Live Markets, Charts & Financial News

Israel layoffs reflect eBay’s global decline

0 13

Until a decade ago, eBay was synonymous with online retail. Along with Amazon, it was the place to go for new and used items, some of which the platform marketed through limited-time auctions that offered discounts to those who managed to register in time. The auction format it pioneered, “bidding,” spread like wildfire to other shopping sites as well.

But in recent years, eBay’s grip on the market has begun to weaken. In Israel, and especially in the United States, big brands like Amazon and Walmart, along with Chinese brands like Shen and Timo, are growing at the expense of the American giant. More affordable prices, discounts on delivery and aggressive advertising have slowly led customers in the United States and abroad to migrate to other platforms.

In fact, the number of active users on the site has stopped growing. The number fell from 138 million in the first quarter of 2022 to 131 million a year later, and has remained there ever since. eBay’s decline is also reflected in Israel, where the e-commerce giant has one of its largest development centers outside the United States in Netanya. eBay is now wrapping up its third wave of layoffs, both in Israel and globally, in just 18 months. Forty eBay Israel employees were laid off last month, 20 more were laid off early last year, and 30 employees lost their jobs last year.

At the height of eBay’s activity in Israel, the company had 350 employees. Today, according to LinkedIn, eBay Israel has 250 employees.

The company, once considered the undisputed king of e-commerce, established its presence in Israel in 2005, by acquiring Shopping.com, which developed a virtual price comparison platform. The acquisition was for $620 million, a large deal even by today’s standards.

Fear of closure in Israel

The layoffs in Israel mirror broader waves of layoffs at eBay abroad, and employees in Israel are not confident that this will be the last. Some eBay employees in Israel told Globes that operations in Israel could come to a complete halt because of the war and eBay’s weakened position against rival Amazon.

After acquiring Shopping.com in 2005, the company’s iconic Netanya building, visible from the coastal road, became eBay’s development center in Israel. During the latest round of layoffs, entire departments were affected, including the user experience department and the business unit responsible for recruiting sellers and stores to the platform.

An eBay employee in Israel told Globes that the recent round of layoffs “diminished the importance of the center in Israel, especially from the company’s perspective.” The employee added that “in this round, eBay fired the two most productive local divisions of the global company,” and that the current actions could indicate the company’s intention to close its operations in Israel.







“Ebay couldn’t compete with Amazon or Shopify, and it was too spread out,” says Uriel Levy, chief investment officer of the technology fund at More Mutual Funds. “It chose to acquire too many companies, rather than focus on the quality of the product it was offering. In the last five years, eBay hasn’t grown in revenue, although it has grown in commission fees. Amazon, on the other hand, continues to grow at a double-digit rate.”

eBay was founded in 1995 and went public on the Nasdaq in 1998 at a value of $1.9 billion. Today, the company has a market cap of $27 billion, and while its stock price has fallen from its peak, it has risen 18% since the beginning of 2024. Over the past five years, eBay has shown the lowest increase among the e-commerce giants, rising 33%, while Amazon and Shopify have more than doubled their value in the same period, while Walmart has risen 82%.

Levy points out that the company was a leader in the online retail market until the early 2000s. In 2002, it made the move that ultimately sealed its fate: it acquired PayPal to simplify the online payment process, and that company became a major component of its value for many years.

In a market study conducted by eBay, it found that 70% of auctions involved PayPal payments. “That was the main uptick in the company’s value,” says Sergey Vaschenok, chief equity analyst at Oppenheimer. PayPal’s founders, including Elon Musk and Peter Thiel, who left the company after the acquisition, were less pleased with the situation.

In 2015, the two companies were split. Then-eBay CEO John Donahoe explained the move: “This creates a new space of possibilities and challenges for both companies, and we believe that providing operational independence will allow them to have strategic focus, flexibility, and the ability to move faster in a changing environment.”

The split was another big blow to eBay, as nearly half of its revenue came from PayPal, which also managed to maintain reasonable growth through 2021, but then also found itself at a dead end. “PayPal just went off the deep end and started buying up a lot of companies,” says Levy. “They didn’t understand that the space they were in was very competitive and they lost the market to other players.”

“stuck in the middle”

Levy explains that investors today are grappling with the question of whether eBay and PayPal, individually, are value traps—a cheap company that doesn’t generate value for its investors. “You can say the stock is ‘working,’ but from the perspective that it’s implementing streamlining measures and trying to return money to investors,” he says. “eBay is selling companies it has acquired, for example, and at the current stock price, a single-digit multiple of earnings next year, investors think the business is reasonable. Yet eBay can’t compete with Amazon and Shopify, which are winning the digital retail market alongside Walmart and Chinese companies.”

Many analysts point to one of eBay’s biggest failures as its failure to integrate all the dozens of companies it acquired, most of them in e-commerce and billing technology. “After all the many acquisitions eBay has made, it has not been able to create synergies in the product it offers,” Vaschenok says. “When you do a series of acquisitions and you fail to integrate, it creates a very serious problem in terms of service and product.”

“At the end of the day, all successful companies are either goal-driven or organically growing, or acquiring companies that contribute to their platform, that remain unified. Companies that have a clear strategy for where they want to go. eBay is stuck in the middle. It’s not a leader, it’s not an efficient company. In today’s tech market, that’s very noticeable, especially over the past year, when there’s no belief in cheap tech stocks, because if a company is cheap, there’s probably a good reason for it,” he adds.

“The proposed changes in Israel are part of eBay’s global business strategy to provide a more efficient and tailored response to the company’s customers,” eBay said. “This was a difficult decision, especially given the situation in Israel. At the same time, the Israeli position remains integral to eBay’s ability to deliver on its product strategy.”

This article was published in Globes, Israeli Business News – en.globes.co.il – on July 4, 2024.

© Copyright Globes Publisher Itonut (1983) Ltd., 2024.


Leave A Reply

Your email address will not be published.