An Interesting Year for eBay

Sen. John McCain recently held eBay businesses up as a model for success in the present economy and in a limited sense he was correct. For many people eBay provides at least a supplementary income and allows those living in areas of the country particularly affected by the lousy economy to generate income from outside of it.

All in all it has been a good year foe eBay Inc. The company announced that revenue climbed to $2.2 billion, up 20% from last year. However, there is much to indicate that eBay may not be the answer to the country’s economic woes. The increase was primarily due to growth in advertising revenue and the online payment service PayPal not the primary auction site. (eBay also owns the Skype phone service and StubHub, an event ticket exchange site.)

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In the portion of eBay’s empire referred to by the Republican presidential candidate growth has slowed. The total number of transactions increased by only 8% over the previous year, far lower than eBay’s early years of seemingly endless double digit expansion. Discouraging as well is the declining sales of high end items such as cars and appliances.

Recent changes in the rating rules has also created problems for eBay by angering sellers. It is now no longer possible for sellers to leave negative ratings and comments for buyers. For this and other concerns groups of sellers protested and disrupted eBay’s June 2008 eCommerce Live event for top sellers.

Also, luxury-goods makers have accused eBay of being too lax about the sale of knock-offs on its site. They were fined in the past over fake Louis Vuitton handbags. Tiffany’s has alleged that 70% of the Tiffany jewelry sold on eBay is fake. However, on Monday a U.S. District Judge ruled that companies like Tiffany’s are responsible for policing their own copyrights and that it is not the responsibility of auction sites such as eBay. This was a major victory for the company and ultimately for its countless honest sellers.