Copyright © 2014 SYDNEY SCHUSTER – All Rights Reserved
Note: I will keep updating this post with new developments.
Do you sell your book (or anything else) on eBay? If you’ve had more than zero sales, consider yourself lucky.
eBay sellers have seen catastrophic drop-offs in sales, while eBay steals scads of their dough. WTF happened?
The easy blame is Cassini, the glitch-plagued, useless search engine eBay rolled out in 2013 just when sales started flatlining. (Sellers affectionately call it “Can’tSeeMe.”) Naturally everyone assumed a connection. And there is one, but eBay started doing things that are way more awful than Cassini:
● eBay gives preferential treatment to foreign mass marketers, pushing aside smaller domestic sellers.
● eBay deliberately hides many listings. (See here’s how and why eBay limits visibility of your listings below.)
● eBay hides your listing descriptions, too. Except when it replaces them with random nonsense phrases.
● eBay interlards the listings you pay for with eBay product promotions and links to competing listings, typically 31 per page. That’s not including advertising from external retailers like Target, who pay eBay to skunk up your listings with pop-up ads that redirect buyers away from eBay. Even Amazon considers this practice unconscionable. Schadenfreude points: Those retailers are paying eBay big bucks for ad placement on listings no one can see. LMAO
● eBay launched its Global Shipping Program (GSP) and forced sellers to use it. How it works: You mail your international packages to a Kentucky distribution center run by Pitney Bowes, who removes your packing materials to save money on postage and then ships broken purchases, often to the wrong place, with exorbitant export fees due to buyers (typically 33% of item value) that eBay keeps if customs doesn’t request it. GSP has been caught stealing shipments and reselling them on eBay.
eBay vs Google
There’s more. Remember all that action you used to get from people finding what you sell via Google search? Wave bye bye. eBay shot off its own foot by aggravating Google so egregiously that Google eliminated eBay listings from Google search.
● In 2006 eBay rolled out Google Checkout as a payment method, then rolled it back in a few days later.
● Over three days in 2014, eBay rearloaded 97 commercial tutorials onto YouTube, hoping guides on how to buy belly button rings and not lose socks would boost eBay’s presence in Google searches (Google owns YouTube). Mostly it just boosted Google’s pique.
● In retaliation for eBay being dickish, Google minimized the presence of low-quality and/or thin content promotions, like eBay’s poorly thought out AdWords campaign.
● In 2014 eBay sellers suffered massive cutbacks in their listings on Google Shopping search after Google made the service pay-to-play and eBay didn’t want to so much. eBay punished Google by moving its Internet ad business to Bing, used by no one.
● In 2015 shoppers reported receiving “Suspected Phishing Site” warnings on every eBay page they viewed using Chrome (a Google product).
● Due to eBay’s intransigent reliance on Flash (the program of choice for hackers who implant malware on your computer), Chrome disabled eBay features that utilize it (Auctiva displays, translation options).
Anyway, here’s how and why eBay limits visibility of your listings:
● Rolling blackouts (rotating exposure). eBay’s file management system herds what it considers less-desirable listings (ie, yours) into dead zones. It assigns server locations and listing numbers based on criteria like category and seller volume, allocated regionally, which eBay can manipulate discreetly. So like, if eBay needs you to step off because they got boxcarloads of bad art and Korean Rolexes to fence and you’re hogging their precious bandwidth with your dumb book, they just turn off your whole server and the entire Midwest (or wherever you are) goes dark.
● Restricted visibility of listings to small, distant areas. By forcing you to sell far away, eBay gets a bigger postage kickback. When you buy postage from eBay, eBay gets a fat cut from carrier services (a whopping 58% from USPS, 13% from FedEx). And eBay doesn’t want you selling locally, where buyers can — horrors — pick up for free!
● eBay physically turns off listings (tap-on-tap-off) without notification (including ending auctions early, often within one minute of the end. One reason is to block snipe bidding, which overtaxes eBay’s inadequate infrastructure and bandwidth. eBay uses other means to block sniping, too.
● Secret selling limitations (throttling). No matter what you do, you’ll only be able to sell as much as eBay allows, and not one widget more. (You’ll still be allowed to list things, of course. Buyers just won’t be able to find them.)
Instead of your listing, buyers often see this:
eBay’s rationale regarding restricted visibility is actually codified in their user agreement:
Accordingly, to drive a positive user experience, a listing may not appear in some search and browse results regardless of the sort order chosen by the buyer.
I now invite you to share my horror upon discovering that “a positive user experience” means my eBay listings are visible ONLY in Texas, Louisiana, Mississippi and South Carolina. They’re not big readers of cutting-edge literature there, so I gave up selling my novel Dead Spot on eBay.
Fun Fact: In December 2014 an eBay forum moderator posted an internal company memo explaining nine different kinds of limits to which sellers are arbitrarily subjected, including this one: “Silent limits (limits placed on an account that can’t be seen by the seller).” The post and the mod both were deleted from the forum immediately. Here’s the deleted memo:
Fun Fact: eBay customer service reps are trained to call 911 in response to the many calls from sellers who are suicidal or having heart attacks.
