Until 10 years ago, eBay was synonymous with online retail. Together with Amazon it was the right place to look for new or used items, some of which the platform marketed through a limited-time auction that grants a discount to those who manage to register in time. The auction format, "the bid", which it devised, spread like wildfire to other shopping sites as well.
However, in recent years eBay's grip on the market has been weakening. In Israel, and in particular in the US, big brands like Amazon and Walmart, alongside Chinese brands like Shein and Temu, are growing at the expense of the US giant. More affordable prices, discounts on deliveries and aggressive advertising have led customers in the US and abroad to migrate slowly to other platforms.
In fact, the number of active users on the site has stopped growing. The number fell from 138 million in the first quarter of 2022, to 131 million a year later, remaining around this figure since. eBay's decline is also reflected in Israel, where the e-commerce giant has one of its largest development centers outside of the US in Netanya. eBay is now concluding its third wave of layoffs, in Israel and worldwide, in a period of just 18 months. 40 eBay Israel employees were dismissed last month, 20 were laid off at the beginning of the year another and last year 30 employees lost their jobs.
At the peak of eBay's activity in Israel, the company had 350 employees. Today, according to LinkedIn, the number of employees at eBay Israel is 250.
The company, which in the past was seen the undisputed king of the e-commerce world, established its presence in Israel in 2005, with the acquisition of the Shopping.com platform, which had developed a virtual platform for comparing prices. The acquisition was for $620 million dollars, a big deal even by today's standards.
Fear of closure in Israel
The layoffs in Israel reflect wider waves of layoffs by eBay abroad as well, and employees Israel are not sure that this will be the last wave. Some eBay Israel employees even told "Globes" that operations in Israel could be shut down altogether due to the war and eBay's weakening position against its rival Amazon.
After acquiring Shopping.com in 2005, its distinctive building in Netanya, which can be seen from the Coastal Highway, became eBay's Israel development center. During the last round of layoffs, entire departments were affected, including the user experience department and the business unit responsible for recruiting sellers and stores to the platform.
An eBay Israel employee told "Globes" that the most recent round of layoffs, "Reduced the center in Israel, and especially its importance from the company's point of view." According to the employee, "In this round, eBay fired the two local departments that were the most productive for the global company", and that the current measures could hint at the company's intention to close its Israel activity.
"Ebay has not been able to compete with Amazon or Shopify, and has been simply too far spread," says Orel Levy, investment manager at the tech fund of More Mutual Funds. "It chose to acquire many companies, instead of focusing on the quality of the product it offers. In the last five years, eBay has hardly grown in terms of revenue, although it has grown in terms of commission fees. Amazon, on the other hand, continues to grow at a double-digit rate," he explains.
eBay was founded in 1995, and in 1998 listed on Nasdaq at a valuation of $1.9. Today the company has a market cap of $27 billion, while its share price has fallen from its peak, it is up 18% since the start of 2024. Over the past five years, eBay has shown the lowest increase of the e-commerce giants, up 33%, while Amazon and Shopify more than doubled their value in the same period, while Walmart rose 82%.
Levy points out that until the early 2000s the company led the online retail market. In 2002, it made a move that in retrospect sealed its fate, acquiring PayPal to simplify the payment process on the website, and that company became the main component of its value for many years.
In the market research it conducted, eBay discovered that 70% of the auctions included payments through PayPal. Oppenheimer senior equity analyst Sergey Vastchenok says, "This was the main rise in value in the company." Those who were less satisfied with the situation were PayPal's founders, including Elon Musk and Peter Thiel, who all left after the acquisition.
In 2015, it was decided to split the two companies. The then eBay CEO John Donahoe explained the move: "This creates a new space of possibilities and challenges for both companies and we believe that providing operational independence will allow them focus, strategic flexibility and the ability to move faster in a changing environment."
The split was another major blow to eBay as almost half of its revenue came from PayPal, which also managed to maintain reasonable growth until 2021, but then it too found itself at a dead end. "PayPal simply scattered in all directions, and started buying a lot of companies. They didn't understand that the arena in which the company exists is super competitive and they lost the market to other players," Levy says.
"Stuck in the middle"
Today, Levy explains, investors grapple with the question of whether eBay and PayPal, each individually, are a value trap - that is, a cheap company that does not generate value for its investors. "You can say that the stock is 'working', but from the point of view that it is implementing streamlining measures and trying to return the money to investors. eBay is selling companies that it has acquired, for example, and at the current share price, a single-digit multiple of the profit for the coming year, investors believe the business is reasonable. However, eBay is unable to compete with Amazon and Shopify, which are winning the digital retail market together with Walmart and Chinese companies."
Many analysts point out that one of eBay's main failures lies in the fact that it failed to effectively integrate all the companies it acquired, dozens in number, most of them in the field of e-commerce and billing technologies. "After all the many acquisitions eBay has made, it has not been able to create synergy in the product it offers," says Vastchenok. "When you make serial acquisitions and fail to integrate, it creates a very serious problem at the service and product level as well."
He adds, "Ultimately, all successful companies are goal-oriented or have organic growth, or they acquire companies that contribute to their platform, which remains uniform. Companies with a clear strategy of where they want to go. eBay is stuck in the middle. It's not a leader and it's not an efficient company. In the technology market today this is very noticeable, especially over the last year, when there is no belief in cheap shares in the tech sector, because if the company is cheap, there is probably a good reason for it."
eBay said, "The proposed changes in Israel are part of eBay's global business strategy to provide a more efficient and tailored response to the company's customers. This was a difficult decision, especially considering the situation in Israel. At the same time, the Israeli center remains an integral part of eBay's ability to realize its product strategy."
Published by Globes, Israel business news - en.globes.co.il - on July 4, 2024.
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