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 this year, while eBay steals scads of their dough. WTF happened?
The easy blame is Cassini, the glitch-plagued search engine eBay rolled out in 2013 just when sales started flatlining. Naturally everyone assumed a connection. And there is one, but the real answer is more complex.
In fact, eBay started doing other things that are way more awful than Cassini:
● eBay gives preferential treatment to foreign mass marketers, pushing aside smaller domestic sellers.
● eBay started selling postage to sellers, for which it gets a fat cut from carrier services (a whopping 58% from USPS). Sellers who use it receive discounted shipping, but the service is frequently ultra-slow or completely down.
● eBay launched its Global Shipping Program (GSP) and forced sellers to use it. Sellers mail their international packages to a Kentucky distribution center run by Pitney Bowes, who removes their 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 apparently eBay keeps. GSP has also been caught stealing shipments and reselling them on eBay.
● eBay deliberately hides many listings.
● 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. (eBay’s Apple Watch app is so abominable, Apple yanked it from its app store — one of only two Apple Watch apps to be dumped out of some 3,500 available. The other one belonged to some scumbag who stole cancer charity donations.)
● eBay interlards the listings you pay for with links to competing listings, typically 31 per page 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, and eBay product promotions.
● Make no mistake: You are the product. When I logged in for 10 minutes on June 23, 2015, eBay injected 127 advertiser-paid cookies into my computer. (I deleted them immediately.)
● 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 private data of many, if not all, of eBay’s 128 million users. As a direct result, many buyers abandoned the venue.
● 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. Google’s new search algorithm (Panda 4.0) uses bid-based priority ranking that ignores cheap-ass clients like eBay. eBay has since moved its Internet ad business to Bing, used by no one.
● eBay rolled out Google Checkout in 2006 as a payment method, then rolled it back in a few days later.
● eBay pirated YouTube tutorials, further antagonizing Google (who owns YouTube).
● 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. 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 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. eBay shut down other marketing operations and/or transferred their databases to foreign servers to free up bandwidth and server space for the live auctions. 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 Fact: the buyer’s premium on eBay’s live auctions ranged up to 30% of price realized. Ha — bite that, screwed eBay Mom & Pop Store!
The upshot: eBay sales have tanked because eBay willfully thwarts sellers in pursuit of various ends, none of which benefits you. eBay revenues nosedived in 2014 (including a $200 million loss due to the Google debacle alone). And, apparently, eBay 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 its marginally functional postage program and the bonus site hacks resulting from inadequate security. eBay’s popular Magento ecommerce service is a jackpot for cyberthieves using malware to freely steal customer credit card information from web stores that use Magento.
Fun Fact: On January 27, 2015, eBay announced it had created a new horrible technology division to build a new horrible payment gateway to replace its soon-to-be-independent PayPal operation, in spite of a non-compete agreement with PayPal.
What a shock. eBay is hemorrhaging money.
According to a Seeking Alpha article, eBay’s 2014 net income was $46,000,000, down from $2,856,000,000 in 2013.
eBay blamed its 2014 spring/summer sales slump on the May data breach. eBay ended 2014 — after partnering with bottomfeeder mega-retailers like Wal-Mart and Sears — by blaming its fall/winter sales slump on food stamp reductions. EBay’s 2015 Q1 4-percent marketplaces revenue dive excuse: the damned US dollar was just too strong!
eBay is “on life support,” Scott Wingo, CEO of the ecommerce consulting company ChannelAdvisor, told Bloomberg in April 2015.
☹ ☹ ☹
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. And eBay doesn’t want you selling locally, where buyers can — horrors — pick up for free! And eBay doesn’t want you competing in desirable markets against eBay’s mass-market darlings, except when eBay’s had a real slow quarter and its financial report to investors is due and shazam! just watch those floodgates open. Fun Fact: ebay plans to force indie sellers to let their customers pick up purchases at partner retail outlets like Target, Best Buy, and Home Depot. Hey — what could possibly go wrong?
● 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.
● eBay physically turns off listings (tap-on-tap-off) without notification (including ending auctions early, often within one minute of the end, to block snipe bidding because it overtaxes eBay’s inadequate infrastructure and bandwidth; eBay uses other means to block sniping, too).
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 was deleted from the forum immediately, and the mod’s account obliterated. 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.
☹ ☹ ☹
This seems like a good time to remind everyone (especially eBay) that even though eBay acts like a retailer, it’s not. It has neither inventory nor 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 ways it hopes aren’t obvious enough to start an avalanche of class actions.
