September 25, 2023 marks the 4 year anniversary of eBay CEO Devin Wenig's abrupt departure from the company.
At the time, Wenig cited "differences with the board" amidst ongoing restructuring and activist investor activity as the reason for the leadership shakeup, and eBay was quick to assure stockholders the operational and strategic review would continue.
SAN JOSE, Calif., September 25, 2019 – eBay Inc. (NASDAQ: EBAY) today announced that the Company’s Board of Directors has appointed Scott Schenkel, most recently eBay’s Senior Vice President, Chief Financial Officer, as interim Chief Executive Officer.
This appointment follows Devin Wenig stepping down as President and CEO, and a director of the Company. The eBay Board will undertake a search to identify the Company’s next CEO, and will consider internal and external candidates...
...eBay noted that its previously announced operating review is ongoing, and the Company expects to provide an update this fall. In addition, eBay’s strategic review of its asset portfolio, including StubHub and eBay Classifieds Group, is continuing to move forward with the assistance of Goldman Sachs & Co. LLC.
Of course, shocking details of Wenig's alleged involvement in a bizarre corporate plot targeting Ina and David Steiner of EcommerceBytes, and seeking to unmask the identity of unsuckEBAY, a particularly vociferous commenter who sparked the ire of top executives at the company, had not yet been made public.
Seven members of eBay's global intelligence team eventually pleaded guilty to multiple federal felonies and a civil case against eBay, Wenig, Chief Communications Officer Steve Wymer, Head of Global Operations Wendy Jones and others is still ongoing.
eBay's internal investigation of the August 2019 events determined Wenig's communications with Wymer about the situation were "improper", but they believed, not criminal.
Wymer was fired for cause due to his involvement, but Wenig was not. Instead he conveniently stepped down the day after eBay's full report was turned over to the US Attorney's Office, taking a ~$57 Million severance on his way out.
But assuming disagreements with the board and activist investor activity were at least contributing factors in Wenig's departure - has eBay seen significant improvement in corporate strategy or operational execution under new leadership?
Pressure on Wenig had begun to pick up in 2018, particularly around constant business impacting glitches and technical issues that plagued the site, which Wenig was confronted about at eBay Open in September of that year.
There've been a lot of site glitches recently on eBay. What are you guys doing to get rid of them?
Here's the simple answer - unacceptable, unacceptable. And we're making a lot of changes. When you make changes there are times that things happen but that's not an excuse and it's not ok with me and this summer in particular there have been a number of issues that directly impacted sellers like people not being able to see their view counts and a few other things and it's just not ok.
I'm extremely proud of a lot of things we've done, I'm not proud of that and in fact I hold my team accountable and it's not important, it's an internal matter but, we made changes to people and teams because shipping product that isn't ready is not ok. It's not ok with me and it's not ok with my team.
So the short answer is it's not like we don't get it. We are making a lot of changes and I want to make those changes, we need to make those changes, but making changes and then having to back up and fix things is not cool and I totally get it. Most of the issues from this summer have now been remedied but I was pissed off.
Those glitches and other executive failures caught the attention of activist investor Elliott Management, resulting in a very public letter calling for substantial changes at the company in their Enhancing eBay plan in January 2019 (emphasis mine).
According to the letter, despite its remarkable history as one of the world’s largest e-commerce platforms, eBay as a public-company investment has underperformed both its peers and the market for a prolonged period of time.
While eBay’s core Marketplace continues to enjoy sustained growth and the two other franchises that eBay owns, StubHub and eBay Classifieds Group, are thriving, eBay suffers from a deeply depressed valuation due to its history of misexecution. Elliott believes that eBay is worth far more – but change is urgently needed to address both public perceptions and real business issues.
Today eBay suffers from an inefficient organizational structure, wasteful spend and a misallocation of resources. By increasing operational efficiency, eBay can free up capital to invest in capability- and revenue-enhancing activities.
...As an online marketplace that provides a critical forum for millions of buyers and sellers, the efficient and effective functioning of the platform is paramount. Unfortunately,eBay has been plagued by technical problems and operational challenges for years...
...Fast forward to recent years and the platform still faces issues. In 2018, eBay sellers complained about countless technical issues including incorrect billing, lost photos, warped titles and many others. On this month’s end of year podcast, eBay senior management apologized to sellers and admitted, “This is a 2018 that we don’t want to repeat on a number of levels. And the technology issues that we have had with the platform is top of the list.”
