Kai Ryssdal: Meg Whitman, welcome to the program.
Meg Whitman: Thank you. Glad to be here.
Ryssdal: How was Cyber Monday for you?
Whitman: You know, pretty good. We haven't, I don't think, released all the facts and figures, but ...
Ryssdal: Well, you can tell us now.
Whitman: ... but we're off to a good start on the holiday season. I think we were well prepared. We had a good marketing plan in place. We had a good merchandising plan. And, so, things are good.
Ryssdal: Do you buy into the whole concept of Cyber Monday?
Whitman: You know, I think it's a little hard to pigeonhole people's behaviors. I think this holiday season gets going and I frankly think it happens later and later every year.
Ryssdal: Yeah, yeah.
Whitman: But, I think people certainly on Monday are back at work and shopping.
Ryssdal: What is the right way to measure this company?
Whitman: Well, I think a couple of things. One is of course our financial results, which is revenues, operating profit, return on invested capital, cash flow. The traditional financial metrics. And, then, looking at on the eBay business, our gross merchandise volume; on the PayPal business, our total payments volume; and, on the Skype business, Skype-to-Skype minutes; are probably the best measure of vibrancy of the marketplace.
Ryssdal: Is it a changing set of parameters as you now mature into this marketplace?
Whitman: Well, we are a very different company than we were ten years ago. And, so, I think you have to be thoughtful about not just saying, "OK, there's only one measure that matters." You know that a lot of the people who follow eBay spend a lot of time focused on listings.
Whitman: Listings is interesting, but how that translates into gross merchandise volume is a function of the conversion rate, meaning the percentage of those items that actually sell and the average selling price, and successful listings, right? So, I think it ... you have to just be a little bit more detailed and a little bit more thoughtful than you were ten years ago when there was really only one metric for success.
Ryssdal: Get thoughtful for me for a minute then and tell me how you think you're doing objectively by the standards that other people view this company, not you and the folks in the building?
Whitman: Mm-hmm. Well, I think, let's step all the way back. Of the thousands and thousands and thousands of companies that were founded on the internet since 1995, there's only two with market caps of more than 45 billion, that's eBay and Google. Google is a lot more than 45 billion. And, then, there's just a couple of others in the sort of $35-40 billion range. So, by any measure, if you take the ten-year perspective, this has been a remarkable success story. In the last couple of years, I think a couple things we wish were a little different. One is we wish that gross merchandise volume in our big markets was growing faster than it is and we've spent a lot of effort in the last year to see if we can reaccelerate gross merchandise volume in our three big businesses. And, I think people would say PayPal has just been a remarkable success all the way around. So, I would say if you take the ten-year perspective, one of the all-time great success stories.
Ryssdal: Let's take the shorter-term perspective and let me ask you why, in the last couple of years, growth in your core business ...
Ryssdal: ... that is auctions ...
Ryssdal: ... has slowed?
Whitman: Well, first of all, it's getting to be a very big business. You know, this year, our users will trade over $55 billion worth of product. If we were a retailer, which of course we're not, we'd probably in the top ten retailers in the world. So, we're getting to be a very big business. And, then, I think the standards on the internet, the competition on the internet has all changed quite a bit in the last two or three years. And, we have to continue to keep pace with what consumers want and what our buyers want and what our sellers want. And, so, in this business, you have to constantly reinvent yourself.
Ryssdal: It's a tricky thing actually for you because you're in the retail business, sort of, but you're not the retailer.
Ryssdal: So, when customers go looking for a trusted retailer, a company that they can really believe in, you're only sort of the device ... you're not it.
Whitman: Well, we are the platform, where we connect buyers and sellers. So, you're right, we don't control the buying experience. In fact, the buying experience is more determined by who you're buying from than from eBay. But, of course, we have created a trusted environment where you can look at feedback; you can understand who it is that you're buying from. And, that actually is of a lot of comfort to people, because if you're just randomly looking for websites on the internet, you have no idea whether Joe's Surfboards is a good, bad, or indifferent retailer. And, we do a lot obviously to give you tools by which to make a decision on eBay.
Ryssdal: One of the things you're doing to try to sort of reinvigorate growth around here is to turn eBay from what had been sort of a seller-focused marketplace to more of an emphasis on the buyer and making sure their experience is good and worthwhile. Why are you doing that if the revenue actually comes from the people who sell, who pay to list on the site?