In 2013 (and reportedly as early as 2008, when the current CEO took over) 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 clamps down on 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.
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.) But on the 20th of every month since, thousands more sellers were 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.
When buyers can’t see listings, sellers relist perpetually, paying a fee per listing of 50 cents to $2. (By way of example, 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.
[This just in: per eBay’s 2015 Spring Seller Update, fees have increased up to 500%!]
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 when your buyer doesn’t bother returning your item. Fun Factoid: eBay reportedly scores an average of $100 for every sale that goes south.
Now multiply all of the above by millions of unsold listings to get the big picture.
Fun Fact: Another reason eBay doesn’t care if you get stiffed: fake sales inflate eBay’s gross merchandise volume (GMV) report to investors.
But wait, there’s more! eBay collects store fees — $16-$180 per month. If you have a store and you want out, you’ll pay an early termination fee, from $5.32 to $719.80. Cha ching, sucker!
Fun Fact: For books, eBay limits the shipping fee you can charge to $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!
Arguably the most disturbing thing is this: Instead of just outright banning the small sellers it no longer wants, eBay elected to painfully drag out and monetize their exodus.
And yes — there’s even more!:
● eBay forces sellers to start auctions at 99 cents to attract buyers to the site, then shuts off the auctions from views and late bidding, forcing a sale at the opening bid (or a relist).
● It wasn’t mean enough for eBay to hide your listings’ visibility, so eBay started hiding your listing descriptions, too. Except when eBay replaces your descriptions with random nonsense phrases.
● eBay secretly allows high-volume sellers to buy their way out of negative feedback (one reported payment: $150) or hide crappy ratings entirely.
● eBay cares way more about your sales if you’re a bloodthirsty international terrorist or fencing shit stolen from Amazon.
● If you think your sales are bad now, just wait. Listings without UPCs will be relegated further in search results (if that’s even possible), even if what you’re selling predates the use of UPCs (vintage) or doesn’t have a code for any other reason (you know, like a book).
● 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. Fun Fact: eBay CS reps, who are mostly in the Philippines, are paid $5 per day plus a sandwich.
Fun Fact: PayPal (which eBay owns) now places 21-day holds on seller funds. Why? Because it can. 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.
And there’s also this:
● eBay’s idea of idea of clever marketing is its Father’s Day promotional emails stating “Your father called,” regardless of the recipient’s relationship with said father or said father’s current mortality status. And eBay will robocall you at the funeral to survey you about the urn you bought, in violation of federal and state consumer protection regs.
● eBay unlawfully gooses 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!) Every time the share price rises, board members and top execs sell theirs, buy them back low (via company discount), and resell them at market price.
● Since eBay soon won’t have PayPal to suck the life out of (latest alleged spinoff date: mid-2015), eBay now pushes eBay MasterCards, with a vertigo-inducing variable purchase APR of 19.99% or 23.99%.
Fun Fact: According to eBay’s 2014 Q3 report, the company had $749 million net profit from 128 million users. Really? That’s $1.95 monthly profit per user. Who needs massive infrastructure for that? Homeless people make more money selling soda cans.
Fun Fact: eBay openly admits hiding money in Switzerland and Luxembourg. The company also has or had a vast off-the-books slush fund, called the black budget, that it uses to finance illegal activities.
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.
☹ ☹ ☹
Sellers are already lining up to sue the crap out of eBay, if Icahn (the largest stockholder, who owns 46 million shares and the BOD’s balls) doesn’t rip it to shreds first. So far, three state attorneys general (not including New York’s, see below) have started investigations.
eBay’s big, sure, but is it bulletproof? Nope!
● 2008: To honor the first eBay “live auctions,” the company was sued for bid rigging.
● 2009: A French court fined eBay 1.7 million euros 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.
● 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: 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.
● 2015: eBay settled a class action seeking damages for unauthorized charges to sellers for Good Til Canceled listings. Gross settlement amount: $6.4 million. Fun Fact: Payouts will be made as credit to claimants’ eBay accounts—after the eBay/PayPal split, just in time for eBay’s rumored bankruptcy filing.
● 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), 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.
● Tiffany & Co. sued eBay after proving 73% of “Tiffany” jewelry sold on eBay was fake.
● Ditto Louis Vuitton and Christian Dior, who nailed eBay for 40 million euros for selling fakes.
● 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 when eBay sold its stake in Craigslist back to Craigslist.