We agree: The consistent reliability of the platform is central to eBay’s success, and management must do all that it takes to achieve it.
While innovative endeavors in new pursuits like machine learning and augmented reality are promising future technologies,eBay’s publicly touted initiatives in these areas will add little value if the core platform continues to have critical functionality failures.
While Elliott has since divested its eBay shares, it's surprising just how much of the 2019 letter still rings true today under the leadership of current CEO Jamie Iannone.
Anyone who thought the technical issues were bad in 2018 should be shocked by the often daily glitches that are still impacting both buyers and sellers on the platform.
Just a few recent examples:
For over a week, server errors disrupted Promoted Listings ad delivery and listing page loading across the site.
eBay users were stopped in their tracks and prevented from accessing any part of the site as security settings incorrectly flagged them as bots and a similar Captcha glitch blocked buyers from viewing item descriptions earlier this year.
A major malfunction hit sellers over Memorial Day weekend, randomly increasing inventory quantities and relisting previously sold items resulting in massive out of stock cancellations and negative buyer experiences.
eBay's transition to the new USPS Ground Advantage shipping method did not go smoothly, with mass confusion about what changes sellers needed to make to listings, technical malfunctions that disabled QR code shipping label feature, and a massive flub on updating pricing for eBay Standard Envelope.
Not being able to see views was specifically called out as an "unacceptable" technical issue by Wenig in 2018. Embarrassingly, this problem keeps popping back up, with views and sales reporting still failing to provide accurate statistics to sellers.
Search is arguably one of the most important technical aspects of the site.
Unfortunately, it's also one of the most commonly broken or non-functional features as well.
In February, June, and August of this year, eBay had multiple events which caused the search engine to be completely non-functional, returning 0 results for search terms that should have had 10s of thousand of results.
At other times, search has repeated page one results over and over and autocorrect continues to show wildly inaccurate and irrelevant results to buyers.
Just days after initially launching a ChatGPT powered AI description generator in May, eBay abruptly removed the feature from the app, blaming "bugs" for causing "a broken, confusing user experience."
The bugs were eventually worked out and the feature was finally restored in July.
Now Jamie is teasing a "magical" AI listing experience that will create a full listing just from an image - but sellers are skeptical eBay can pull this trick off, considering the current state of eBay's image recognition capabilities on display with the "search visually similar" functionality.
"While innovative endeavors...like machine learning and augmented reality are promising future technologies,eBay’s publicly touted initiatives...will add little value if the core platform continues to have critical functionality failures."
AI may be the shiny new toy on the block, but just as Elliott noted in 2019, it will add little value if the core platform continues to have critical functionality failures.
Unfortunately, sellers will not have the opportunity to ask Jamie directly about any of these issues during eBay Open 2023 this week. His keynote segment has already been pre-recorded and he will not be participating in any live Q&As during the virtual event, according to eBay staff.
Mergers, acquisitions and strategic investments under Iannone have also had questionable value for the company.
eBay Ventures announced new investments this year in pre-owned sporting goods marketplace SidelineSwap and luxury fashion rental app The Volte, while their previous investment in Cudoni took an embarrassing turn as the luxury resale outlet closed its door just 3 months after raising eBay-led ~$9 Million funding round.
One year after acquiring NFT marketplace KnownOrigin, the cryptoart bubble has popped. Will Iannone face scrutiny of strategic missteps and execution failures that saddled eBay with this overhyped business?
And the ongoing TCGPlayer debacle has raised serious questions about possible due diligence and disclosure failures in the acquisition, not to mention embroiled the company in a costly and ultimately unsuccessful fight to try to prevent the formation of the first US labor union in eBay history.
Part of Elliott's plan called for revitalizing the marketplace, saying "eBay’s Marketplace is a strategically valuable asset that has weathered prolonged, self-inflicted misexecution. Management should turn its singular attention to growing and strengthening Marketplace."
Today, the eBay marketplace has had less active buyers than Q1 2018 for 5 consecutive quarters - meaning under Iannone's leadership, eBay has not only lost gains from the pandemic ecommerce boom, they have also lost the growth they had achieved for over 2 years prior to the pandemic.
On the Q2, 2023 earnings call, Iannone and CFO Steve Priest both said eBay is going to continue focusing on these "enthusiast buyers" as they claim this cohort is where they are seeing great results from their strategy - but looking back at previous earnings reports, it's difficult to see much progress here.
