April 1, 2005, 12:00 AM

Follow that margin

(Page 3 of 3)

EBay also will seek to expand user activity in categories it already has and launch new categories, with the idea of getting buyers in one category to buy in related ones. In January, Whitman told Goldman Sachs analysts that a high percentage of eBay buyers buy only in one category and a small percentage regularly buy in two. "We have work to do to move that up to three and four," she said. "If you buy jewelry, you should also buy cosmetics. If you buy cosmetics, you should also buy other health and beauty aids." EBay will change its marketing mix slightly so as to expand the daily consideration of categories among buyers, a build on its historic focus on customer acquisition, Whitman said. EBay--already a big buyer of paid search advertising--says it will continue to leverage natural and paid search to market eBay listings to buyers, and it issued its first catalog last year. And that`s just in the U.S. EBay has also announced plans to spend significantly in expanding internationally and continuing to export PayPal abroad.

"They are doing the right things," says Rashtchy. "They`re expanding geographically, expanding categories as much as they can, and increasing the activity level. I would contend there is still significantly more there than meets the eye in what we saw as represented by their Q4 performance."

But what eBay does globally in the future to maintain or boost its share price is less immediately relevant to retailers than what eBay can do for their business right now.

As retailers evolve online, so does the way in which they use eBay. For some, eBay`s importance as a quick and inexpensive route to online sales and a way to get in front of the widest possible set of potential buyers is giving way to new thinking in which eBay`s greater value is as a liquidation strategy and a means of finding new customers. "I don`t think we`ll ever leave eBay completely," says Wieber. "It`s good for a certain type of product, and we have been doing it for a long time. We have very good systems for selling on eBay. To scrap all of that would not be smart."

Wieber`s position represents the view of many that expect to keep a foot on eBay`s platform while exploring new options as they move along that evolutionary curve. "EBay`s a fabulously strong platform and will continue to be so," Effle says. "But what we are seeing is that there are now other companies that can do an efficient job of driving customers to merchants."

mary@verticalwebmedia.com

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