Whitman: Well, let me take you again all the way back.
Ryssdal: Oh, we're doing a lot of that today, aren't we?
Whitman: Well, we started, obviously, really focused around the seller ... I mean, around the buyers, right? Because, what we believed to be true was that first and foremost you have to have the buyers be happy, because if you have no buyers, you don't have sellers. But, it's obviously an ecosystem. Buyers bring more sellers who in turn bring more buyers who in turn bring more sellers. So, it's an ecosystem. You have to pay attention to buyers as well as to sellers. And, I would say in the last three or four years, we've become a little more seller focused, and then last year we said, "You know what? We've got to really redouble our efforts against the buyers and make sure they're having a fabulous experience, that it's easy, that it's a competitive buying experience relative to others on the net," and that's why we sort of focused on the margin back towards buyers.
Ryssdal: As we were preparing for this interview, we went around ...
Ryssdal: ... and actually talked to some people who had been buying and selling on eBay.
Ryssdal: Some people have been doing it for a long, long time. One of them is a guy named John O'Neill.
Ryssdal: And, we asked him this question ...
Ryssdal: ... about the balance between buyers and sellers. Here's what he said:
"eBay is wasting their time making it simple, because it is simple. They spend too much time messing with the system. They need to find a happy medium. Don't make it for the buyer. Don't make it for the seller. 'Cause it takes both of them."
Takes two to tango, right?
Whitman: Yeah. And, I think that's what I said, which is that it's an ecosystem, right? You've gotta have a great and easy selling experience. And, you've gotta have a great and easy buying experience. And, that's probably what makes this a little more challenging than a traditional retail environment where if I'm a retailer, I buy inventory, I merchandise it, and I sell it. But, the benefit is, of course, we provide tremendous breadth of inventory. No matter what you want, it's for sale on eBay.
Ryssdal: Yeah, that's a fact.
Whitman: And, so, I think it can be a great proposition. And, the other thing is we have 1.3 million people who make their living pretty much selling on eBay. And, that is something that's I think quite unique.
Ryssdal: Aren't you worried, though, about perhaps alienating that 1.3 million-user group basically as you tighten up your requirements for them?
Ryssdal: You make them deal with buyer feedback and all sorts of other things that make life a little bit tougher for them. Here's another piece of tape to play.
Ryssdal: Are you ready?
Ryssdal: It's a woman named Clarissa Parshar. And, we asked her about the new rules on buyers giving sellers ...
Ryssdal: ... feedback on their auction experience:
"I know several people that have been caught up in this and have been restricted. People with 99.9% positive feedback and they get restricted because one or two buyers in a month ... say it's an international buyer, and they don't read, and they don't realize they're going to have to pay customs fees. So, they blame you, and they give you negative feedback over it. It's not your fault. But, you get a couple of those and boom, all of a sudden you're restricted?"
What ever happened to caveat emptor?
Whitman: Well, I mean, obviously you need to be smart about wherever you buy on the net. But, what I would say is that good buyer experiences are incredibly important to our model, that without buyers being happy, the sellers won't be happy because the business won't be there. So, you know, one of the reasons we went to detailed seller ratings was the ability ... instead of just saying, you know, "great seller," to be able to say, "hey, great seller on shipping, great seller on item as described, but, you know, wasn't a great communicator." So, it just gives a little bit more nuance and a little bit more qualitative feel for who it is that you're buying for. And, actually, people really like this. Our buyers love the fact that they can look at shipping, they can look at item as described, and they can look at communication as a way to gauge, "gee, do I want to buy, you know, that iPod from you or do I want to buy it from someone else?"
Ryssdal: How do you get back people like me? I bought something on eBay four or five years ago now. Haven't really seen a need to since. Went poking around on the site the past couple of days and it's fine, it's great ...
Ryssdal: ... but how do you get me back into the fold to keep me as an active user?
Whitman: Well, our first priority of course is to keep our existing active users. So, you know ...
Ryssdal: So, forget about me, right?
Whitman: No, no, no, not forget about you. I'm just saying in a priority here.
Ryssdal: Just checking, 'cause I had to hear it. I figured I might as well ask.
