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I came across this letter on a subreddit and am reposting here for your interests:
My read is that (1) this letter is from an investment entity that has done its homework (2) the investor believes that eBay is undervalued and poised to grow markets (3) to achieve this eBay must divest of non-Marketplace businesses (StubHub and Classifieds) to better focus on Marketplace. The article makes the point over and over:
Successful execution in eBay’s core business [Marketplace] is the single most important driver of its future value and the reason that the Plan requires exclusive focus on this business. Success in Marketplace will require both a commitment to operational and technical excellence as well as a strategic focus on growth and innovation in the core.
(4) eBay is misallocating spending and needs to invest in the technology and operational execution that will allow Marketplace to thrive.
As a seller, the opportunities for expansion and growth are obvious. If people leave eBay to open a Poshmark or Etsy store with some of their wares, then eBay has to recapture those sellers (and those sales) by building out whatever the seller is finding at those other sites.
I really like the upbeat message from this letter, the affirmation that eBay has not had it’s eyes on the prize and the promise that perhaps eBay will refocus on their core business in the near future.
Best wishes to all, Daniel
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Yeah, this guy sees the strength in what eBay actually is:
eBay’s core Marketplace is a strategically attractive asset. As mentioned previously, eBay is the world’s second-largest e-commerce retailer outside of China and, along with Amazon, one of only two truly global players.
It is the largest online retailer in South Korea, Australia and Italy and second-largest in the U.S., U.K., Germany and Canada.
eBay benefits from a long-cultivated community that drives a virtuous cycle: Buyers invite sellers to list more, and sellers attract greater purchase activity. This self-reinforcement is powerful and has made eBay a highly defensible platform that would be nearly impossible to replicate.
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Here is what Morning Brew had to say about the Elliot letter:
FOR SALE: Major eBay Business Units, Limited Time Offer Ending SOON!!
So they’re not added to cart yet, but count us among those “watching.”
With a more than 4% stake in eBay (+6.13%), activist investor Elliott Management yesterday sent a letter to the e-commerce company’s board urging it to sell/spin off both its StubHub ticketing platform and its Classifieds business—arguing both are worth more on their own.
Elliott argued eBay shares could be worth nearly double by the end of next year should the company take its advice.
And it’s got backup. Per the WSJ, fellow activist Starboard Value has also built up a sizeable stake in eBay and advocated for similar strategies.
So what’s at stake? StubHub (which eBay bought in 2007 for $310 million) accounted for 14% of eBay’s $2+ billion in Q3 revenue. The Classifieds biz brought in 12%.Bottom line: Change could be a good thing—eBay’s struggled to keep pace with the competition during the age of Amazon, and as Axios put it, “What Elliott wants, Elliott often gets. Particularly when its target is in the tech sector.”
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Oh wow, what an amazing read! I would LOVE to see this plan get implemented. It involves a huge amount of housekeeping from some board members all the way down to the overseas CS reps. I remember people here asking “why are they rolling out all of these new tech programs and changes when they can’t even run the existing functions of the site smoothly?” They should do it now while they still have good traffic. How much more would I love selling on Ebay if it became more reliably functional and streamlined?
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Be careful here. “Activist Investor” is putting lipstick on the pig of “Corporate Raider”. We’ll see how this plays out, but many times the end game is to pillage and burn before moving on to the next village.
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Yeah, I’m doubtful this has anything to do with making eBay a better platform. Its just people with money who see a way to sell of pieces of eBay to make more money.
Did selling off Paypal help sellers? I cant think of any way that sale helped any at our level.
If anything, the other profitable parts of eBay can help fund eBay. You start taking away more and more parts and this means there’s less and less money.
To argue the other side, maybe stripping eBay of everything but the marketplace means they have to become laser focused, even if it means eBay marketplace fails and gets snatched up.
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True, but things are bound to change for the better after this kind of exposure. If the marketplace is acquired I could see us paying more fees eventually. But, it would be really nice to see a more efficient Ebay where things make sense. We are already paying more fees, but arguably not seeing the benefit of that money being spent.
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I’m trying to think of an example when a large established company is broken up and sold off, then becomes better. Maybe it happened?
But as Incompetent Picker says, usually these moves are just to extract value from an undervalued company. Plenty of history to see how it can go badly: https://en.wikipedia.org/wiki/Corporate_raid
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This sounds like a potential raiding of Ebay in the spirit of Bain Capital.