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Earth to eBay: Your technology platform blows
You’d think an ecommerce company as big as eBay would try to keep up with technology. But no. eBay is aggressively brainless, or nihilistic, or both. Apparently it recruits programmers from the local bus station. (Except for the one who also coded Silk Road, which worked great until the Feds torpedoed it.)
● Instead of using dedicated standalone servers to conduct its cavalcade of bad experiments, eBay uses live listings for beta testing. Worldwide, eBay had 16 site crashes in 2014 alone, on top of site hacks resulting from inadequate security. In November 2015, the site was down three times.
● eBay tasks its programmers with screwing sellers instead of improving security, resulting in broad downtime outages and the hacking in May 2014 by cyberthieves who stole the unencrypted names, passwords, email addresses, physical addresses, phone numbers, and birthdays of 100, 112, 128, 145 or 233 million eBay users (depending on which report you believe, although there’s a consensus that the hack actually occurred the previous February and eBay informed no one for three months). As a direct result, 24% to 49% of customers abandoned the venue.
Fun Fact: So many sellers fled, eBay now encourages buyers with complaints to file IC3 Internet fraud reports, thereby relieving eBay of responsibility to refund them when sellers go AWOL. If you thought selling on eBay sucked before, just wait until your name is on an FBI list.
Fun Fact: 149,000 users successfully sued over a data breach in 2008, and another breach-related class action began in 2014. eBay didn’t fix its security then, so you can safely assume eBay will never fix it. Paying off claimants is cheaper.
● eBay’s user database was hacked again in July 2015, and then again in December. eBay wouldn’t say how many accounts were compromised either time, and ignored the second one for a month before patching the related security flaw.
● Instead of safeguarding its own servers, in October 2015 eBay started storing security data in temporary Flash cookies stored on your computer. When you clear the cookies from your browser (as many do during regular maintenance), you’ll be locked out of your eBay account and see this message: “We don’t recognize your computer.”
● eBay sells discounted postage to sellers, but the service is frequently ultra-slow or completely down.
● eBay encourages sellers to input “item specifics,” ostensibly for better search visibility. Then Cassini systematically excludes listings from search by those attributes.
● eBay and PayPal were merrily robocalling customers in blatant violation of consumer protection laws until the FCC and New York State attorney general warned them to cut that shit out.
● Magento, a popular ecommerce service that was part of eBay Enterprise from 2011 until November 2015, is a jackpot for cyberthieves using malware and ransomware to freely steal customer credit card information from independent web stores that use Magento.
● eBay UK was occupied for 3 weeks in September 2015 by hackers. They installed booby-trapped ads on the site that infected millions of users’ computers with malware that steals data. eBay notified no one. “The attacks that are documented publicly are only the tip of the iceberg,” said a representative of the security firm that discovered them.
● eBay’s mobile app is virtually useless. It omits item descriptions and shows all your listings with Free Shipping! If a buyer tries to leave you five-star feedback on his iPhone, eBay’s mobile app will erase it. Plus the shopping cart doesn’t work. The September 2015 app update is even worse than what it replaces. Among other things, it hides bidder IDs from sellers.
● eBay’s Apple Watch app was so abominable, Apple yanked it from its app store — one of only two dumped out of some 3,500 available. The other one belonged to a scumbag who stole cancer charity donations.
eBay’s unwillingness to upgrade its staff, coding, or infrastructure is a big mess of stupid, best exemplified by a market launch on October 9, 2014, when eBay began hosting live auctions with real-time bidding for a consortium of major art auction houses. The highly publicized event crashed eBay’s American servers the first day and its European ones the next. The buyer premiums alone ranged up to 30% of price realized, and eBay wasn’t about to forfeit that. So it shut down other marketing operations and/or transferred their databases to foreign servers to free up bandwidth and server space for the live auctions. According to reports on technical issue reporting boards and eBay forums, US sellers found their stores had become Russian or Chinese ones, their PayPal accounts were German, and their auctions had vanished. Some members could only access their accounts by logging in via eBay Canada. US buyers were blocked from making purchases from US sellers because, eBay insisted, one party wasn’t in the US.
Fun eBay Tech Facts:
● In May 2014, then-CEO John Donahoe blathered freely to the media that eBay was on the verge of integrating Bitcoin as a payment option. A year later, eBay was banishing sellers who accepted Bitcoin payments.
● In 2015 the DOJ actually managed to catch exactly one eBay scam artist (with no help from eBay), and only after he stole the identity of a USPS Office of Inspector General special agent and used it to access law enforcement databases to steal personal info of many of his victims.
An Even Funner Fact: On January 27, 2015, eBay announced it had created a new horrible technology division to build a new horrible payment gateway to replace the now-erstwhile PayPal (spun off in July 2015), in spite of a non-compete agreement with PayPal.
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eBay’s Award-Free Customer Service
Call customer service all you want. They won’t help you, but they WILL activate bots that identify keywords in your conversation that enable eBay to spam you with Internet ads. There’s also this:
● If you call eBay customer service and the CS rep doesn’t like your attitude after you’ve been on hold for hours, watch out for damaging retribution.
● eBay customer servivce reps, who are mostly in the Philippines, are paid $5 per day plus a sandwich.
