David and Tom Gardner recently interviewed eBay CEO Meg Whitman on The Motley Fool Radio Show on NPR. This is the second of five parts.
TMF: Do you view yourself as entirely a distributor or does eBay -- or will eBay ever --private-label and sell any of its own products?
Whitman: We are strictly a marketplace. We enable buyers and sellers to connect. We will never compete with our sellers by holding inventory, by marketing our own products.
TMF: What is your biggest moneymaker?
Whitman: Well, the U.S. business is the largest business in terms of revenue and now tied with international for operating profits. But the U.S. is our biggest profit contributor in absolute dollars.
TMF: Meg, what percentage today of your listings on eBay is fixed priced and what percentage is auction?
Whitman: In the second quarter, probably the best way to look at it is gross merchandise sales. In other words, the value of the goods sold on the platform that are in a fixed-priced format. That was 27% in Q2. So, nearly a third, which is quite remarkable.
TMF: Meg, I wrote a few years ago that I thought that the greatest obstacle to eBay's long-term growth may well end up being the United States Justice Department. I have noticed that the Justice Department has occasionally conducted inquiries where huge profits exist, particularly when those profits are dominated by one company. Do you ever have any concerns in this area?
Whitman: You know, we are really focused on making sure we conduct ourselves not only within the letter of the law but the spirit of the law. I think the really important thing to notice is when we were little, maybe we competed just with other online merchants. Our sellers in Q2 on an annualized basis traded over $20 billion worth of product and so our sellers now are competing for consumer dollars vs. all other channels of distribution. For example, if you were looking for a fishing rod, you have the choice of going to your local retailer, going to a mass merchandiser, looking elsewhere online, or coming to eBay. At this scale, I think we are competing very broadly for customer dollars.
TMF: Let's talk a bit about the competitive landscape. Google is becoming an increasingly significant global player. In fact, I saw a recent brand study that identified Google as a better-known brand than even eBay. Is Google a competitive threat?
Whitman: Right now, we view Google as a very cooperative and helpful partner with us. We are one of Google's largest advertisers, not only here in the United States but in most of the countries of the world in which they operate. What we do is we buy Google keywords on behalf of our community of sellers. So, in other words, if you are interested in buying the word "surfboard," we can help our buyers get placement on Google by effectively helping them on their behalf buying those keywords.
TMF: A category.
Whitman: We think it is really a great relationship for us and our sellers and for Google. We continue to expand around the world and they are usually in the same markets as we are so it has been a great relationship thus far.
TMF: How about Microsoft
Whitman: Well, Microsoft did actually join a consortium in the summer of 1999, which was Microsoft, Excite, and Lycos... to enter the auction business and compete against eBay. In the end, it was not probably as successful as it might have been. That said, Microsoft is a very big, very competent company. Obviously, we have to be thoughtful about that. Right now, we are actually a decent-sized advertiser on MSN. So we buy through their paid-search model as well as advertising on MSN, which is a growing and important portal for us.
TMF: How about Amazon.com
Whitman: Well, we compete with Amazon in that we are competing for customer dollars. So when you go onto the net to look for a book, would you buy it on Amazon or would you think about getting a great value at eBay? Certainly in the books, movie, and music category we compete for customer dollars, just as we compete with land-based retailers. But our proposition is entirely different. Amazon is all brand-new, for the most part in-season books, movies, and music and our product mix tends to be much more unique, hard to find, used, vintage, returned items. Sort of what you would call the tail ends of the product life cycle. Not so much the brand-new, in-season retail.
TMF: We had the CEO on our program a couple of months ago, a very impressive guy. What do you make of Patrick Byrne and Overstock.com
Whitman: We have known Patrick for a long time. I think his company offers a real service. He is very good at buying low and selling high, and we think he has got a good little company.
Tomorrow: What international operations mean to eBay.