Whitman: So, the first thing is we want to keep our existing buyers, just delighted and happy. And, then, of course, we have the ability to reengage those users who bought something several years ago. And, we do that in a couple of ways. We do that through emails. I don't know if you've received any emails from us.
Ryssdal: I have had them.
Whitman: We do have a relatively straightforward email campaign. And, then, of course, our television advertising obviously brings back consideration of eBay to someone like yourself. So, you may be watching a ballgame on TV and you'll see an eBay ad, and you say, "You know, I haven't been to eBay in a while and I should check it out."
Ryssdal: There are, though, a million places out there on the web where I can go and buy something. Whether it's doing a search on Google or whether it's going to Amazon. What makes you better?
Whitman: I think it's three things. It's value, selection, and fun. You'll find the best deals on eBay with the widest assortment, because we are a marketplace, so there can be a thousand sellers selling an item. And, then, you know what? It's really fun. The auction is fun. The community is fun. And, people tell us all the time it is the most fun place for people to shop. So, value, selection, and fun.
Ryssdal: There is also a very strong ... or has been in the past. I actually don't know if it's as strong as it used to be. A sense of community ...
Ryssdal: ... here at eBay.
Ryssdal: That really was the basis for a lot of your growth.
Ryssdal: And, the last piece of tape I want to play for you is a guy by the name of Jay Sinese.
Whitman: Mm-hmm. I know Jay.
Ryssdal: See, there you go. So, I don't need to identify him too much further, other than to say he's a power seller.
Ryssdal: He makes a lot of money buying and selling on eBay. And, we asked him the question of community.
Ryssdal: And, how you guys are stacking up in what is a very different environment than when you first started business:
"I think the whole subculture thing at eBay has come and gone. A lot of people have burned out on eBay, a lot of the old-timers. The thrill is gone. They lost the community to places like MySpace and Facebook and the other chat sites and all that. The activity you see now on the message boards and the chat rooms is a shadow of what it was a few years ago."
Who's your competition in that regard, talking about this sense of community?
Whitman: So, it's interesting because this is community that is anchored in commerce.
Whitman: It's not just community for community's sake.
Whitman: And, I would argue that MySpace and Facebook are more community for community's sake, whether it's flirting or dating or, you know, whatever it happens to be. So, we still are very much the community anchored in commerce model, whether you want to call it social commerce or whatever. And, actually the metrics continued to grow dramatically. We look at page views on our bulletin boards. We look at the number of messages that are going back and forth. And, the community at eBay is still very much alive and well. Now, the question then becomes what about where are people spending their time on the net? And, it's very true that the 18 to 24 year olds have been captured by Facebook and MySpace. We don't see a lot of our older customers frankly hanging out on MySpace and Facebook. But, you know what? We have to keep pace with community. We have to think about ways to build community on eBay and then actually take eBay to those pages. So, we have eBay and PayPal widgets that are on Facebook and MySpace. We've actually, done a deal with Skype on MySpace. So, we have to be willing to take our community and our product off of eBay as well as just keep it on eBay.
Ryssdal: Do you find that your demographic's skewing older as time goes by?
Whitman: They have always skewed a little older, even back to 1998. Because, you might recall, collectors were the first to come. And, collectors tend to be a little older. So, we have a huge share of people basically over 30. And, we don't have as big a share of sort of the 18 to 24 year old crowd. And, so, we're working on how do we actually engage the younger group? But, frankly from an economic point of view, the purchasing power is the 28 and above.
Ryssdal: You have said that one of the ways you want to grow this company ...
Ryssdal: ... is by acquisitions.
Ryssdal: And, you have a pretty track record.
Ryssdal: I think PayPal, clearly everybody agrees was a gangbuster hit, StubHub the ticketplace. One that hasn't really worked out so well obviously is Skype.
Ryssdal: What was running through your mind when you agreed to pay $2.6 billion for an internet phone company?
Ryssdal: It was, just to be clear, a $1.4 billion write-down.
Ryssdal: It was not pocket change.
Ryssdal: What was the plan though to integrate Skype into an online auction site? How was that gonna ever work?