There’s no action yet against eBay by the SEC or FTC. But the last time anyone checked, the SEC still frowns on pump-and-dump and insider trading, and the FTC doesn’t look kindly upon theft of service or bait-and-switch. (Like France, Russia, interestingly enough, has no qualms about bitch slapping eBay.) So the most plausible reasons why eBay has dodged greater regulatory scrutiny should make you think, and squirm:
1) Boardroom bully Icahn 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) eBay is used by the government to spy on … well, everybody, the same way it uses Facebook and Google. eBay saves searches and purchase histories of users, and maintains a proprietary email system for them. Connect the dots, yo.
As for the seller purge that’s destroying millions of small businesses, scuttlebutt is rampant in eBay forums and elsewhere concerning the real intent behind it. Pick your fave:
1) with generous government payments for members’ records (the Feds pay Verizon $775 each and AT&T $325; Facebook pays no taxes in exchange for records), who needs small business sales commissions?
2) reduce payouts from upcoming lawsuits
3) minimize claimants from a rumored bankruptcy filing
4) easier reincorporation of eBay in the UK, where 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 the same year — and would’ve paid 80% less in the UK)
5) prep eBay for sale to Alibaba and PayPal to Apple, Google or Icahn.
On September 30, 2014, eBay announced it would part ways with PayPal sometime in 2015 (PayPal constitutes 45% of eBay’s value). [The split will be complete by July 17, 2015.] On October 1 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.”
On February 11, 2015, eBay CFO Bob Swan said at the Goldman Sachs Technology and Internet Conference that PayPal will receive a $5 billion cash divorce settlement from eBay when the two companies split, 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 is transferring all its cash and assets to PayPal, and absorbing all of PayPal’s financial liabilities, obviously in preparation for (one way or another) The End.
Back on December 10, an eBay insider leak posited that after the eBay/PayPal split, CEO John Donahoe will truck on into the sunset… with PayPal. And — surprise! — eBay’s stock goes up again (over 5% in the next two days).
What’s not much of a surprise is that top eBay executives are fleeing, most recently CTO Mark Carges, VP of merchant development Michael Jones, board director and Netscape co-founder Marc Andreessen, PayPal president David Marcus, SVP for eBay North America Christopher Payne, PayPal VP Stan Chudnovsky, North America CMO Richelle Parham, and PayPal head retail exec Don Kingsborough.
Along with the first PayPal spin-off announcement on September 30, eBay also announced the imminent departures of the much-despised Donahoe and CFO Bob Swan. Donahoe (the former Bain & Company CEO who calls eBay sellers “noise”) received a $23 million retention bonus to stick around and “help” with the PayPal spinoff. He also was awarded acceleration of all his restricted stock unit and stock option awards. (And yes, it turns out he will sail off with PayPal.) Swan received an obscene retention bonus, too, of $12 million.
Wow, what a coincidence! On September 30 Donahoe just happened to own 660,748 eBay shares that he no longer needed, the value of which shot up immediately by 7.5% on the spin-off announcement. (And predictably sank 20% following eBay’s Q3 report in October 2014, after it was downgraded by analysts who consider a clusterfuck a bad investment.)
Under Donahoe’s stewardship, eBay has become an easy road to huge piles of your money for rich insiders. On November 17, 2014, he 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 Donahoe dumped another 485,665 of his 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.
Donahoe did the same thing in 2015, selling (for $6,865,815 on Feb. 2), buying (for $3,227,063 on Feb. 10), and then selling (for $7,119,475 on Feb. 10) the same 129,445 shares. Donahoe’s one-day profit on Feb. 10: $3,892,412. Feel free to assume these figures are creatively underreported. And take a picture, eBayer. You know how. It’ll last longer.
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.
And that’s eBay’s corporate culture in a nutshell. Donahoe is hardly the only dumper. Other eBay insider sell-offs in 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.
Fun Facts: John Donahoe claims he once sold an old cell phone on eBay. And that his first job, which mainly involved drinking stolen beer, taught him everything he knows about leadership. Also, since the publication of this post, Donahoe has had nearly all the data about him cited and linked to here either removed or doctored.
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. And if you relied on buyers finding your listings via Google Shopping to pick up the slack, you can kiss that goodbye.
In other words, eBay’s current business model is you giving eBay money for nothing, 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.
Copyright © 2014 SYDNEY SCHUSTER – All Rights Reserved
Sydney Schuster and Dead Spot neither approved nor endorse any third-party advertising that may appear below, nor do we derive any income from it. Feel free to ignore it.