● Instead of improving its virtually nonexistent customer service (because that would cost money), in August 2015 eBay tried to trick Ecommercebytes.com, an independent news site, into carrying eBay’s baggage for free. When that failed, eBay tried to sucker eBay sellers into providing US support, for free. Meanwhile, eBay invested lavishly in a massive eCommerce talent training center in China.
Fun Fact: Chinese eBay sellers enjoy deeply discounted shipping to the US, subsidized by USPS who loses an average of $1.10 on every piece and lost $75 million on ePacket service in 2014.
● eBay is considering charging fees for access to customer service.
Today, eBay’s relevance in modern ecommerce is the same as Myspace’s is to Instagram.
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This seems like a good time to remind everyone (especially eBay) that even though eBay acts like a retailer, it’s not. It has no inventory, warehouses, fulfillment capabilities, or salespeople. It’s just a brokerage for independent sellers who provide stock and manage their own sales, and pay eBay a commission to use the venue. But for reasons that defy all logic of commerce, eBay has commenced jettisoning the small and mid-sized sellers who made it the 800-pound gorilla it is today.
In 2013 (and reportedly as early as 2008, when ex-Bain chief John Donahoe became CEO) an anonymous eBay manager posted this chilling warning on the sellers’ forum, accompanied by details of the secret Machiavellian makeover designed to result in exactly what has transpired:
“[Small to mid-sized sellers] are not wanted. Leave. If you stay, you will be crushed. Leave. Go away. You cannot win. … You do not know how much they [eBay] hate you.”
Reports vary, but eBay admitted to (translation: probably grossly understated) 54,000 seller suspensions over just two days in 2013. In addition, ridiculous sales limitations were placed on an undisclosed number of active sellers. And when eBay locks out sellers, it uses their IP addresses to stop their rise from the grave, unlike deadbeat eBay buyers who return again and again like a zombie army, with “rental” scams that include death threats.
After a tsunami of bad publicity, eBay clammed up about whatever it’s doing. (One possibility: driving disenfranchised sellers into its disastrous Valet selling program. Another possibility: unloading small sellers before ecommerce sites are forced by law to collect and disburse sales taxes to all states; eBay has no programming to support that nor means of enforcement.) Whatever the answer, on the 20th of every month thousands more sellers are kicked out, nominally for “underperformance” (directly caused by listing invisibility, duh).
Your turn will come. In the meantime, eBay doesn’t care if your listings never sell. Why? Because fees, dog. eBay has no skin in the game. You sell, you don’t sell — eBay wins either way.
When buyers can’t see listings, sellers relist perpetually, paying a fee per listing of 50 cents to $2 (although some fees increased up to 500% in spring of 2015). eBay collects $7.20 in basic fees for one unsold $10 item relisted for two years, compared with $3.63 if it sells once. If a seller ends an auction early and there were bids on it, there’s a penalty fee. Do you prefer 30-day fixed-price listings? Don’t worry — eBay will convert them to Good Til Canceled without notice (no, you can’t change them back) and bill you monthly in perpetuity. Yes, even after you’re dead.
Want more (or any) buyers to see your listings? You’ll pay extra for that. And if you do manage to actually sell something, eBay will relist it without telling you — and charge you a listing fee. If your buyer doesn’t pay or returns it, you ain’t getting your seller fees back. For returns you’ll pay for return shipping, at a specially inflated rate that’s hoovered from your PayPal account against your will along with the refund you’re forced to give, all of which you lose and eBay keeps, including the thing you sold if your buyer doesn’t bother returning it. Yes, even if you use GSP, despite assurances that sellers bear no responsibility for packages GSP loses. Buyers don’t even have to pay for what they “buy” to receive a refund (wrested by eBay from sellers, who have no recourse). When all else fails, eBay blocks buyers from paying you (and keeps the fees).
Fun Fact: eBay announced in November 2015 that it will no longer investigate seller claims of buyer return fraud.
Fun Factoid: eBay reportedly scores an average of $100 for every sale that goes south.
Bonus round: Fake sales inflate eBay’s GMV report to investors.
Now multiply all of the above by millions of unsold/unpaid-for listings to get the big picture.
But wait, there’s more fees!
● eBay collects store fees — $16-$180 per month. If you signed up for a store and you want out, you’ll pay an early termination fee, from $5.32 to $719.80. Cha ching, sucker!
● eBay pushes eBay MasterCards with a vertigo-inducing variable purchase APR of 19.99% or 23.99%.
Fun Fact: For books, eBay caps your shipping charge at $5 or $6 and then steals 13% of that in fees (10% to eBay + 3% to PayPal). Selling coffee table books? Reference books? Textbooks? Good luck with that!
Plus there’s other misery besides fees!
● eBay is considering limiting search results to five items.
● So you think you set your listings to only sell domestically? Bwahahaha! eBay changed them to show you ship to Russia and China, without your knowledge or permission.
● eBay secretly allows preferred sellers to hide crappy ratings.
● eBay cares way more about your sales if you’re a bloodthirsty international terrorist or fencing shit stolen from Amazon.
