Pierre Omidyar founded a sole proprietorship in September1995 called Auction Web to allow people to buy and sell goodsover the Internet. The new venture was based on the idea of developinga 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 Jeff Skoll 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 the company. Whitman brought to thecompany global management and marketing experience andsoon became President and CEO. In almost no time, the companybecame one of the Web’s most successful sites, with233 million registered users. By 2007, the average eBay userspent nearly two hours a month on the site—more than fivetimes the time spent on Amazon.com.117Whitman expanded the company’s operations and spentmore than $6 billion to acquire companies, such as Internetphoneoperation Skype, online payments service PayPal,ticket reseller StubHub, property rental and roommate searchfirm Rent.com, comparison shopping site Shopping.com,Web site recommender Stumbleupon, and 25% interest inCraigslist. Expansion and diversification provided revenueand profit growth plus stock price appreciation. Although financialanalysts wondered how all these businesses would fittogether, Whitman argued that she wanted eBay to be everywhereusers wanted to be. At developer conferences, companyrepresentatives unveiled new services that let buyersshop for and purchase 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. The core auction and retailbusinesses, which accounted for the majority of revenue, wereshowing signs 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 to 532,000. The companyhad not done a good job of integrating Skype with its mainbusiness. Since its acquisition, Skype’s service had actuallydeteriorated.118 Competition had increased as rival Web sites,particularly Amazon, now provided similar Web services anderoded eBay’s competitive advantage.On January 23, 2008, CEO Whitman announced thatJohn Donahoe would take over as the company’s CEO. Donahoestated that his first priority would be to revitalize eBay’score business, even at the expense of investors. “We need toaggressively change our product, our customer approach, andour business model,” announced the new CEO.1191. What is eBay’s problem?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 necessary to change the company’sproduct, customer approach, and business model?
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.117
Whitman expanded the company’s operations and spent
more than $6 billion to acquire companies, such as Internetphone
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 Stumbleupon, 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.118 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.119
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?
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