For years eBay could do no wrong.  It has a virtual monopoly in the online auction marketplace, a sector worth $55 billion worldwide, and has built an impressive customer base of 233 million members in 37 countries.

Recently, however, some of the shine has come off the company.  Sellers have been complaining of high fees, low sales and bad customer service.  There was even a (small) seller strike in August 2006 over the change in eBay shop listing fees.  Amongst many eBayers there is a feeling that it is not looking after its members.  In 2006, a survey on Auctionbytes, a leading online eBay newsletter, found that 60% of sellers wanted to find alternatives to selling on eBay.

The company’s performance has been lacklustre and the growth of eBay’s auction business has been slowing.  In 2006, overall online sales grew by 30% whilst eBay’s grew by a mere 10%.   Competition is also heating up as the success of Amazon’s fixed price marketplace begins to threaten eBay’s monopoly.  Furthermore, fraud is still a problem and eBay is locked in a court case with Tiffany & Co.  These factors have all contributed to a flat share price over the last year.

In an effort to recapture its previous momentum the company has been diversifying into other sectors.  However, whilst its investment in PayPal has been a resounding success, it recently had to write off $900 million which it spent on Skype, the internet telephone service.  eBay express, the company’s much anticipated offering for businesses sellers, was a flop.  

Despite these facts, I feel that talk of eBay’s demise is premature.  People love to complain, but there is no evidence of a mass exodus to other auction sites. It is still a great place for both individuals and businesses to trade online and reach a huge international audience.  eBay is acutely aware of the problems it faces and I have been impressed with its efforts to improve user experience such as redesigning the sell your item form.

So what does the future hold for eBay?  Many industry experts think that it should merge with another big online player such as Yahoo or Microsoft.  There are also rumours of a takeover of UK based online auction site QXL, which will enable eBay to get a foothold in the booming economies of Eastern Europe. Whatever happens, eBay is still very much a force to be reckoned with.

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