● Think your sales are slow now? Just wait. Listings without UPCs are now relegated further in search results (if that’s even possible), even if what you’re selling predates the use of such codes (vintage) or doesn’t have a UPC for any other reason (you know, like a book). Fun Fact: You cannot search an item on eBay by UPC number.
● eBay’s new UPC system is tied to its new Amazon-ish catalog system that has confused eBay’s many braindead buyers, who don’t know the difference between product reviews and feedback and stick scathing irrelevant rants on catalog descriptions.
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What a shock. eBay is hemorrhaging money.
Despite valiant efforts to fleece sellers, company revenue nosedived in 2014 and 2015 (including a $200 million loss due to the Google debacle alone). Three of eBay’s biggest partners bailed: Toys R Us, Martha Stewart, and Neiman Marcus, who said the partnership “did not meet all our expectations.”
According to eBay’s 2014 Q3 report, the company had $749 million net profit from 128 million users. Sounds like a lot, right? Dogs, that’s $1.95 monthly profit per user. Who needs massive infrastructure for that? Homeless people make more money selling soda cans.
A Seeking Alpha article explains that eBay’s 2014 net income was actually $46 million, down from $2.856 billion in 2013.
eBay’s unreliable new revenue streams, willful subversion of sellers, endless technology failures, and inexplicable customer abandonment have backfired. But according to eBay, all its problems are someone else’s fault.
The company blamed its 2014 slump on the data breach (and blamed that on employees) and food stamp reductions (after partnering with bottomfeeder mega-retailers like Wal-Mart and Sears). In 2015 eBay blamed its Q1 4% revenue dive on the US dollar being too strong. John Donahoe blamed mom-and-pop sellers for tanking eBay.
Fast forward two quarters. In October 2015 eBay reported a 2% revenue decline from the year earlier. In a Q3 earnings conference call, CEO Devin Wenig idiotically called that “solid performance” and “a step in the right direction.” US gross merchandise volume (GMV) accelerated a mere 1 point over the previous quarter, due entirely to ticket sales on StubHub. YTY GMV declined by $433 million and net revenue by $51 million, both 2% deficits. Q3 auctions declined 21%. eBay blamed “the SEO headwinds” (codespeak for Google exiling eBay) for eBay’s inability to attract new buyers.
A July 2015 report by the ecommerce consulting company ChannelAdvisor.com noted that eBay’s Q2 active user growth was 6% — way lower than its 14% growth a year earlier.
The upshot: eBay is hurriedly liquidating assets of any value.
● The PayPal IPO was July 17, 2015. eBay bought PayPal for $1.5 billion but won’t reveal the amount raised in the IPO. Neither will PayPal.
● On July 15 eBay claimed it sold Enterprise, its ecommerce services division, for $925 million — at a loss of $1.475 billion. (eBay acquired it in 2011 for $2.4 billion.) Part of Enterprise is now owned by Permira Funds’ Innotrac Corporation; Morgan Stanley, who’s managing eBay’s debt financing on the Enterprise deal, says it can’t find buyers for the remaining $640 million of eBay’s loans still outstanding and eBay lied to investors about its earnings on the deal.
Fake IPO Fun Facts:
● Enterprise, despite being “sold” in a suspiciously PayPal-esque fashion and relocated to Wilkes-Barre, PA, is still called eBay Enterprise, remains affiliated with eBay, and is run by the same executives who were in charge of it at eBay.
● Remember Magento, the eBay service that allowed hackers to loot its customers with malware? It was part of the Innotrac deal, and was then spun off from eBay Enterprise in a big hurry (November 2015). Mark Lavelle, the eBay boss who let hackers run rampant at Magento, is the new CEO of Magento Commerce Technologies.
“We are doing what we said we would do,” boasted Wenig, obviously very proud of losing vast sums of money and exacerbating huge messes.
eBay is “on life support,” Scott Wingo, CEO of ChannelAdvisor.com, told Bloomberg in April 2015.
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*** Sucks-to-be-you eBay update:
Here’s how things are going under new CEO Devin Wenig, who ascended on July 20, 2015:
● July 16: Instead of advertising and fixing eBay’s worthless broken search engine (both cost money), Wenig told sellers to promote their listings their own damn selves on social media.
● July 20: eBay announced it purchased the retread rag business Twice.com to beef up Valet. Then on July 28 eBay announced it’s ending Valet. Then it didn’t.
● July 23: eBay announced a grand seller outreach event — that you could attend for just $95!
● Sept. 4: eBay announced more real-time auctions with Phillips and Sotheby’s, presumably because of the success of the previous live auctions that crashed eBay’s servers and got it sued.
● Sept. 14: eBay launched eBay Plus, a membership program to compete with Amazon Prime. It provides (for €19.90 annually, the test is in Germany) free two-day shipping and returns. Clearly eBay is clueless about how little shipping €19.90 actually buys. Which means sellers will be forced to pick up the slack.
● Sept. 14: eBay’s updated user agreement forbids you from adding your customers’ email addies to your marketing list.
● Sept. 14: eBay will be helpfully translating your emails to foreign buyers into whatever their language is. Ack ack! We are your friends! What could possibly go wrong?
