts wondered how all these businesses would fit together, Whitman argued that she wanted eBay to be everywhere users wanted to be. At developer conferences, company representatives unveiled new services that let buyers shop for and purchase eBay items outside of the core eBay.com site.

By 2008, eBay was in trouble. Its stock price had lost half its value over the past three years. The core auction and retail businesses, which accounted for the majority of revenue, were showing signs of weakness. The number of active users had been flat for three quarters, at 83 million. The number of new products listed on the site had increased only 4% from the previous year. The number of stores selling goods at fixed prices on eBay declined from a year earlier to 532,000. The company had not done a good job of integrating Skype with its main business. Since its acquisition, Skype’s service had actually deteriorated. Competition had increased as rival Web sites, particularly Amazon, now provided similar Web services and eroded eBay’s competitive advantage.

On January 23, 2008, CEO Whitman announced that John Donahoe would take over as the company’s CEO. Donahoe stated that his first priority would be to revitalize eBay’s core business, even at the expense of investors. “We need to aggressively change our product, our customer approach, and our business model,” announced the new CEO.

1) What is eBay’s problem?

2) Which marketing strategy was eBay following: market development or product development? Do you agree with it?

3) What decision-making process should CEO Donahoe utilize to make the decisions necessary to change the company’s product, customer approach, and business model?

N.B. your review report should have the following contents to the minimum:

ü Introduction

ü Case summary

ü Answer to the questions

ü Conclusion

ü Lesson learned from the case