Walmart currently allows 3rd party sellers to sell on their website, but they only allow new items. I wouldn’t hold my breath that used items would continue to be allowed for sale on Ebay if they were bought out by Walmart. It would become a more restricted site under Walmart.
With Google’s (Alphabet’s) track history of running their own divisions into the ground – Google+ being the latest portion of their company to go bye bye – I wouldn’t trust them to take over Ebay, either. How many people wear Google Glass? Yeah yeah, Android phones and Youtube, blah blah. I still wouldn’t trust them to run a company like Ebay. If they did, it would be heavily for data mining purposes, not necessarily a way to “help” sellers.
Every time someone wants to “help” the marketplace, the sellers bear the brunt of it. Expect increased fees, less exposure for listed items, more catalog pages, less individual listings, less unique items, lowered exposure for used items, if still allowed on the site at all, maybe even no used items eventually. Who knows? At the very least, they’ll probably get rid of high upfront costs of listings items on the site.
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An interesting read, and , for me, a lot of unanswered questions. Spinning off StubHub and the Classifieds can make quick money for investors, but of the three “parts” of ebay, they are the two showing the fastest growth…which means their profits probably help the Marketplace at this point. Is it really a good idea to strip that away? (From what I’ve read, much of Amazon’s profit really comes from its Cloud Service business, not the retail business…strip out the profitably Cloud business, and do you help or hurt the “core” business there? Same sort of thing…)
While I understand the money making potential of stripping them out of ebay, the letter doesn’t actually provide any evidence that ebay management is distracted by those two parts of the business. In fact, the letter acknowledges that most of the Classifieds sites are run as stand alone businesses, so I suspect as long as they are growing, upper level ebay management doesn’t spend much time on them. If they aren’t really distracting from the core marketplace business, then this looks like a simple money grab….split off the two higher growth parts, make money on them, and, without them, ebay’s dollar value declines, which makes it an attractive take over target. Although not mentioned in the letter, news reports suggest the firm has implied Google or WalMart might be possible buyers. I’m not sure how likely either one of those is, although WalMart seems more likely than Google to me. For small sellers like us, with mostly used stuff, that could be a blessing or a curse, just depending on what WalMart does with ebay.
The letter is also VERY short on specifics when it comes to what ebay should do to rev up the Marketplace. The usual corporate raider answer seems to be present though: lay-offs, cost cutting measures, etc. The main proposal seems to be: “eBay’s platform provides a truly unique forum for innovation which can and should be leveraged to expand the universe of what is transacted on its Marketplace.”
Uh-huh. And just what the H-E-double toothpicks does that MEAN? “expand the universe of what is transacted on its Marketplace” The letter doesn’t provide any examples. Pretty much any retail goods can be sold on the Marketplace as is, so they must mean something else, but what?
Still, I’m not at all surprised by this. When Devin took over, after the PayPal split, I told my better half: He’s got a window of opportunity to really show some serious growth, but investor patience won’t last forever. Well, investor patience has done run out. ebay reports its Q4 results next week…..even if its pretty good, it isn’t likely to be great…and great is what ebay needs to assuage investors like these guys.
Part of the problem is, Devin painted “Product Pages” as the key to a turnaround, and so far, the Product Pages are a mess. If you follow ebay, you know that ebay hasn’t been talking about them much lately, now its all about Payments and the potential of seller advertising (such as promoted Listings). Those two things made a huge difference for etsy, and they might do the same for ebay. But just the fact that ebay seems focused on them now and Product Pages seem to be left struggling….it appears Management
All I can say is, it’s going to be an interesting year. I plan to stay focused on ebay, while eventually test driving Mercari and some others.
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At least the stock is up!
Re: corporate raiders, affiliation with Walmart, and the effect on sellers, look out below.
Jay really said it best recently, eBay is / was great because it gives people a chance to connect their goods with a huge global customer base. Don’t really need anything else.
Aggressive top down executive meddling, even with the best intentions, usually dilutes the core business. As mentioned above, separating with PayPal seems to have confused things and the product pages really are disastrous.
Would love to see a pure seller to buyer eBay , sorry, like the old days.
Cynica -
Great letter! I love the way he describes eBay’s Marketplace as a “strategically valuable asset that has weathered prolonged, self-inflicted misexecution.” Besides the surveys of buyers and sellers they ran, the guy’s mother has sold jewelry on eBay for a decade. Sounds like maybe he’s been getting an earful from her.
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