● Nov. 14: eBay colluded with UPS to illegally auction off a rare custom car engine made for and stolen from tech entrepreneur Rob Dahm.
<end of update>***
Speaking of PayPal: eBay claims to have freed it in the wild but it’s really still part of eBay. They still share operational facilities, including a main database center, and PayPal shipping labels still display eBay logos. Plus there’s all this:
● PayPal, which is not a bank, nevertheless makes what it calls “business loans” to customers — half a billion dollars’ worth per year at annualized rates of up to 86.3%. In April 2015 the CFPB indicated a willingness to sue PayPal for excessive finance charges.
● PayPal (which eBay forces sellers to use) places 21-day holds on seller funds. The problem (besides the obvious): The length of time a money transmitter can hold funds is regulated by states, and most allow a maximum hold of 10 business days. PayPal hopes you don’t know this.
● PayPal’s user agreement effective July 1, 2015, makes PayPal the owner of all intellectual content of any business or website that accepts PayPal payments. As in non-exclusive, worldwide, perpetual, irrevocable, royalty-free, sub-licensable right to exercise any and all copyright, publicity, trademarks, and database rights on your personal intellectual property.
● PayPal sends you a 1099 stating your annual revenue, and then sends one to the IRS stating something entirely different, and then you get audited.
Fun PayPal Facts:
● In 2010 PayPal froze the account of Markus Persson, developer of the video game Minecraft, threatening to keep his €600,000 without explanation. Funner Fact: PayPal has been doing this forever. In 2005 the company was sued by a computer seller whose funds were held for six months without explanation. When confronted about it by the California attorney general, PayPal lied that the case had been resolved.
● In 2013 PayPal withheld hundreds of thousands of dollars raised in Indiegogo and Kickstarter crowdfunding campaigns by entrepreneurs, including Ouya, GlassUp, and Mailpile.
● In 2014-2015, Paypal froze 5,000 accounts of Chinese sellers scammed by eBay. CEO Devin Wenig told The Atlantic: “We send data [to Chinese manufacturers] about what people are looking for on eBay and they respond and turn it around incredibly quickly” by knocking off copies. Then eBay busts them for selling counterfeits, US courts sue them, and PayPal confiscates their money. Most can’t afford an American lawyer to fight their case.
● In May 2015 a woman sold her boat on eBay for $8,500. The buyer paid with PayPal, used the boat all summer, then filed a credit card chargeback. PayPal sided with and refunded the buyer, who refused to return the boat unless the seller paid him an additional $2,690.
● American Express, tired of account hijackers and scammers who abuse chargebacks to “rent” eBay stuff, revamped its Return Protection in 2015. It now covers only US purchases returned unused/unopened/undamaged within 90 days, with a $1,000 annual cap and no reimbursement of shipping costs.
*** Sucks-to-be-you PayPal update:
Since becoming chairman on August 20, 2015, here’s how former eBay CEO John Donahoe is crapping up PayPal:
● Aug. 28: eBay announced sellers can no longer accept ProPay and Skrill payments, only PayPal. The same day, PayPal announced 16-32% transaction fee hikes.
● Sept. 4: Donahoe apparently didn’t get the memo about the US and Cuba resuming diplomatic relations. PayPal is confiscating funds of sellers who sell anything made in Cuba, including empty cigar boxes.
● Sept. 8: PayPal resumed servicing online betting, an activity the US government indicted and fined PayPal for in 2002 as a violation of the Patriot Act. In December Illinois and New York State banned two of PayPal’s partners, and New York’s attorney general is suing them.
● Sept. 11: PayPal was found by researchers to have three web app vulnerabilities that allow attackers to bypass login securities and steal user accounts and info.
● Sept. 15: PayPal increased its return window to 368 days from purchase (180 days for buyer to request refund plus 188 days to investigate the claim).
● October: PayPal limits the amount of customers’ own damn money customers can transfer from their own damn PayPal accounts to their own damn bank accounts.
● Approximately every three weeks starting in October 2015, PayPal’s system goes down. No online selling or buying, no grocery shopping with PayPal debit cards. No warnings, no explanations. Just PayPal protecting you from your own money. Bonus Round: When you do manage to use PayPal to pay for a purchase, PayPal sucks the money out of your bank account first, leaving your PayPal cash balance available for PayPal to lend to someone else for 24-86% interest.
<end of update>***
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So caveat venditor, dogs. eBay is no longer a venue for indie sellers. It’s just that eBay isn’t copping to that because they’re too greedy to blow off that much free dough. The big question is, where does it all go?
eBay openly admits hiding money in Switzerland and Luxembourg. But if eBay’s not spending it on programmers, inventory, infrastructure, advertising, or customer service, what does it spend money on?
That would be lawsuits. Also golden parachutes and businesses it doesn’t need. (Over 40, according to Wikipedia. Remember Skype?) But mostly litigation payouts.
A brief history of eBay litigation
Sellers are lining up to sue the crap out of eBay, and three state attorneys general (not including New York’s, see below) have started investigations.
Here are some of the rest:
● 2001: Montres Rolex S.A. sued eBay for selling counterfeit Rolex watches. In 2007 the German Federal Supreme Court found eBay guilty of infringement.
