It's big, it's hungry, and if you don't batten down the hatches, I swear, eBay (NASDAQ:EBAY) will eat your babies!
I'm just teasing you, now. You and I both know that it will gobble up cute puppies first.
The world's leading online exchange has become a political hot potato this month. Yet if I can offer up an analytical voice of reason, I would argue that the partisan shots feel more like duds than spuds.
Let's review what happened here. Earlier this month, Vice President Dick Cheney was stumping in Cincinnati when he brought up eBay as an example of why economic data isn't fully factoring in a robust recovery. "That's a source that didn't even exist 10 years ago," he said, pointing out that the data munchers aren't accounting for the fact that "400,000 people make some money trading on eBay."
Sensing that it was something worth pouncing on, the person angling to replace Cheney as the country's VP took aim. "He said people are selling a lot of stuff on eBay," John Edwards said. "When we count the bake sales and lemonade stands, we'll have a roaring economy."
It's odd, isn't it? It's not just that eBay has gone from CNBC to C-SPAN fodder these days. But now, despite the bucketfuls of ubiquity, this seemingly simple company is just being flat-out misunderstood by the educated politicos.
eBay is big
With 114 million registered users -- 48 million of those being active eBayers who have bid, bought, or listed with eBay over the past year -- this is more than just the world's largest garage sale. It's often referred to as a virtual flea market, though maybe a wired car showroom would be just as appropriate since nearly $10 billion of the $29.1 billion in gross merchandise value that the site has helped move over the past four quarters has been in its automotive category.
Nearly $30 billion in sales volume? That doesn't sound like bake sale money to me. If Edwards is listening, we're talking about pouring 582 billion cups of nickel lemonade at this stand. This doesn't mean that Cheney has it right either, but it's just wrong to sell eBay's reach short.
Many eBay users are bona fide entrepreneurs. Sole proprietors and small companies have opened up more than 121,000 domestic eBay stores. Whether it's an art gallery pitching pieces worldwide or a Web designer looking for work, I would like to think that most file timely tax returns and are, in fact, portrayed accurately in many of the tracked economic gauges.
Just about every major city is also finding an enterprising company or two launching eBay-powered businesses, where folks just drop off their secondhand discards and the company takes a generous cut if they are able to market it effectively on a consolidation basis through the auction site.
These aren't rank amateurs scouring for garage sale Picassos. Sorry Edwards, these are real people making real money. Sorry Cheney, these are real businesses paying real taxes.
eBay is hungry
There is usually a time in a growth stock's life when the fire in its eyes goes out. Our brand new Rule Breakers newsletter is looking to uncover companies while their corneas are still ablaze. That's important. On this very day six years ago, eBay shares could have been had for a split-adjusted price of $3.95.
If something scared you away from pursuing this eventual 20-bagger, it certainly didn't frighten off eBay. New challenges arose along the way, and eBay navigated past them perfectly. Amazon (NASDAQ:AMZN) and Yahoo! (NASDAQ:YHOO) launched cheaper auction sites, and eBay made its rivals irrelevant because of its volume. Half.com and PayPal threatened eBay's market-thumping model, so it simply acquired them.
That's what eBay's been doing all along. It has always been hungry. That fire you see in its eyes? It's coming from the belly. So much of what's great about this country -- from self-empowerment to free enterprise to raw capitalism -- is on display each and every time that someone puts an item up for bid on eBay.
eBay won't eat your babies
There are some worthy knocks when it comes to eBay undercutting our country's productivity. If folks are happy swapping mostly used goods, there is little reason to fire up the factory to manufacture new ones. Many of these goods are crossing state lines untaxed, and that, too, stings. And, yes, don't get me started on all of the time that employees spend glued to their eBay screens as auction timers wind down.
But let's take a closer look here. What about the auction seller? Isn't that wealth being created, sometimes out of something that would have otherwise been collecting dust in the attic? And if one can argue that Wal-Mart (NYSE:WMT) is good for the economy when it allows the consumer to stretch a dollar further and spend what's left elsewhere, then why not eBay?
Let's not forget to sing the praises of eBay's PayPal, either. The financial-transaction specialist claims 50.4 million accounts, and this past quarter it helped speed up $4.4 billion in payments. Closing on deals and transferring funds faster and safer mean that the proceeds are being made available sooner. Do you think that kind of monetary turnover is helping the economy? You bet.
Yet one of eBay's greatest contributions to this country is that it is such an efficient high-margin machine that it will pay out more than $300 million in income taxes this year. That breaks down to about a buck on behalf of every man, woman, and child living in this country -- no matter what they think of eBay, lemonade stands, or bake sales.
So take a load off. Your babies are safe. Your puppies are safe. We're all safe -- here in the well-lit belly of a whale named eBay.
eBay is just the type of growth company David Gardner will be covering in his new growth newsletter, launching in late September. Click here and be the first to know about it.
Longtime Fool contributor Rick Munarriz has been an eBay member since the 1990s. However, he does not own shares in any of the companies mentioned in this story. The Motley Fool is Fools writing for Fools.
