By Leslie Walker
Thursday, June 15, 2006

LAS VEGAS EBay's big buying binge was the talk of its fifth annual user convention here this week, which pulled 15,000 sellers from around the world eager to learn what the Internet auction giant plans to do next.

While eBay Inc. is showing signs of a middle-age crisis, with slowing growth and a sliding stock price, company executives seemed almost giddy as they outlined plans to use their recent acquisitions to move beyond auctions -- into communications, advertising and financial services.

Wall Street has remained skeptical that eBay can recoup the $2.6 billion it spent last fall to acquire Skype, a young company that provides Internet-based calling services but brings in relatively little revenue. It was eBay's second major purchase last year, following its $620 million acquisition of Shopping.com. But chief executive Meg Whitman told convention-goers that she believes Skype's calling service will boost trade on eBay much the same way PayPal's payment service did after eBay bought that company several years ago.

"The combination of eBay, PayPal and Skype is more powerful than the sum of its parts," she declared.

Starting Monday, eBay sellers in the United States will be able to add "SkypeMe" buttons to their listings for cars, real estate and 12 other merchandise categories, allowing customers who click those buttons to call sellers or send them text messages using Skype software. First, however, shoppers must download the software and install it on their computers.

Many merchants said they either weren't familiar with Skype or considered it too early to add the SkypeMe feature to their listings.

"Right now, there aren't enough people using it for me to adopt Skype," said Edwin Dodson, a Claysburg, Pa., resident who sells shoes on eBay. "But about a third of my business is international, and if my customers over there adopt it, I might use it." Skip McGrath, who lives near Seattle and has written two books on eBay, said he has no intention of using Skype for his auctions. "Do I really want bidders instant-messaging me all day long? Who's got time for that?"

Bill Cobb, president of eBay North America, said in an interview that eBay has no plans to force sellers to use Skype and will go slowly in figuring out how to integrate Internet calling into eBay listing pages.

At the four-day convention, which ends Thursday night with a dinner concert featuring Huey Lewis & the News, Whitman also talked up the company's recent partnership with Yahoo, calling for each to promote the other's services. The two are developing an eBay-Yahoo toolbar, she said, which will feature "click to call" buttons that enable a new pay-per-call advertising business based on Skype.

"We are going to test different approaches with Yahoo over the next several months, and we want to get your input," Whitman told the more than 10,000 folks who filed into the Mandalay Bay casino to hear her keynote speech Tuesday.

EBay executives spent a fair amount of time talking up Skype; PayPal; and Shopping.com, the comparison-shopping service that eBay bought to expand its online marketing and advertising repertoire. They also tried to reassure their key customers -- the more than 1 million people who earn part or all of their living selling on eBay -- that auctions remain their core focus.

"Even as eBay has grown in style and complexity over the years, auction listings . . . are what differentiates us in shoppers' minds," Cobb told convention-goers.

Cobb announced new policies to help sellers, including a crackdown on what he called "excessive shipping fees," such as merchants selling headphones for 99 cents and charging $49 for shipping. He also introduced a revamped cellphone alert service that will let buyers get automated updates on their eBay bids and raise them by cellphone.

Cobb said eBay also is placing big bets on alternative buying formats, such as the new "eBay Express" site, which debuted seven weeks ago, geared to shoppers seeking new goods. It lets people buy items from varying merchants and pay for them in a single transaction. EBay will heavily advertise eBay Express starting this fall, Cobb said, airing 30 TV commercials carrying the tag line "Get it new. Buy it now on eBay Express." Some sellers, however, seemed skeptical.

"I am participating in eBay Express but have not had a single sale from it yet," said Cindy Sorley, a needlework dealer from Layton, Utah, who closed her bricks-and-mortar store two years ago to sell full time on eBay.

The rumblings of discontent among eBay sellers did not seem as intense this year as last year, when eBay sharply hiked its selling fees. Still, there was an undercurrent of unease here about how much support eBay will offer sellers as the auctioneer moves into new businesses.

"EBay sellers are getting squeezed on two sides today, from steadily increasing competition and from the higher fees eBay has imposed," said McGrath, who has been selling on eBay since 1999. "What's helped is that eBay has also been increasing its number of buyers -- to 72 million in the U.S. If eBay can keep growing that user base, it will sustain sellers, but if the growth were to stall, a lot of sellers would be in trouble."

No wonder eBay has moved aggressively into buying ads for key words and phrases at Google and other search engines to direct search-engine shoppers to eBay's marketplace. EBay dramatically boosted the number of keywords for which it purchases ads on search engines over the past year, Cobb said, up 20-fold to more than 15 million words and phrases.

Taking a page out of the book of its rival Google, eBay even previewed here a new advertising program of its own called AdContext that resembles Google's AdSense network. EBay's program will let owners of other sites put software snippets on their pages to automatically display listings from eBay related to the content of those pages. If visitors click through and buy something, the site owner will collect a fee from eBay. Unlike Google's ad network, which is open to any site, participation in eBay's will require approval by eBay.

What struck me most about eBay's convention this year is how smartly and intensely the company is trying to improve online shopping by integrating new forms of advertising, payments and communication. EBay may not be growing as fast as it was, but it is growing shrewdly -- and in ways that are likely to have a major impact on the future of e-commerce.

Leslie Walker welcomes e-mail athttp://leslie@lesliewalker.com.