Alex Le’s Blog

I’m pretty surprised at the current news about Ebay’s strategy to ban Google Checkout on their site. Ebay have been buying a lot of keywords from Google AdSense, millions, as the related Mercury News article cited. But since Google is putting out both indirect and direct competitive services, I suspect the relationship now is merely because Ebay want to leverage Google’s popularity to help drive more customers to its auctions. This strategic relationship will sooner or later be aroded. Make it now as Ebay ban Google Checkout.
There are reasons why Ebay ban Google Checkout, a Paypal alternative. Google has planned to take losses to launch its Checkout service to attract more users. Checkout charges a lower percentage and a lower transaction fee than Paypal does. Ebay Power Sellers with thousands of items listed everyday in turn can save lots of money by offering G-Checkout side by side with Paypal. Hence Ebay can potentially lose lots of money. By banning G-Checkout, Ebay want to slow down the acceptance rate of Checkout and prevent this competitive service from reaching a critical mass that Paypal currently has attained. The question is how long this strategy can work and in turn, how it will affect the Ebay-Google relationship.

Recall not too long ago when Google launched Base, there were rumours about it launching Checkout. Now with Base and Checkout, whose rate is cheaper and leveraged by the Google technology and powerful, people-trusted brand, Ebay is facing a cirtical threat. Investors have seen this coming and translated the incoming threats into the plummet of Ebay’ stock. In January, the stock was valued at a peak of $46.77. At the current time of writing, Ebay stock is $26.97 a pop. That is a 42% decline! On the other hand, the GOOG stock has done very well for this year. GOOG attacked the $400 region, fluctuated a little bit down to $350 but has since headed up north. At this time, GOOG is $426.05.

Ebay should be criticized on its strategies. While competitors such as Google and Amazon constantly innovate with the releasing of new services, Ebay remains pretty static and slow in terms of innovation. When was the last time Ebay launched a new service? - exactly! Ebay’s business model has changed very little for, well, the last 4 years. Yes Ebay did try to expand its business to VoIP with the purchase of Skype for a whopping $2 billion something but little did change on Ebay auction pages. Skype still remains only a little banner at the footer of Ebay pages as a separate business entity. Skype is awesome on its own and Ebay is missing out big time in capitalize the potential of Skype for its auction business. Or is Ebay so busy with squashing out phishing that it has forgotten to innovate?

To sum up, with the heating-up competition from the giant Google, Ebay will have to do more than just the traditional auction service. Ebay has to expand its auction business either by adding more creative business ideas, diversifying itself technologically, or forming more powerful partnerships. Until something happens, Ebay stock will be very likely to suffer.