Whitman: Oh, in a couple of ways. First was adding a communication mechanism for high-end auctions. Gee, if I'm gonna buy a car from you or a grandfather clock, I might like to talk with you. And, the ability to make that path of communication incredibly simple. The other was, and we are now building out these e-commerce services like a SkypePrime, like a SkypeFind, that are actually voice marketplaces that we can then integrate onto eBay to get traction that then propels Skype. And, then of course there's PayPal "Send Money" and the SkypeClient, which just recently launched. Which I think has pretty good traction. We'll have even better visibility in the next generation of the SkypeClient. So, we were slow on some of these integration issues, not because we didn't want to but there was this thing called the earn-out that frankly I think was not perfect in terms of the incentives.
Ryssdal: Speak English to me and tell me what an earn-out is.
Whitman: Ah, so, we paid a certain amount of consideration up front for Skype and then the founders were entitled to incremental monies if they hit certain milestones. Those milestones were revenues, gross profit, and users. And, it was pretty clear to us that they were gonna hit their user number. And, so, that's what we chose to pay early. And, then, we agreed with them that they were not likely to hit their revenue and gross profit target. As a result, let's get the earn-out off the table and run the company to delight users.
Ryssdal: And, how much is it actually now contributing to eBay, the corporation's bottom line?
Whitman: Well, it is profitable. It'll be a $400 million roughly this year in dollars. Of course, Skype's revenues are actually in Euro ...
Whitman: ... so depending on the exchange rate.
Whitman: But, anyway, and it is profitable but I don't think we've actually released the profitability. It's profitable ahead of schedule actually.
Ryssdal: This is a little bit out of left field, but how are you feeling about the economy and the dollar and the credits? Are you worried about that at all?
Whitman: Well, I think every indication is that the consumers are a little jittery out there. That the sub-prime mortgage issue may not affect all consumers, but there are sort of tentacles that go out from that sub-prime mortgage meltdown. And, I think what we're seeing is we're seeing a little more tentativeness on the part of consumers, but we're also seeing casual sellers sell on eBay. And, in many ways, we may be counter-cyclical. Because when times are a little tougher, you may say, "You know what? I need a little extra money. I may not get the overtime that I counted on at my job," or whatever. "I'm gonna sell some stuff on eBay to bring in a little extra cash."
Ryssdal: But, I'm just as likely not to buy stuff on eBay.
Whitman: Yes, except for here again we're counter-cyclical because we are the one with the broadest selection. So, let's say you're looking for a bicycle for your son, you might say, "Hmm, I'm gonna buy a used bicycle or a second-hand bicycle or last season's bicycle, as opposed to the brand new bicycle because it's 30% of retail or 40% of retail." And, we are actually, you know, we see that in our metrics.
Ryssdal: When you're at a cocktail party ...
Ryssdal: ... and you're chitchatting with somebody you just met.
Ryssdal: And, they say, "So, what do you do?" What do you say?
Whitman: I work at eBay.
Ryssdal: And, they say, "What's that?" 'Cause this could be my mom having this conversation. And, she'd have no idea who you are and what you do.
Whitman: Well, in the early days, almost no one had heard of eBay. It's rare that I run into people today who haven't heard of eBay. But, if I ran into your mom ...
Ryssdal: Just for the heck of it, yeah.
Whitman: ... I'd say, "So, we are the largest worldwide marketplace for the buying and selling of practically anything that has a huge sort of fun and social component to it. But, no matter what you're looking for, you can find it on eBay."
Ryssdal: You've been here almost ten years.
Ryssdal: What's the single biggest change you think in the time you've been here since 1998?
Whitman: Gosh, there's been so many changes. I think ...
Ryssdal: Just pick one.
Whitman: ... probably the scale of the operation. That when I joined eBay, there were 30 employees and $4.7 million in revenue and 300,000 community members. Today, we have 16,000 employees. This year we'll do about $7.6 billion in revenue. And, we have over 240 million community members. So, the scale is just completely different.
Ryssdal: Do you do opposition research? Do you shop on Amazon, and Google, and Yahoo shopping sites?
Whitman: I don't actually. I only shop on eBay. As a matter of principal. But, we obviously have competitive research that we do as a company of course.
Ryssdal: What are you worried about from your competition?
Whitman: I think it's a great thing for consumers. But, consumers are much more net savvy than they were ten years ago. There's a lot more options out there. And, so, we need to keep our site above the crowd in terms of value and selection and fun. And, the fun thing is we have lots of new technology tools that we didn't have even ten years ago. And, we have this fabulous brand and this remarkable community of users. And, we just have to keep reinventing ourselves. I think time on the internet has collapsed. And, so, we just have to be bold and be willing to reinvent ourselves every year.
