EBay's Challenge to Craigslist
What is eBay, anyway? That is the question investors are asking after the world's largest online auction site announced last month that it was launching its own free classified advertising site in the United States—daring to tread into territory that craigslist has dominated for years.
Called Kijiji, which means "village" in Swahili, the site was launched internationally in 2005. Since then, people in 20 countries have been using it to do what they can't do on eBay: buy and sell not just products but services, too. On top of the usual array of cast-off cameras, furniture, and motorcycles offered by eBay, Kijiji allows users to search within their own cities for everything from job openings to carpools to apartments for rent. The site is now up and running in 220 cities in 50 states.
Whether it will catch on—and what it says about the long-term prospects of eBay's vaunted auction business—is a matter of some debate. Kijiji isn't eBay's first step away from auctions, of course. When it bought Skype in 2005, the company became a global Internet telephone service; when it bought StubHub, the online ticket reseller, earlier this year, it moved into ticket sales. Its PayPal system makes it an online payment processor and a virtual bank, of sorts.
Clever or desperate?
EBay is many things, in other words, to many people. But as the company prepares to release its quarterly earnings next week, the Kijiji launch has analysts mulling over what this latest move says about where the Silicon Valley giant is headed—and whether this is a case of cleverness or desperation.
At first glance, the move makes sense. People go to eBay to buy stuff; Kijiji simply expands the pool of stuff they can buy. EBay was originally conceived as an E-commerce site, and even though it is best known for auctions, the company's focus is commerce, in the broadest sense of the word.
Still, there's a reason eBay hasn't done this before: Since the dawn of the Internet boom, classified ads have been the domain of craigslist, the San Francisco-based brainchild of entrepreneur Craig Newmark. More than 15 million people use craigslist every month, giving it a huge leg up on eBay.
By its very nature, classified advertising tends to be a one-stop shopping experience. Who wants to go to five websites to find an apartment? In some ways, craigslist is in a position as dominant as eBay's was when it fended off attempts by Yahoo! and Amazon to push into auctions.
The stock is stuck
So what's behind eBay's move? Simple, analysts say: The company needs to grow, and its auction business may not be able to do the job. EBay's stock has been stuck for several years, trading between $22 and $35 since last summer, down from a high of $58 in 2004. That's largely because investors are worried about the rise of Google and eBay's failure to catch on in Asia—both of which have put a damper on its growth prospects.
In the United States, eBay's auction business isn't exactly saturated, but it is rapidly moving toward maturity, and the company has stumbled in its efforts to expand in new markets in Taiwan and China. Last year, eBay shut down its sickly China site and put $40 million into a joint partnership with a Chinese company that will oversee its operations.
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