eBay Bids for Revitalization

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Similarly, Donahoe tweaked the Detailed Seller Ratings (DSRs) to improve the quality of sellers and weed out untrustworthy ones gaming the system. Today sellers can no longer rate buyers since many were threatening negative reviews as a retaliation for their own low marks, rendering the rating system useless. Now sellers with low grades have their accounts frozen, while ones with high scores get fee discounts for good behavior. While many of the changes are so new it's hard to gauge whether they're working, in the third quarter the highest-rated sellers grew their business 26%. "He's doing all the right things," says Lindsay. "But because the economy has gone south and eBay has fallen so far behind, he has a turnaround problem."

Unlike his predecessor, Donahoe doesn't travel with an entourage. But when he was invited to the White House in September to accept an award on eBay's behalf, he took everyone, filling up the company plane with colleagues ranging from executives to engineers. "It's rare to find a CEO that is so hands-on and into details," says Sheng, one of the eBay sellers who attended the ceremony. "He has minimeetings on the fly where he listens to sellers and then pulls his staff aside to execute things."

Could the value-driven eBay actually be aided by a weak economy? "In theory, yes," says Derek Brown, an analyst at Cantor Fitzgerald. "In reality, not likely, because the company's own internal issues are outweighing potential positives from the economic slowdown." Nevertheless, eBay's holiday sales have gotten off to a solid start. It was the most trafficked retail site on Cyber Monday, the Monday after Thanksgiving, logging 13 million visitors, up 45% from last year.

Yet there is a unique opportunity for a place like eBay to improve. Unlike Amazon, eBay doesn't carry inventory, lowering its risk if goods don't sell. "If you keep people happy and coming back for more, when the economy picks back up, you gain ground, and that's what we plan to do," says Donahoe. Currently, eBay makes up about 14% of e-commerce, but e-commerce represents only 7% of retail. "If we're still in the early stage of e-commerce growth, both eBay and Amazon can thrive," says Imran Khan, managing director at JPMorgan. "I would not necessarily say it's a zero-sum game."

Still, with every platform tweak that Donahoe puts into effect, sellers have to adjust, and some have seen their profits plummet as a result. They're not shy about complaining. "There are people who say you've got to learn to ignore some of the criticism, and I don't," says Donahoe. "[Sellers] are vocal because they care, and the moment they stop being vocal is the moment I am concerned." In this economic climate, he shouldn't have to worry about that.