Ryssdal: Going back to something you said earlier, though, that reinvention or reinventing yourself period becomes much more difficult the bigger you get. And, you are now a very, very big company.
Ryssdal: Where growth is, there's diminishing returns.
Whitman: Yeah. Well, one of the things we have to do ... and this is what all big companies have to do ... is how do you make scale an advantage, right?
Whitman: How do you make scale an advantage? And, there's lots of ways to make scale an advantage. Let me give you a most recent example is our classifieds business. You might not know, but we're actually the number one player in online classifieds in about 400 cities and 35 countries. And, the reason is that we were able to use our billing mechanism, use our platform to actually get to market in 400 cities, you know, from standing start in nine months. And, no start up could ever do that. No start up would have the resources, nor would they have the leverage of our infrastructure in all these countries. So, that's a case where we made scale a real advantage.
Ryssdal: Could a company like eBay start today from scratch?
Whitman: Oh, I think innovation on the net continues unabated. Look at it. There's been a number of very big success stories, whether it's eBay or Yahoo or PayPal or Skype or MySpace or Facebook or Google. You know, I think there will be more success stories on the net. I think we're at the beginning not the end of sort of innovation on the internet.
Ryssdal: Before you came to this company, you ran FTD, the florist?
Ryssdal: You had a key role at Hasbro.
Ryssdal: What does that have to do with running what has become, what you have built really into an internet powerhouse?
Whitman: Yeah. I think a couple things. My background is on consumer-oriented markets, consumer-oriented businesses. And, eBay is a consumer-oriented business. So, starting with a completely keen understanding of customers was part of my DNA. I think the second thing is I was used to running relatively large organizations. And, so, for many years, eBay grew to me in terms of, you know, I'd run a $600 million division at Hasbro. So, running a $5 million company was manageable.
Ryssdal: So, why'd you take this job?
Whitman: You know, it was very interesting. At first I said, "No." When the headhunter called me back in 1997, I said, "No." And, he called me back three weeks later and he said, "eBay is perfect for you and you are perfect for eBay. Please get on a plane to meet the founder." And, I said, "All right. I will do this." Thinking to myself, "I don't want this job, but I don't want to make the headhunter mad." So, got on a plane and actually met Pierre Omidyar and his early co-founder, Jeff Skoll. And, by the end of the afternoon, I said, "You know what? This is something I should do. This is going to be a really big idea."
Ryssdal: Hmm. If you think about what happens here, it's kind of funny. Because you have an electronic sales platform.
Ryssdal: Which is based on really site-unseen purchases, sometimes over huge distances. What is your responsibility in keeping both sides of that transaction honest?
Whitman: Well, we have a huge responsibility to keep the site a safe and well-lit place to do business. This is a marketplace that's based on trust. And, the early skeptics of eBay, back in 1998, those who didn't invest at the IPO, said, "Gee, I don't know how this is gonna work. I'm gonna send money to someone I've never met and maybe I won't get the product." Well, it turns out in 99.99% of the time, you do get the product and you're delighted and there's a personal aspect to it. But, we for ten years have provided tools and all kinds of efforts, probably, oh, I don't know, 3,000 or 4,000 people at this company now work in what we call our trust and safety arena to keep the site a safe and well-lit place to do business. So, it's a big responsibility of ours.
Ryssdal: It doesn't always work, though. I mean, there are some people who lose money and have terrible experiences.
Whitman: That's true. But, it is a tiny fraction of all experiences. That said, if you're one of those people, that doesn't make you happy. So, we are on a constant quest to make sure that everybody's transaction works out as they had hoped.
Ryssdal: You mentioned online classifieds. Obviously, you've got PayPal. You've got Skype. What else does eBay have to offer us in the next three to five years?
Whitman: Well, I think the thing that we do is that we have the number one position really in three major segments on the net ... e-commerce, payments and communication. So, our objective is to extend the lead in those three segments. And, on the e-commerce side, we do it with really three major brands. We do it with eBay, obviously. Our classifieds business. And, then shopping.com, which is an advertising-based revenue model that's all about new, in-season product and finding you the lowest cost camera that you're interested in shopping for for the Christmas season. So, it's really three different market segments, three different brands. And, that's gonna keep us busy for awhile. You know, we think we're at the beginning of a lot of these markets, not the end.
