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eBay Experiencing Technical Difficulties

eBay has been hit in recent days with technical glitches from upgrades, and by a skeptical weekend write-up in Barron's citing a number of trends that "would seem to bode rather ill for an online auction company," while at the same time characterizing the company's recent performance as "impressive," "pretty darn stellar," and not "shabby."

By Nico Detourn
August 14, 2000

Buyers and sellers at online auction leader eBay (Nasdaq: EBAY) have been experiencing technical glitches in recent days as a result of upgrades to the service's computer system begun on August 2. Unlike last year's series of well-publicized outages, some of which lasted into the double-digit hours and brought trading to a halt, eBay's current round of problems have not brought the site down for extended periods. But sluggishness of the servers at the site has made for a less-than-optimal user experience.

eBay members are having trouble listing auctions, viewing an item's bidding history and finding information on individual sellers. Members' personalized My eBay pages have also been in the glitch zone.

eBay's spokesperson Kevin Pursglove said the problems should be resolved within the next seven to 10 days, but cautioned that "an occasional interruption could happen in that time frame" due to ongoing improvements and expansions. The upgrade involved moving closed auctions from eBay's main servers to secondary servers in order to improve the performance and scalability of the site.

Although eBay's official policy requires that a site outage last at least two hours before fees are refunded, sellers have been invited to apply for refunds if they believe recent problems affected their auctions.

In a notice posted to its users, eBay said it was "extremely distressing" to have to report problems. "Some of you have told us to leave things alone, saying, 'If it ain't broke, don't fix it.' The fact is that we have to continually make changes to meet the growing demands of the successful marketplace that the eBay community is creating."

"Bid-ness" Slipping?
Adding to the spotlight's heat was a report in the August 14 Barron's of "some indications that eBay's core domestic auction business is losing a step or two." The article, "Bid-ness Slipping at EBay?" cites stats from measurement firm Quotetracker.com that the number of simultaneous auctions hosted by eBay has been a flat 4.5 million since March, give or take the occasional spike and dip.

In addition to this "anemic domestic auction growth," the paper points out that eBay's revenues per auction has slipped three quarters in a row, and that merchandise sales per auction and gross merchandise per user also dropped between the first and second quarters of this year. The combination of these trends, Barron's enthused, "would seem to bode rather ill for an online auction company."

Despite characterizing recent performance by the company as "impressive," "pretty darn stellar," and not "shabby," the Barron's piece was nevertheless "not persuaded" by the explanations of eBay's VP of finance that yearly and quarterly comparisons are influenced by customer credits issued last year following service outages, and by seasonality in activity at the site.

eBay EU
Interestingly, eBay says that international expansion will depress total online revenue growth because the company waives user fees when entering a new market, and that its German site, which has started charging fees, is "ready to hum."

Also humming with a German accent are reports of unspecified problems with the merger between eBay's main European competitor, QXL.com (Nasdaq: QXLC), and German auction site ricardo.de. The London-based QXL announced last week receiving new information about a "serious" issue involving ricardo. QXL's CEO was quoted today saying, "I'd very much like the deal to go ahead. But we can't yet say where things will go."

The ricardo acquisition was QXL's bid to better compete in Germany, Europe's largest market, where eBay currently leads due in part to its 1999 acquisition of alando.de, then the country's largest person-to-person trading site. Some analysts believe that London-based QXL would itself become a takeover candidate for eBay should the ricardo deal fall apart.

Your turn:
Are eBay's glitches just growing pains? Is Barron's on to something? Is another European acquisition in the cards, or will organic growth carry eBay forward on the Continent? We bid you welcome to the eBay and QXL.com discussion boards to share your thoughts with fellow Fools. And for a European perspective, there's also the QXL.com board at Fool UK.

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