eBay Brand Strong Despite Falling Numbers

Auction giant sees first quarterly decline in almost 10 years.

by Auctiva.com staff writer
- Jan 21, 2009

eBay is still one of the top brands in the country, despite posting its first quarterly revenue decline in almost 10 years for fourth quarter of 2008.

The auction giant ranks No. 11 on a list of the top 50 U.S. retail brands recently compiled by Interbrand Design Forum, a retail brand consulting firm. The firm ranks companies based on current and potential revenue, brands' influence on consumer demands and projections of how brands will generate future demand.

"In a recession, brand is more important than ever, as retailers with a well-positioned brand have the opportunity to thrive and seize a bigger piece of the pie in terms of customers," says Lee Carpenter, Interbrand's CEO.

During the last three months of 2008, eBay brought in $367 million in net income—a 31 percent decline from a year ago. The company netted $1.78 billion in income for all of 2008. eBay's traffic also dropped about 4 percent in December compared to the year before.

Overall revenue for December-ended quarter came in at $2.04 billion, down $145 million from the same quarter a year ago. The Marketplaces business unit—which is what the eBay brand is best known for—declined 16 percent year over year to $1.27 billion.

"(The fourth quarter) has been a difficult quarter for eBay, which has been implementing a turnaround strategy in one of the worst consumer environments since World War II," reports Jeff Lindsay of Sanford Bernstein. "Although online consumer spending held up better than expected—with the consumer pulling out the last of the stops for the holiday season—we think the lion's share of that benefit went to Amazon."

Amazon reported its best sales ever during the 2008 holiday season, receiving more than 6.3 million orders on Dec. 15, according to reports. Still, the eBay rival didn't beat eBay on Interbrand Design Forum's list. Amazon came in 14th. Wal-Mart was No. 1, followed by Best Buy and The Home Depot.

eBay's revenue decline wasn't a surprise, says CEO John Donahoe. In October, the company reported a third-quarter revenue increase of $228 million. But in a conference call that same month, Donahoe said he didn't expect those numbers to continue.

And he was right. Although PayPal and Skype helped bolster the company's revenue, they did so "at lower margins than auctions," reports MarketWatch. And cars, computers and electronics—all important categories on eBay—saw a drop in sales during the fourth quarter, according to reports.

"Given the dilutive impact of recent acquisitions, current company-specific challenges and the macro environment, we believe (eBay) will maintain a cautious tone on outlook," notes Mark Mahaney of Citigroup.

In fact, eBay projects first quarter revenue will be flat, if not down from the fourth quarter, and that earnings per share will drop as much as 10 cents.

But it wasn't all bad news in 2008, Dohanoe says.

"While the holiday season was tough and competitive, our overall results for 2008 were strong," he says. "For 2008, we delivered double-digit revenue and earnings growth, made significant changes in our eBay business and built a stronger, more diverse portfolio of leading e-commerce businesses. We will build on our strengths in 2009 while managing our business prudently in the continued challenging environment."

About the Author

Auctiva staff writers constantly monitor trends and best practices of those selling on eBay and elsewhere online. They attend relevant training seminars and trade shows and regularly discuss the market with PowerSellers and other market experts.

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