Meg Whitman: Making PayPal Pay

Position: CEO, eBay

Contribution: Has proven that e-commerce can be wildly profitable. The number of registered users at the auction site has mushroomed to 50 million

Challenge: Integrating eBay's $1.5 billion acquisition of Web payment service PayPal and adding enough areas of new growth to reach its lofty goal of $30 billion in transactions by 2005

E-commerce skeptics have long tried to find eBay's Achilles' heel. So far, the online bazaar doesn't seem to have one. And that has a lot to do with CEO Meg Whitman's ability to keep it on a steady course despite a recession, the burst Internet bubble, and competitive pressures. Since being appointed to the top spot in 1998, Whitman has delighted investors and wowed critics with spectacular increases in revenues and profits, and a relatively solid stock performance.

Remarkably, eBay avoided major acquisitions while growing from $372,000 in revenues in 1996 to $748.8 million in 2001. This summer, though, Whitman bought online-payment service PayPal to drive down back-end processing costs. eBay's own in-house credit-card payment division was a money-loser, while PayPal's is expected to be profitable this year.

Now, she has to persuade investors that eBay is better off for having purchased PayPal at what many consider a lofty price. "This is by far the largest and more strategically significant acquisition they've made," says Derek Brown, an analyst at W.R. Hambrecht.


  This year, eBay dropped its efforts to replicate its success in Japan, where Yahoo! was more aggressive and now dominates the online-auction market. Still, eBay's ventures in other foreign markets produced international sales growth of 148% in the most recent quarter -- faster than the 34% revenue gains it recorded in the U.S. If Whitman's plan works, global expansion along with new selling tactics like fixed-pricing, which allows users to buy without going through the auction process, should offset slowing growth in product listings in the U.S.

Indeed, Whitman now faces the daunting task of expanding the lineup of selections on eBay to continue delivering a larger pie. She gets a lot of help from customers, whose buying and selling habits play a big part in determining which new niches to try. But how many more aisles can she add to the store, after pickup trucks and telecom routers?

That question has yet to be answered. For now, though, even skeptics can't dig up much evidence that Whitman is losing touch with the people who matter most to eBay -- its buyers and sellers.

By Amy Tsao in New York

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