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eBay becomes an Exchange? Not likely

There are various forecasts of the future that may be right or wrong.  For example, this one’s a goodie.  Called EPIC 2014, and nicknamed Googlezon, it forecasts that by 2014 the current media and news organisations are dead and gone, and Google and Amazon merge. 

It was made in 2005, around the same time as Sean Park – formally of Dresdner – created Amazonbay.  This video predicted the future of trading being run by eBay in 2015, after they takeover NYSE Euronext.  You can read about it here and download the Amazonbay video here, if you haven’t seen it already.

To be honest, I thought that this video might not be far from the truth, as we often debate and discuss the idea of eBay moving into the banking world by offering trading operations.  We even have an eBay for trading called Bidroute, described as "an eBay for programme trading" by co-founder Barry Marshall.

Therefore, the news this week that eBay’s CEO of the last decade, Meg Whitman, is retiring sparked my interest again in the idea that eBay could move into banking.

I caught the announcement when looking at PayPal’s Q4 results:

"PayPal posted another stellar quarter with $563 million in revenue, an increase of 35% year-over-year. Net total payment volume (TPV) for the quarter was $14.04 billion, an increase of 35% year-over-year."

Admittedly, PayPal are a bank … but I’m talking about eBay as an exchange here, as in trading and dealing, rather than payments or retail banking.

So, the announcement of Meg’s departure sees one of the giants of the internet world retiring as such, although it appears to be more disappointing for her track record, as the initial coverage in the USA is pretty negative. 

For example, the well respected technology commentator Erick Schonfield of Techcrunch, reckons that John Donahue will take over the helm and states that:

"During most of Whitman’s tenure, eBay seemed unstoppable. But the network effects that made it so powerful in the Web 1.0 era began to dissipate as destination sites began to lose some of their appeal. Now that people want to bring the Web to them—to their blog or MySpace or Facebook page—eBay needs to adapt to the new realities."

eBay not a Web 2.0 firm?  Well, I never. 

I suppose the fact that you cannot build community sharing and socialising in eBay makes this true, but at least you have participation which is a critical element.

Schonfield goes on to state that Meg has wiped out half of eBay’s share value in the last two years.  Oh dear.

This is followed by William Holstein of BNET asking if her "departure from eBay at the age of 51 signal a management  failure on her part?"  He builds on the most insightful column on her tenure from Mylene Mangalindan of the Wall Street Journal, who states:

"Ms. Whitman’s retirement would come at a critical point for eBay. The company’s auction business, which allows individuals to buy and sell items online to the highest bidder or at a fixed price, accounts for more than two-thirds of eBay’s nearly $6 billion in annual revenue but has experienced slowing growth rates for the past few years. Any efforts to reverse the slowdown could involve drastic changes that may be more palatable under a new CEO."

With most people saying that the core auction business is in trouble.

So, an eBay in banking?  An eBay / NYSE Euronext merger?

I don’t think so.

Rather than Amazonbay therefore, it’s more likely an eBacebook, as you need social networking auctions in the new generation internet. 

Equally, I can’t see eBay themselves moving into trading as eBay protects you from potential losses of up to £500 through PayPal … I’m not sure eBay or PayPal would want to cover £5 billion of losses, although a few French managers may well be looking towards AXA and other French insurance firms to do just that this week.

About Chris M Skinner

Chris M Skinner
Chris Skinner is best known as an independent commentator on the financial markets through his blog, TheFinanser.com, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal’s Financial News. To learn more click here...

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