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EBay Attempts to Clean Up the Clutter EBay Attempts to Clean Up the Clutter EBay Attempts to Clean Up the Clutter EBay Attempts to Clean Up the Clutter EBay Attempts to Clean Up the Clutter EBay Attempts to Clean Up the Clutter


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EBay Attempts to Clean Up the Clutter

Wall Street Journal
by GEOFFREY A. FOWLER And SCOTT MORRISON
October 31, 2010

As eBay Inc. prepares for a critical holiday shopping season, the company this week plans to unveil new elements of an overhaul in how shoppers find and buy products on its Web site.

Behind the new look, which includes eBay's first major home-page redesign in nearly four years, is an urgent effort to close a technology gap that has caused the onetime Web pioneer to lag behind rivals like Amazon.com Inc. Amazon for years has had many of the same features that eBay is adding.

EBay Attempts to Clean Up the Clutter.

"One of the most important things we had to do was become more of a technology-driven company," says eBay Chief Executive John Donahoe. He says that while the company has made "significant progress" in its turnaround, eBay is only about halfway through some major technological goals, such as building a product catalog for the millions of products sold on eBay.

As part of the overhaul, eBay's home page will provide recommendations based on previous searches and feature a list of the hottest items. In recent weeks, shoppers looking for DVDs, MP3 players or GPS devices have begun seeing a single page for each model of a product, consolidating the sometimes thousands of different listings by sellers and highlighting the best deal at the top. The company says more such pages are to come.

The technological shift is crucial in turning around eBay. Over the past two years, the San Jose, Calif., company's core marketplace business has underperformed the U.S. e-commerce market. And while sales on eBay were twice as much as those on Amazon last year, Amazon in October of last year moved ahead in U.S. traffic.

This holiday quarter, a period in which eBay typically sells 30% of its yearly nonauto merchandise, will provide a test of whether the changes are effective and working fast enough.

"If they hadn't addressed their technology problems, they would have continued to lose market share," says Sandeep Aggarwal, an analyst at Caris and Co.

Created in the late 1990s, eBay's marketplace was built to let mom and pop merchants sell all sorts of goods in auctions. Merchants typed in details about millions of products, giving the site an assortment of goods that remains unrivaled. But eBay had few ways to sort and organize those individual listings, other than by which auction was ending soonest.

Meanwhile, retailers like Amazon focused on new, fixed-price merchandise, relying on organized catalogs that let the online retailer keep track of what it was selling. That created the ability to cross-sell products and recommend other merchandise.

EBay's system, which involved 25 million lines of inflexible code, soon became a liability. The company, for example, couldn't figure out which of its hundreds of thousands of "iPod" listings were for a given model or for iPod accessories.

EBay's challenges with outdated technology are common for Web pioneers, whose systems were built with custom software that is now too old and rigid to adapt to a competitive and fast-moving market.

To change a website's underlying technology is "one of the most difficult and dreaded things you can do" as an information-technology manager, says Rob Enderle, of tech consulting firm Enderle Group. "The benefits are fuzzy and the risks are very real. Yet you have to do it. If you don't, you fall behind and you go out of business."

EBay's tech overhaul began soon after Mr. Donahoe became CEO in 2008. He quickly hired a new chief technology officer, Mark Carges, and gave him free rein and sufficient budget to recode the software that powers eBay's marketplace.

"It's like having the jet engines changed while the plane is flying," Mr. Carges says. He ended up hiring 150 engineers. Mr. Carges also had eBay purchase Positronic Inc., which has built predictive models for financial-services clients.

Early last year he assigned the Positronic team, including eBay Vice President Dane Glasgow, to revamp eBay's search engine and build a catalog so the company could organize its listings, steps designed to help shoppers find what they want to buy more quickly.

The engineers created templates for types of products, filled with details like color, make and model. After a year of work, eBay's catalog had grown to 8% of all listings from 3%. Now, two years in, some 20% of eBay's listings are in the catalog.

Mr. Donahoe says eventually eBay could catalog about half of the site's inventory. The other half, he says, defies cataloging because it consists of odds and ends, like fossils or cave homes. He has set an internal goal to increase the size of catalog to 40% of inventory by the end of next year.

The effort has had to overcome cultural stumbling blocks. For years, tech staff didn't attend key strategy meetings, including those in which eBay decided to emphasize fixed-priced goods.

Mr. Carges, the technology chief, is now a key voice within the company and encourages engineers to take the initiative in testing new ideas and adding features. He created an area on eBay's site called "The Garden," where engineers can try ideas and solicit shopper feedback.

The underlying tech changes, which were made in consultation with some merchants, already have enabled eBay to roll out popular shopping apps for smartphones and shopping pages built with eBay's new catalog and search technology.

Some eBay merchants applaud the changes. "This should be a huge benefit to us and eBay buyers who will benefit from a better shopping experience," says Israel Ganot, CEO of used-electronics seller Gazelle.com.

But other merchants say the effort is too little, too late. Skip McGrath, a popular eBay merchant who sells kitchen items and writes books about e-commerce, says eBay's new catalog and search engine haven't helped him sell items like knives.

"We are on eBay version 2.999216. They have never made the step to eBay 3.0," he says.

EBay says a fashion section of the site rolled out in April that was made possible by the tech improvements contributed to an 8% increase in third-quarter sales of clothing, shoes and accessories.

"We have been responsible in driving pretty aggressive change," says Mr. Donahoe. Still, "I always want to go faster."



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