EBay bids for durability in changing digital world

While Yahoo staves off a takeover bid from Microsoft — and Microsoft braces for life after Bill Gates — another high-tech pioneer is at a digital crossroads.

As eBay ebay readies for the post-Meg-Whitman era, and new CEO John Donahoe takes over Monday, it faces fierce challenges in a Web 2.0 era defined by armies of agile competitors.

Running eBay could be a daunting task. The former dot-com darling has lost some of its luster and is reinventing itself to reverse years of slowing growth in its auction marketplace, where millions trade online selling to the highest bidder or at a fixed price.

Some sellers are drifting away to take advantage of more options these days at online stops such as Amazon amzn and specialty stores, or to protest another fee increase at eBay.

Lynette Setzkorn reluctantly hopes to be "eBay-free" by June. The 50-year-old Tulsa resident sold $30,000 worth of antique furniture in January, but the latest increase was the "final straw," she says. Setzkorn is shifting sales to antiques dealer Ruby Lane and Amazon.

The wrenching changes at eBay underscore the challenges it and other mature Internet companies face as they enter the second decade of the dot-com era, analysts say. Like its Silicon Valley neighbor, Yahoo, and Microsoft, eBay is confronted by the growing shadow of Google as well as the looming presence of longtime rival Amazon.com and other e-commerce sites.

"The issue for most of these Web 2.0 businesses is, what are they going to do for Web 3.0?" says Roger Kay, president of Endpoint Technologies Associates. "Google's model is robust and extensible. If you're an auction site, what do you do for the next act?"

So far, the personable Donahoe has dived into his new assignment.

Donahoe has vowed to put greater emphasis on fixed-priced listings — items sold through its eBay's Buy It Nowservice — a seismic shift for eBay buyers that would approximate their experience on Amazon and elsewhere.

If anything, the 47-year-old Donahoe is a pragmatist. Fixed pricing (Buy It Now on the eBay site) accounts for 40% of revenue at eBay Marketplaces, its largest division. Most of the rest is from auction sales, for which eBay is better known.

To offset slackening growth in Marketplaces, eBay has diversified into online ticketing, payment services for merchants, classified listings and advertising. Donahoe and other eBay executives declined to be interviewed before he assumes the CEO job this week. But he has previously said he envisions a way of combining fixed-price listings and auctions, so both results would be displayed on eBay's main website. Eventually, shoppers could parse a search for new or used iPods by model and price, he has said.

In a nod to the growing sway of Google, goog eBay is developing a comprehensive search engine to evaluate customer feedback, shipping costs, PayPal data and other factors to present the best deals to shoppers. Google has become a factor because consumers increasingly use its search to find inexpensive deals, and Amazon and other eBay rivals have paid for prominent listings as sponsored links.

"My commitment is to build from (eBay's) strengths and make the changes necessary in this competitive environment," Donahoe, a former Bain & Co. consultant, said in a conference call in January. "EBay's best days are ahead."

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