Whitman's Window Into eBay's Future

CEO Meg Whitman discusses the auction site's transformation into a "social commerce" platform and other big changes on the way

Margaret "Meg" Whitman, the longtime chief executive of eBay (EBAY), is fond of calling the auction giant the first social network. In some ways, it's true. The 12-year-old company was among the first to let users generate content. After all, most of the items for sale are supplied by members of eBay's community. They provide the photos and descriptions of items that make up eBay's auction pages. It's their content that attracts eBay's global audience of 233 million users.

That doesn't mean eBay is a pioneer in all areas. The company is just catching up to some of the Web's more recent innovations. At eBay Live!—the company's annual conference/revival for eBay buyers and sellers—Whitman & Co. announced a plan to redesign the site to make it more multimedia-centric, relying on photos and videos of products. Whitman and her managers also described efforts to make the site's auction feature available on social network pages, blogs, as well as Web sites and stores outside of eBay via widgets—those increasingly popular small programs that enable users to easily share content and incorporate it into their own Web sites.

As a result of these and other recent efforts, eBay has morphed from an online auctioneer and shopping site into what Whitman calls a "social commerce" platform. BusinessWeek reporter Catherine Holahan caught up with Whitman at eBay Live!, held this year in Boston, to discuss eBay's new identity, how eBay and the Web have changed, and what Whitman expects from the company in the future. Edited excerpts of their conversation follow.

In your keynote address you spoke about social commerce—the union of community and commerce—as what unifies eBay's businesses. How do you see the social aspect fueling e-commerce and eBay?

It goes back to our roots because we were a community anchored in commerce, and what I think is true is that when you have personal connections it is easier to do business. Think about it. When you live in New York there is a garment district, a flower district, a financial district—and why is that? Why does it make sense for those businesses to cluster together like that? There is a social network there.

First and foremost, we have to make sure that the community on eBay is as current and developed as it should be.… But we are also not averse to taking eBay off eBay, whether that is to some of the social networking sites or exporting it to your Web site with eBay To Go [a widget that enables users to embed eBay auctions into their own Web sites and blogs].

Where will most of eBay's growth come from? Will it stem from PayPal, eBay's payments business, or Skype, your Internet telephony unit? Or, will it come from eBay's core shopping business?

Our core business needs to continue to grow because eBay is still a huge chunk of this company and I think has huge growth potential. For the next few years I would anticipate that PayPal grows faster than eBay. But jobs Nos. 1, 2, and 3 are to reinvigorate the core business.

The company has made some large acquisitions in recent years; will you continue to be as acquisitive?

We have been a very acquisitive company since the beginning and I suspect we will continue to be acquisitive. There are two kinds of innovation. There is evolutionary innovation, which is making eBay better, making PayPal better. Then there is revolutionary innovation.… PayPal is a truly disruptive payment system that wouldn't have necessarily come from eBay. I think, for the most disruptive innovations, we will continue to acquire.

How does eBay's latest acquisition, StumbleUpon, fit your plans?

It is a fun company in the social discovery space.

We liked their social aspects of that and we see some synergies with eBay [the discovery technology could potentially be integrated into eBay to suggest items, for example]. You should think of StumbleUpon as an experiment.

EBay has the distinction of being a 12-year-old Web company at a time when there has been an influx of upstarts less than five years old. What advice do you have for these young Internet companies?

First of all, it is all about the buyer experience. You have to have the buyer experience right—you have to stay close to the customer. You have to continue to stay current and innovate. If we are not experimenting in our space, then probably no one is. So you have to keep innovating and you have to keep experimenting.

The other lesson learned…you have to evolve your organization. You have to have the right people, in the right job, at the right time.

What is the greatest challenge facing eBay?

To continue to grow our e-commerce business in the U.S. and Germany, as rapidly as we would like. It is very important that we reaccelerate the growth in those areas.

What do you think is realistic growth for eBay?

We want to grow faster than e-commerce because the bulk of our business is anchored in e-commerce. But we have another responsibility, which is to grow e-commerce as a whole. If we are not helping the industry grow, ultimately the growth rates will converge with retail, and nobody wants that.

How do you help grow the industry?

Largely in terms of innovation: How can we make shopping on the Net more engaging and a better experience than the land-based alternative? What conveniences can we offer? How can we make it more fun?

You have talked a lot about making the shopping experience fun. What fuels fun?

What our users like is the fact that [eBay] is different than shopping in a big-box retail [store] where you practically know the store better than the people who work there [do]. It is the joy of discovery, of finding a good deal. It is meeting people who like the same things you do. It is interacting with other people in a way you never dreamed possible.

Is e-commerce the same outside of the U.S.?

People are the same around the world. Trading is in the human DNA; the desire to make connections is in the human DNA. The desire to make a better life for you and your family is as relevant in Berlin as it is in Bangkok. Over time we are going to have more customization [the user interface may be different, the social networking aspects may be different] but the experience is the same.

What excites you the most about eBay and the industry, and what do you worry about?

What excites me is really the pace of change that we are implementing at eBay. We are going to do more to eBay in the next few months than we have in the past two or three years.

What concerns me? Can we be an important part of innovating e-commerce? In order to continue to show 30%, 40%, 50% growth rates, we are going to have to pick up the pace of change and the pace of innovation. I think we have a responsibility to make [shopping] more fun, more entertaining, and have better values.

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