● 2001: eBay and Re/Max International settle out of court after eBay used Re/Max’s logo illegally for its own advertising.
● 2005: Then-CEO Meg Whitman, founder Pierre Omidyar, and Goldman Sachs were sued by eBay shareholders for a type of securities fraud called “spinning,” the pre-sale of IPO stocks to pet customers by investment banks. The executives paid $3 million, Goldman $395,000, the amounts they profited from the illegal deal.
● 2006: Net2Phone, Inc. sued eBay for infringement of five Internet technology patents.
● 2007: Netcraft Corporation filed a lawsuit alleging that eBay and PayPal infringed two of its patents for Internet billing methods.
● 2007: An Asian-American eBay employee charged then-CEO Meg Whitman with assault after Whitman shoved her during an expletive-laden tirade. The case was settled out of court for $200,000. Fun Fact: In 2009 Whitman was sued by her Mexican housekeeper for treating her like a slave.
● 2007: Prince (the Minneapolis one) announced he was suing eBay for allowing unauthorized recordings of his music and films to be sold. He succeeded in killing 300 listings.
● 2008: eBay’s Korean subsidiary, IAC, was sued by 149,000 eBay users for a data breach involving personally identifiable information including name, address, resident registration number and some transaction and refund data.
● 2008: To honor the first eBay “live auctions,” the company was sued for bid rigging.
● 2009: A French court fined eBay €40 million on behalf of LVMH, the distributor of perfumes by Christian Dior, Guerlain, Givenchy and Kenzo, which by law aren’t supposed to be for sale at a dump like eBay. LVMH claimed 90% of the Louis Vuitton and Dior-labeled perfumes, watches, and handbags on eBay were fakes.
● 2010: Tiffany & Co. sued eBay after proving 73% of “Tiffany” jewelry sold on eBay was fake, and eBay refused to do anything about it. A federal court ruled that eBay could keep selling counterfeits because how could eBay possibly know?
● 2011: eBay settled a class action for $30 million for overcharging sellers in the Motor Parts and Accessories category.
● 2012: A federal class action was allowed to proceed in which claimants allege eBay’s refusal to allow any payments other than PayPal constitutes an unlawful monopoly.
● 2013: An Israeli sued PayPal for converting his account funds to a currency he didn’t want or authorize, and charging him conversion fees.
● 2013: eBay settled a class action for $4.75 million after failing to provide visibility upgrades to sellers who paid for the service.
● 2013: A PayPal program called Bill Me Later was investigated by the federal Consumer Financial Protection Bureau for predatory lending. eBay’s solution: rename it PayPal Credit and resume as before. In 2015 PayPal Credit was fined $25 million by the CFPB for illegally signing up customers and diverting them away from their preferred payment method. PayPal Credit also (among other crimes) failed to honor advertised promotions and charged late fees when website problems prevented consumers from making payments.
● 2013: A DOJ judge allowed a lawsuit against eBay to proceed that charges the company with poaching employees from Intuit.
● 2014: Two technology companies sued eBay for patent infringements. (US patent numbers 7,296,033 and 8,195,569). In 2001 a third company, MercExchange LLC, sued eBay all the way to the Supreme Court for patent infringement of three technologies, resulting in a 2011 landmark technology ruling and a $30 million settlement.
● 2014: A class action was allowed to proceed in which eBay is accused of unfair policies toward sellers that enable buyers to defraud them.
● 2014: A class action was filed in a U.S. federal court in connection with the May 2014 data breach.
● 2015: eBay settled two class actions seeking damages for unauthorized charges to sellers for Good Til Canceled listings. Gross settlement amount for Noll v. eBay: $6.4 million; for Rosado v. eBay, $1.2 million. Fun Fact: Payouts will be made as credit to claimants’ eBay accounts, not cash, usable only to pay eBay fees.
● 2015: PayPal was compelled to pay $7.7 million to the US Treasury for 486 economic sanctions violations including the Weapons of Mass Destruction Proliferators regulations.
● 2015: A seller is suing eBay in Spain for kicking her out after she auctioned off 1-meter-square plots of the sun. Turns out there’s precedent (John Travolta and Ronald Reagan, among others, own stuff in space, plus there’s the International Star Registry), and she has legal standing to challenge eBay for breach of contract in violation of its seller agreement.
● 2015: Mary Kay Inc. sued eBay in Texas courts to force eBay to reveal the identities of people selling Mary Kay cosmetics illegally. Mary Kay won initially but lost on appeal.
● 2015: eBay and PayPal are being investigated by the New York Attorney General and the FCC for violations of the Telephone Consumer Protection Act in their user policies. FYI, NYS takes such abuses very seriously.
● 2015: Wimo Labs, a maker of Apple accessories, is suing eBay and some of its Top Rated Chinese sellers for selling counterfeits on the site. The lawsuit accuses eBay of racketeering. Wimo Labs called eBay’s counterfeit oversight program “a sham.”
● 2015: eBay Australia and New Zealand is being investigated by the tax office there for cheating on its income tax payments for the past 12 years.