Q2 2022 - "Enthusiast buyers made up approximately 17 million of our active buyers in Q2...average spend among enthusiast buyers grew sequentially and remains over $3,000 annually."
Q3 2022 - "Enthusiast buyers accounted for approximately 17 million of our active buyers in Q3...average spend per user grew sequentially and continues to be healthy at over $3,000 per year."
Q4 2022 - "Enthusiast buyers accounted for over 16 million of our active buyers in Q4...average spend per enthusiast rose again sequentially and continues to be healthy at above $3,000 annually."
Q1 2023 - "Enthusiast buyers remained relatively stable sequentially at 16 million in Q1...and on average, spend approximately $3,000 annually."
Q2 2023 - "Enthusiast buyers was stable at 16 million in Q2...spend per enthusiast grew modestly year-over-year, averaging roughly $3,000 annually."
Where exactly is the growth? And how much does it cost for eBay to acquire and retain those "enthusiast" buyers with expensive marketing and subsidized coupons and incentives to prop up the vertical focus categories?
Back in 2018, eBay leaned heavily on sitewide discounts running many "flash sales" of 15-20% off through the year. Those promotions were funded directly by eBay (though of course indirectly by seller fees) and proved to be a two edged sword.
One problem with constant discounting is once buyers get used to the idea they can expect it, they will very often wait for a sale or coupon code before making a purchase, which creates more "one and done" or only occasional (when there are discounts) buyers.
The previous flash sale strategy led to an increase in those "one and done" buyers, which led to much criticism for not doing enough to bring repeat business to the platform.
In fact, Wenig's strategy was considered such a failure that Iannone felt the need to explicitly distance himself from it when explaining his "high value buyer" strategy to investors in Q2 2021.
We've discontinued legacy tactics that led to low value, infrequent or one and done buyers. Our buyer base is starting to evolve based on this strategy. These high-volume buyers are growing compared to a year-ago and their spend on eBay is growing even faster. This higher-quality mix of buyers increases value for sellers and will lead to improved health of our ecosystem over the long-term......This is something that I laid out last July when we talked about the tech-led reimagination as being focused on turning buyers into lifelong enthusiasts on the platform and moving away from the tactics that we had in 2019 what was really just about the number of active buyers even low value buyers or one and done buyers. I've got the whole organization pivoted to focusing on those high-value buyers; buyers that are buying over $800, buying six times a year, or buyers who sell.
However, despite his criticism of those past tactics, Jamie hasn't abandoned them completely.
eBay continues to offer 10-20% discounts to goose the numbers in select "vertical focus" categories like sneakers, watches, handbags, trading cards, jewelry, certified refurbished, and parts and accessories.
The theory was they could use those focus verticals to lure in buyers who would then shop across the whole marketplace, but Jamie has yet to offer any solid proof that strategy is working or benefitting the site as a whole.
Just like his predecessor, Iannone is using discounts to drive short term sales with very little thought to long term consequences.
These end of quarter focus category revenue bumping shenanigans are sadly predictable and likely to have a long term negative impact as buyers become habituated to the discounts, just like they did before.
Not to mention that continuing to turn a blind eye to ongoing deceptive discounting practices by big brands could put eBay in the regulatory hotseat if the FTC were to scrutinize how rampant fake strikethrough prices on the platform harm consumers.
The last point of Elliott's letter read:
Effective Leadership and Oversight: eBay must ensure that it has the right, most experienced talent in place to oversee the portfolio review and operational improvements.
The changes we have highlighted previously require a strategic and operational focus that eBay has not shown in recent years...It would be well worth the Board’s time to do a full evaluation of the skills required to effectively execute the Plan and manage the business for long-term success...
...Getting leadership right is only one part of the picture: the Board must also be well positioned to provide accountability and oversight.
4 years after Wenig's departure, eBay is still struggling to retain buyers and grow the core marketplace, technical issues and glitches are the worst they've ever been, innovation and improvement have completely stalled, and seller engagement and trust in the platform is at a dangerous low.
It's safe to say eBay has not found the right, most experienced talent to oversee the critical operational improvements that are still urgently needed at the company, and the board is clearly either unwilling or incapable of providing the accountability and oversight necessary to turn things around.
Will shareholders take action to force change at eBay before it's too late?