Shake-Up, Competition Raise Doubts About EBay

By Yuki Noguchi
Washington Post Staff Writer
Friday, July 7, 2006

A management shake-up at eBay Inc. and a new threat posed by an online payment system from Google Inc. have caused analysts to question the outlook for the world's largest online auction site.

The San Jose-based company announced yesterday that Jeff Jordan, a longtime eBay executive and the dynamic heir apparent to current chief executive Meg Whitman, would leave the company to spend more time with his family. Jordan was president of PayPal Inc., the popular payment processing system owned by eBay.

At the same time, eBay said it would not accept Google Checkout -- the rival online payment system unveiled last week by Google Inc. -- on its site, angering many buyers and sellers who want alternatives to PayPal and who claim eBay is using its market share to squeeze out competitors.

The unlikely timing of Jordan's departure and the emergence of Checkout signaled turmoil for eBay, which in the first quarter this year got nearly a fourth of its $1.39 billion in revenue from fees collected through PayPal. The company's shares fell 5.3 percent to close at $26.85.

"It's curious that he's leaving at this time," said Avivah Litan, an analyst with Gartner Inc. "He infused the organization with that innovative spirit," but leaves at a time when eBay is starting to lag in that department, she said.

Jordan had a reputation for being ambitious, and with Whitman remaining at the helm, he probably decided to move on instead of waiting to move up, some analysts said.

Jordan, who joined eBay in 1999, will be replaced by Rajiv Dutta, who for the last year has served as chief financial officer, head of strategy and president of Skype, the Internet-base phone service eBay acquired last year. Alex Kazim, vice president of products for Skype, will assume Dutta's responsibilities as president of Skype.

Meanwhile, analysts viewed eBay's ban of Google Checkout as a defensive move against what could be formidable competition.

"In the short term, it's not competitive, but in the long term it is," Litan said, and "it would be disaster for them if they allowed Google Checkout to be used."

Google Checkout is limited to holding credit card information so that users can buy items on any participating Web site with a single click, but the company will probably expand its scope, which would encroach more on PayPal's business of serving individual merchants and buyers. Google is also offering the service at a lower rate, which means merchants would flock to it, Litan said.

Analysts from Lehman Bros. and Citigroup said eBay's future growth would probably be damaged by its Google rival, according to the Associated Press.

EBay spokeswoman Catherine England pointed out that the company accepts about 10 online payment systems in addition to PayPal but that it recognizes only those that have a proven track record of safety and reliability. Google Checkout is too new to have such a record, England said, so eBay yesterday posted an amended policy to note that the service does not qualify.

Ina Steiner, editor of the online auction newsletter AuctionBytes, said she fielded many similar complaints from buyers and sellers yesterday. "They are strongly against this eBay move," Steiner said. Merchants and buyers almost always favor having more payment options.

"In the long run, anything that facilitates payments would help eBay," Steiner said, "so it's strange they would do that."

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