● 2015: Fair Isaac Corp. (FICO, the credit rating company) sued eBay for $45 million for “intentional and willful” breaches of strategic partnership contracts involving data management products and services.
● 2015: PayPal lost a German lawsuit challenging the legality of PayPal’s terms of service, and claiming it’s illegal for PayPal to hold funds for 180 days.
● In 2011 the DOJ launched a criminal investigation after eBay stole confidential data from Craigslist in 2004, and used it to start a rival classifieds site, Kijiji, that eBay charmingly nicknamed the “Craigslist Killer.” eBay has yet to be indicted. eBay attempted a hostile takeover of Craigslist and ran bait-and-switch Google ads redirecting Craigslist searches to Kijiji. Craigslist sued eBay for 14 crimes including deceit, breach of fiduciary duty, securities fraud, and negligent misrepresentation. The case ended in 2015 when eBay sold its stake in Craigslist back to Craigslist.
Despite plenty of complaints, there’s no action yet against eBay by either the SEC or FTC. The FBI and DOJ announced an ecommerce counterfeits crackdown in 2015, and the SEC at least still pretends to prosecute insider trading. You’d think they’d look into eBay’s vast off-the-books slush fund, called the black budget, that eBay uses to finance illegal activities.
The most plausible reasons why eBay has dodged greater regulatory scrutiny should make you think, and squirm:
1) Boardroom bully Carl Icahn (he owned 2% of eBay before the PayPal spinoff, and 3.8% of PayPal now) makes generous political contributions to Mitch McConnell, John Boehner, Mitt Romney, Orrin Hatch, John McCain, and other cash-before-Constitution carpetbaggers who endlessly block cabinet appointments and kill meaningful regulatory legislation; plus, he has successfully evaded SEC investigations himself;
2) John Donahoe contributed $35,800 in 2011 to President Barack Obama’s reelection campaign and $15,200 to the DNC in 2009. Donahoe was recently appointed a member of the President’s Export Council, an international trade advisory committee. In November 2015, the President begged eBay sellers to support TPP by selling more internationally (despite that — or maybe because — a small padded flat rate mailer sent priority with insurance to Europe or Japan costs $50 — and coincidentally provides huge seller fees and postal commissions to eBay). Draw your own conclusions.
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Which brings us back to the seller purge that’s destroying millions of small businesses…
Giant fees from big box retailers and generous government payments for member records (e.g., the Feds pay Verizon $775 each and AT&T $325 each; Facebook pays no taxes in exchange for providing records) mean eBay doesn’t need your pathetic little sales commissions anymore.
That has freed eBay to painfully drag out and monetize the exodus of all the small sellers it no longer wants. Rest assured that’s part of a larger heinous plan you’ll discover the hard way.
Scuttlebutt is rampant in eBay forums and elsewhere concerning what that might be. Pick your fave:
1) fewer members means fewer payouts from upcoming lawsuits
2) fewer members means fewer claimants from a rumored bankruptcy filing
3) easier reincorporation of eBay in another country. In the UK, the company paid a paltry £620,000 income tax for 2013 sales of over £1.3 billion (eBay US paid $6.1 million on $2.86 billion net revenues). eBay Australia and New Zealand paid only $6.2 million in income tax on billions in revenue over the past 12 years, and wrote off goods and services taxes it didn’t collect.
4) prep eBay for sale to another company, like Alibaba.
FWIW: On September 30, 2014, eBay announced it would offload PayPal (representing nearly half of eBay’s value) in 2015. The next day eBay assumed $7.5 billion of PayPal’s debt (ie, all of PayPal’s debt). Then on December 10, eBay announced layoffs in the thousands. According to the Wall Street Journal: “Analysts have said an independent eBay would be a candidate for a buyout, and job cuts would help lower operating costs, a key metric for buyout firms.”
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Anatomy of a trainwreck
It’s been nearly a decade since eBay’s profit machine comprised buyers and sellers of stuff. Now you are the product being sold. (When I logged in for 10 minutes on June 23, 2015, eBay injected 127 advertiser-paid cookies into my computer.) The rest of its revenue comes from fee theft, selling customer records to governments, fake IPOs, and pump-and-dump.
Here’s how the latter works. For years, eBay has unlawfully goosed the price of its stock by planting acquisition/spinoff rumors in the media. (Google to buy eBay! Carl Icahn to buy eBay! eBay may accept Bitcoin! eBay to sell off PayPal! John Donahoe going to PayPal!) Every time eBay’s share price spikes, board members and top execs sell theirs, then buy them back low (via company discount), and resell them at the jacked-up market price for huge profits. (eBay execs and Icahn owned 12% of the company’s shares in September 2015.)
For example, in 2015 then-CEO John Donahoe sold (for $6,865,815 on Feb. 2), bought back (for $3,227,063 on Feb. 10), and then resold (for $7,119,475 on Feb. 10) the same 129,445 shares. Donahoe’s one-day profit on Feb. 10: $3,892,412.
To squeeze off a shitload of Hail Mary stock dumps before the PayPal split, management dragged their gold-digging ass for six months before divulging the exact spinoff date (July 17, 2015) and triggering the massive sell-off destined to accompany it.