Ryssdal: Why has eBay had a rough couple of years? I mean, it's a pretty basic question.
Whitman: Well, that depends how you look at it. From a revenue point of view, an operating profit point of view, cash flow, return on invested cash, we've had a tremendous run. And, the stock price, yes, is down from it's all-time high in December of 2004. But, as I said, this is a remarkably successful company. And, I think the challenges that we've had over the last couple of years that were all about is how do we reaccelerate growth, GMV, gross merchandise volume, in our largest markets? And, if we can do that, I think that any questions about the long-term growth rate of the company will dissipate.
Ryssdal: When you get ready to go on a conference call with Wall Street analysts and you start thinking about they're gonna ask you ...
Ryssdal: ... along these lines ...
Ryssdal: How do you try to convince them that the future's bright for you? I mean, because there are some out there who say, "You know what? It might have peaked."
Whitman: Yeah. In the end, this is all about results, right? So, they judge our company on results. And, our objective and our responsibility is to deliver those results over a relatively foreseeable timeframe for the analysts. So, what we describe to them, I think we are an incredibly transparent company. We get a lot of very good feedback about how transparent we are. And, we tell them what the challenges are, we tell them what the strategy is, we tell them what's going well, we tell them what we wish was better, and then they make their own judgment. So, we tell them the story in a transparent even-handed way.
Ryssdal: You said either at this most recent quarterly earnings announcement or the one before that that we're gonna see more changes in eBay in the next six months than we've seen in the past two to three years. Other than making it a buyer-friendly ... a more buyer-friendly site, what else are we gonna see out there?
Whitman: Well, you've seen a whole host of things over the last twelve months. And, everything from ... I mean, I even have the list here because there's so many things. There's simplifying the user experience from a more personalized homepage; to the next generation check-out flows on eBay; to bid assistance, to best match, which is a new finding experience; to visual browse, where you can browse through pictures as opposed to browse through listings. So, a whole host of things. And, what you'll see going forward is more focus on the buyer experience, but also easier to list for casual sellers. So, if you want to sell something, make it easier for you. And, then, we've done a whole host of pricing tests. We've done a whole host of merchandising tests. And, so, you'll continue to see, I think changes for both buyers and sellers.
Ryssdal: Who do you spend more time with on a day-to-day basis, your chief financial officer or your chief technology officer?
Whitman: Actually probably my business unit heads. So, actually neither of them. I mean, I spend time with both of them, but I spend time with the folks that are actually on the ground running my businesses. So, two weeks on the road with our eBay people, our PayPal people, our classifieds people in Europe and Asia on imprinted in-depth business reviews. And, what are our customers telling us? What are our sellers telling us? You know, what are the competitors doing in each of the different markets? And, what can we learn from that?
Ryssdal: How dependent are you actually on international growth in your core market area?
Whitman: So, more than half of eBay's revenues comes from outside the United States. About 40% of PayPal's revenues come from outside the United States. So, we are truly a global company. And, growth in international is an important thing for all three of our businesses.
Ryssdal: When you bid on an eBay auction ...
Ryssdal: ... are you one of those snipers who comes in at the last minute or do you sort of place your bid and hope it all works out?
Whitman: I do proxy bidding, which is where I say, "Here's the most amount I'm willing to pay," and then I let the system bid for me. And, sometimes I win and sometimes I don't.
Ryssdal: So, you don't get all wrapped up in it, huh?
Whitman: You know, I am so busy that it's just easier for me to put in the proxy bid.
Ryssdal: What's the last thing you bought? Do you remember?
Whitman: Yeah. Not a very glamorous item.
Ryssdal: That's all right.
Whitman: But, when I travel, I tend to leave electronic and sort of, you know, my computer cord, my Apple charger. And, I left my iPod charger in some hotel someplace. And, so, I went on eBay and found a great replacement for $9.95, which was better than I could have done at retail.
Ryssdal: And, so, your buyer experience was good then?
Ryssdal: All right. Meg Whitman, president and CEO of eBay, thanks a lot for your time.
Whitman: Thanks. Nice to see you.