EBay's Whitman: An Appraisal

Auction site CEO Meg Whitman has tried to keep both customers and investors happy. But with eBay stock faltering, a new leadership plan is in the wings

Axel Schmidt/AFP/Getty Images

by Catherine Holahan

It was mid-June and a khaki-clad Meg Whitman beamed from center stage as she looked over the thousands of eBay (EBAY) users crammed into Boston's newest convention center. The event was eBay Live, the annual networking extravaganza for eBay's customers, and Whitman sought to reassure attendees that she's looking out for their interests and the core eBay services that depend on their participation. "You are looking to expand your sales," Whitman said. "Our fundamental mission is to help you become more successful."

The following morning, Whitman sat in a small conference room sporting a tailored black pantsuit and flanked by public relations officers. She was prepped for media interviews aimed at getting her message across (BusinessWeek.com, 6/15/07) to a different constituency: the investors who have been hammering eBay stock and demanding revenue-boosting moves such as seller-fee hikes that rankle the very users who cheered her the night before.

Whitman, 51, has spent the better part of a decade trying to keep such disparate groups happy—not always successfully. As CEO, Whitman has had to balance fee increases with buyers' demands for bargains and sellers' constant calls for lower fees, better tools, and greater site traffic. That task soon will pass to John Donahoe, president of eBay Marketplaces, who is expected to take over for Whitman by the end of the year, according to a Jan. 22 Wall Street Journal report.

Details of Whitman's departure are expected to be made public Jan. 23, when eBay reports fourth-quarter results. EBay spokesman Hani Durzy declined to comment.

Skype Scrape

As part of her bid to propel growth and please investors, Whitman tried to transform eBay into a global e-commerce platform (BusinessWeek.com, 4/23/07) rather than simply remain a popular auction site. Her acquisitions include the PayPal electronics payment service and Skype Internet calling business. Yet sellers and investors alike complained that Whitman grew too focused on profit and expansion into new markets, to the detriment of the core U.S. site that generates most of eBay's revenue. "She was clearly the person blazing new trails," says Scot Wingo, CEO of Channel Advisor, which sells software that helps small sellers manage their business on eBay, Amazon.com (AMZN), and other sites. "It was all about how we are going to grow in China, the PayPal acquisition, Skype." Meantime, he adds, "users are deactivating at an alarming pace."

Even as growth in the core business slowed, some of the expansion moves faltered. The $1.5 billion acquisition of online payment processor PayPal in 2002 is widely regarded as a success, but eBay's move into China and its $2.6 billion purchase of Internet telephony service Skype have had less impressive results. EBay agreed to sell a majority stake in its Chinese operations to Beijing company Tom Online in late 2006 after struggling to gain traction. In October, eBay took a $1.43 billion charge against profits relating to the Skype acquisition (BusinessWeek.com, 10/1/07).