When the split completed, stockholders received one share of PayPal for every eBay share they already owned. Before the split, eBay stock eternally hovered between $50 and $60. Even with a last-minute buying frenzy by opportunists taking advantage of the stock split, the price never rose above $66.
On the first trading day after the split, July 20, eBay’s share price sank to $28.57 and hasn’t recovered as of January 2016. Compare that with rival Amazon’s shares: $466 on a regular old day the same week eBay and PayPal split.
Donahoe left eBay for PayPal the day of the split, with a $23 million retention bonus for “helping out.” CFO Bob Swan received an obscene retention bonus, too, of $12 million. Other top execs left, too.
Along with the first PayPal spin-off announcement on September 30, 2014, eBay also announced the imminent departures of the much-despised Donahoe and Swan. As per usual, the announcement caused the share price to spike 7.5%.
Wow, what a coincidence! On September 30 Donahoe just happened to own 660,748 eBay shares that he no longer needed. (And he got this figure deleted from the Internet.) His golden parachute just happened to include acceleration of all his restricted stock unit and stock option awards.
On November 17, 2014, Donahoe bought 297,573 eBay shares at $25.85/share for $7,692,262, and sold them the same day at $55/share for $16,344,000. The next day it was publicly reported that he dumped another 485,665 shares for $26,672,721. These numbers have since been cooked to show he instead sold 188,092 shares on November 18 for $10,346,940 at $55/share, and repurchased them that same day at $25.85/share for $4,862,178.
Other dumpers joining Donahoe in the eBay insider clusterfuck of November 2014:
CFO Bob Swan sold 148,000 shares for $6,015,482
SVP Alan Lee Marks sold 6,750 shares for $369,427
SVP Michael Jacobson sold 94,000 shares for $5,124,880
SVP Elizabeth L. Axelrod sold 241,250 shares for $13,222,912
Director Thomas J. Tierney sold 10,120 shares for $295,200
CTO Mark Carges sold 11,392 shares for $600,358 just before resigning in November, after unloading 37,421 shares for $849,861 in July.
Bonus Round: In 2015 Q3, the German hedge fund Meag Munich Ergo Kapitalanlagegesellschaft sold its entire eBay stake of 521,357 shares for $14,326,890.
And the giantest dump of all:
Carl Icahn unloaded all 46.3 million of his shares in November 2015 — his entire 2% stake in eBay. Schadenfreude points: Icahn now owns 3.8% of PayPal, where his old eBay nemesis John Donahoe chairs the board.
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Where’s the beef?
In short, it’s at PayPal. Just ask Icahn and Donahoe.
Back on February 11, 2015, eBay’s then-CFO Bob Swan revealed at the Goldman Sachs Technology and Internet Conference that PayPal, which constituted 45% of eBay’s value, would receive a $5 billion cash divorce settlement from eBay, a gift that would “more likely than not” be parked offshore. (Which corporations do to evade tax liability.) Let’s be clear: $5 billion is 80% of eBay’s entire 2014 end-of-year cash position.
So let’s just say it: eBay transferred all its cash and assets to PayPal and offshore banks, and absorbed all of PayPal’s financial liabilities, obviously in preparation for (one way or another) The End.
What’s left of the new, PayPal-free eBay is a hollow shell making a loud thunking sound.
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eBay corporate culture in a nutshell
Under the stewardship of John Donahoe, the former Bain & Company CEO who calls eBay sellers “noise,” eBay became an easy road to huge piles of money (ie, yours) for rich insiders. Especially Donahoe.
Not for nothing, but if you hire a corporate raider to run your company, this is what you get: a CEO who milks you for multimillions, spends his time manipulating company stock instead of managing its marketplace, robs mom-and-pop businesses with impunity, perpetuates a marginally functional ecommerce platform, and secretly sells its customer database to a rich buyer guaranteed not to squeal.
In a 2014 letter to shareholders, Carl Icahn wrote: “The CEO seems to be completely asleep or, even worse, either naive or willfully blind to these grave lapses of accountability and stockholder value destruction.”
Fun Facts: Donahoe claims he once sold an old cell phone on eBay. [He deleted this reference from the linked page.] And that his first job, which mainly involved drinking stolen beer, taught him everything he knows about leadership. [I made a screencap of this one, before he nukes this too.]
Few Nasdaq companies need to be investigated more than eBay does. In the meantime, eBay still laughably promises sellers better visibility in exchange for sellers providing 24-hour turnaround, free shipping, generous return policies, and of course lots of fees. But in reality seller compliance doesn’t buy blackout immunity, and eBay penalizes sellers for things they can’t control. eBay forums are clogged with complaints from cooperative sellers whose stuff is still deadweight at the ass end of search results (when it’s visible at all) behind thousands of duplicate listings for Chinese counterfeits and other dreck that don’t even have the search terms in the titles.
In other words, eBay’s current business model is you giving eBay money for nothing and eBay pimping you out to advertisers, not you selling stuff on eBay.
My advice: RUN LIKE HELL! Don’t bother selling your book (or anything else) on eBay. Short of worldwide famine or collision with a comet, eBay is your worst nightmare.
If you enjoyed this post, you’ll really like my book Dead Spot!
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