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Monday, September 18, 2006

Is Someone Eating Ebay’s Lunch? (EBAY)

There is an ongoing debate about whether Ebay’s US auction business is in a permanent slow-down. Its international businesses and PayPal are doing well. According to the company’s most recent 10-Q, domestic transactions were 36% of total transaction revenue in Q2. A year earlier, the number was 39%.

But, according to a new survey by AuctionBytes, the future for Ebay’s sales increases may be in jeopardy. To quote the survey analysis: “The most startling figure that jumps out from the results come from eBay sellers. 92% of respondents currently sell on eBay. One of the conclusions of the results is that "only 38% of the respondents plan to be selling on eBay in 6 months.”

The good news from the survey is that 96% of online sellers using option sites use the Ebay PayPal system.

Although the same size of the survey was modest (1,225), the results have to be troubling to Ebay management. Several competing sites are set to have large gains, it the result of the poll are at all accurate. For Amazon Auctions 4% of respondents say “I sell here now”. Eleven percent of respondents say “I will sell here in 6 month” when asked about Amazon. Based on the same questions, Yahoo! Auctions moved from 8% to 14%.

Ebay’s stock has taken a beating over the last year, dropping from a 52-week high of $47.86 to the current price of $27.77.

Surveys of small groups of customers can clearly be misleading. A Citigroup analyst recently quoted in Forbes insisted that Ebay was on-target to hits the firm’s projections of annual listing traffic

One of these pictures of Ebay’s near-term future is flawed. EBay should hope that Citi’s is the winning viewpoint.

Douglas A. McIntyre can be reached at He does not own shares in companies that he writes about.

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