eBay Bids for Revitalization

Rebound Donahoe, a.k.a. Dennis the Menace in eBay-speak, in his executive cubicle.

JONATHAN SPRAGUE/REDUX FOR TIME

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Whitman, a.k.a. Blondie, her eBay nickname, had an impressive 10-year run, but when eBay's slowdown began, she tried to buy her way out of the problem, acquiring companies like PayPal, Skype, Shopping.com and StubHub to generate growth. Many were profitable but distracting, as problems like lack of trust and shoddy search technology continued to ail the auction site, the main revenue driver. "Meg was reluctant to expand things like customer service because it would eat into eBay's margins," says Jeffrey Lindsay, senior analyst at Sanford C. Bernstein.

That's why Donahoe, a Whitman hire at both eBay and Bain, where he spent more than 20 years, eventually becoming its CEO, carried out a series of rapid-fire changes. He emphasized, for example, fixed-price sales over auctions and got his mitts on the hands-off approach that has defined eBay for years. Many wonder whether the 12-year-old auction giant will emerge with the same DNA once Dennis the Menace departs. "Donahoe has introduced more changes in the last six months than we've seen in the last six years," says Jack Sheng, chief executive of Eforcity Corp., an electronics company and top seller on eBay. "Many are long overdue, but the direction is great." Others hate the upheaval. Writes a current eBay software engineer about Donahoe on Glassdoor.com a company-rating site: "Quit! We don't like your changes!"

That's where Donahoe's tough love comes in. First, he's acquiring companies like Bill Me Later, a payment system, and Danish classified-ad sites that have synergy with eBay's brand. He's also re-evaluating whether to spin off Skype, the voice-over-IP phone-system acquisition that was Whitman's biggest mistake, not to mention a $1.4 billion write-off. eBay overpaid for a company that doesn't directly benefit the core business. Donahoe also launched a new search platform to better catalog the 120 million live listings.

To promote the site as more than a bidding exchange, Donahoe has given buyers more choice. He's encouraged fixed-price listings over auctions by having a Buy It Now price for most products and has reduced the fees to list items, while taking a bigger cut if a product sells. "We've done exactly what our sellers wanted, and sure enough, they are listing a lot more," says Donahoe. "The selection on eBay has never been greater."

Next Donahoe clamped down on fraud to build trust to keep customers coming back. "In the Meg Whitman days, eBay didn't have any customer service," says Lindsay of Sanford C. Bernstein. "If something went wrong, it was tough luck, buddy." Today if a buyer pays for the transaction through PayPal--a payment company owned by eBay that has seen tremendous growth--the sale is guaranteed for the full price.