Will eBay Escape the Recession This Time?

Posted by: Rob Hof on January 23

After rising 7% on news of CEO Meg Whitman’s plans to retire in March, eBay’s stock gave back the gains in after-hours trading on a mixed fourth-quarter earnings report. The online marketplace met earnings expectations but its 2008 outlook fell short of analysts’ forecasts. It’s not yet clear whether eBay is being extra-cautious as a new CEO comes on the scene or expects more economic and competitive headwinds.

This year will be a pretty interesting test for eBay, and not just because of its struggle to recharge its core auctions and the transition to new CEO John Donahoe. In the slow economy that followed the dot-com bust in 2001, eBay kept leaping ahead, and Whitman attributed that partly to the fact that eBay’s business model did well in a recession, because that’s when people seek bargains and also a little spending money from selling their stuff on eBay. It appeared, at least, that eBay was something of a self-regulating economy.

Will that happen this time? With more competition from Craigslist and Amazon.com, that’s no sure thing. (Not to mention, the notion of a “self-regulating economy” looks pretty discredited in the wider world right now.) But at the same time, eBay could surprise the skeptics if its previously recession-resistant model proves itself once again.

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Reader Comments

David Yang

January 31, 2008 12:47 PM

there is no doubt that eBay is the king of second-hand economy, effectively replacing the classified ad space from teh newspapers, to a large extent. while CL and Amazon.com, and a whole host of others, are attempting to replicate this model, neither will pose as a significant threat given that CL is not regulated (wild wild west) and Amazon.com is simply not up to speed on execution. You don't have to look to eBay's performance post 2001 to understand that second-hand economy stands separate from teh general economy of new and non-durable goods, just look at the historical classified ad revenue of the newspapers of the previousl recessions, or look around you for garage sales everytime the economy hits tough road, or look at business auctions that inevitably follows the end of each economic boom. The evidence is undeniable: with consistent execution, eBay's revenue beta is non-elastic with respect to a recessive economy.

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