old-school business wisdom
those advantages, the company has decided to "exit" certain
acquisitions that were more "land-based" Penchina explains.
"From a finance perspective, we focused on higher-touch, low-margin
business," he says. "There was a fair amount of work we did
around deciding our financial structure."
online auction site with a virtually unlimited marketplace,
eBay is in the unique position of being able to turn potential
competitors into customers, Cobb says. "We're about trying
to make inefficient markets efficient," he says. "We try to
focus our industry, not outward at competition, but at enabling
our community of buyers and sellers. We're about choice. We're
his May appearance as keynote speaker at the Kellogg Reunion
Weekend, Cobb further distilled the formula for eBay's success:
"one part commerce, one part entertainment, and one part town
meeting all rolled together."
has eliminated barriers that have kept willing sellers and
willing buyers apart. These barriers include distance, time,
and an assortment of structural issues in all kinds of industries
and markets," he said in May. "As our platform grows, it scales
and gets significantly stronger. Every day more sellers and
buyers come to eBay. And the power of large numbers is just
eBay's stock in trade is consumer-to-consumer sales, an increasing
number of small to midsized businesses "are fairly large sellers,"
Cobb says. And Penchina believes using the site to purchase
used equipment became more acceptable during the 2001 recession
and the two years of relatively slow growth that followed.
falling on hard times might, for example, search for a used
computer on eBay because its funds are limited and it "doesn't
need the latest Pentium chip," Cobb says. eBay does not necessarily
see the variety of other options such a customer might have
online as a bad thing, since the combined pull helps drive
people online in the first place. "To some extent, the choice
that consumers have is a benefit to all of us," he says.
Hani Durzy notes that the dollar value of small businesses
buying goods for their own use on eBay doubled from about
$1 billion to $2 billion from 2002 to 2003. "Our business
has strengthened during those times," Cobb says, "and it was
very strong during the heady economic times of the late '90s."
tougher economic times helped by increasing the pool of unemployed
or under-employed people looking to make an extra buck? Durzy
says the company estimates that 430,000 Americans now use
the site to make a part-time living. In Germany, Justus says,
the challenging economic times probably have added to the
base of sellers, but he thinks they'll stay involved even
as times improve.
has brought a sense of relevance to them at a particularly
difficult economic time," he says. "When we speak to people,
yes, their initial impetus to think about eBay has something
to do with the fact that they're unemployed. But eBay is so
relevant" that once people start trading, they won't stop.
the company's success has continued as the U.S. economy has
begun another upswing. Cobb notes that in the first quarter
of 2004, eBay recorded an 82 percent gross margin and a 37
percent operating margin, and in mid-June, the company had
more than $3 billion in cash on hand.
an 8 1/2 year old company to put up world-class financial
architecture results like that speaks to the fact that everybody
here is committed to and disciplined in the way we invest
our dollars," Cobb says. "For a company this young, we have
some pretty amazing figures. It's reflective of the [financial
discipline] that was really ingrained in everybody from our
School MBA experience imparted certain values and knowledge
that Cobb, Penchina and Justus say have proven invaluable
at eBay and throughout their careers. Penchina, who formerly
ran eBay's mergers-and-acquisitions group, cites classes such
as financial accounting as especially helpful.
a marketing and finance major, has spent most of his career
in marketing for such companies as Colgate-Palmolive, Jeno's
Inc., Fidelity Investments and, for the longest stretch, Pepsico.
He says Kellogg instilled in him a "strong bent for the analytical
side. As marketing has evolved, it's such a critical component.
If you don't have a degree of analytical horsepower, you're
not going to do well in marketing."
says the school prepared him well for a general leadership
role by providing a strong background in all areas of business
and because of its international flavor. "For a German national,
it's helped me understand what it is like working with people
from all around the world and helped me understand the mindset
of American companies," he says. From a finance-specific perspective,
Justus says, "The Kellogg curriculum helped me appreciate
a lot how the pieces in the business fit together."
he says, when determining pricing, "We probably start to look
at that from a marketing angle, but obviously pricing has
financial implications. My Kellogg education has helped me
to see these issues not simply from one angle, but from many,
so that the complex implications can be understood and acted
upon by our team."