DISQUS

dave mcclure · 3 years ago

>>..Everything that eBay does in their ecosystem and developer networks supports transactions and growing eBay revenues

mmm, that's a bit of an overstatement.

certainly, prior to being acquired by eBay, those of us at PayPal did not particularly feel like eBay mgmt was being focused on "supporting the ecosystem" while they were shoving Billpoint down their users' gullets. only after it was apparent that PayPal was kicking their own solution's butt did they decide to acquire the company, and then IMMEDIATELY in Q3 & Q4 of '02 after the acquisition, eBay marketplace transaction volume took off and the stock went on a tear for the next 2 years.

however, over the past few years eBay mgmt has certainly shown a fondness for PROFIT growth over REVENUE growth, and has apparently made the decision to optimize for profit in the short-term. this was made evident in their decision to raise pricing twice in the past 2 years, at the same time their own data indicates that growth has been slowing on the marketplace on both US domestic and international fronts.

while i respect David's experience & insights, i would not say that eBay has always shown particularly brilliant judgement in how to support growth in its own market.

imo, the paypal opportunity is still larger outside the eBay marketplace than on it. it will be interesting to see if Meg ever decides that 3% of the entire retail merchandising market is a bigger pie than 7-9% of the [much smaller] auction market.

- dave mcclure

[full disclosure: i used to work for PayPal, an eBay competitor^h^h^h^h^h company]

David · 3 years ago

Dave: That's a good point and clearly you should know! The arguably important point I was making though was not that eBay has always suported one or the other or that eBay has been brilliant at all in managing its ecosystem, but rather that at least you know going in after years of analysis that eBay is going to rule companies in their ecosystem in a consistent way. (One where the likelihood that anyone touching their customer could grow to generate a venture return is highly unlikely without a fight) We are certainly familiar with the PayPal saga. The more important point that I was trying to make was that at this point, there are hundreds of companies trying to ride MySpace at this time because MySpace has let them in most cases, probably because they are not core revenue generators Fox plans on unleashing on the community. But I doubt MySpace isn't right now coming up with a strategic framework for beginning to rule their ecosystem much like eBay did, and in a much more consistent manner. So for a venture firm having gone through the eBay-PayPal experience, and personally having had a company struggle within the eBay ecosystem, Clearstone and perhaps other venture firms, would be wise to look to the past when trying to figure out how to sort out the often irrational excitement surrounding any company putting its emphasis on MySpace widgets. Venture returns in these types of companies are highly dependent on the answer to whether the parent really lets the child grow up or not. In eBay's case, there were a lot of "nots". This all doesn't mean you can't build a great company, just that perhaps they aren't venture type investments. Despite the fact we live and work in a venture-centric world here, it isn't necessarily a bad thing!

Dave McClure · 3 years ago

okay, i agree that's on target analysis.

much as i'm impressed with my ex-paypal peeps over at YouTube kicking butt, i've also been impressed that MySpace videos is doing reasonably well themselves.

i've met the folks down there, and they're a lot more clueful than you'd imagine most large portals / acquisitions to be. i'd agree that MySpace will likely start to extract every possible piece of value from its ecosystem, especially with Ross Levinson (super bright guy) & Rupert running chaperone.

still, for folks that run fast & hard & innovate, i do think there are plenty of opportunities to "draft" off the MySpace ecosystem... just as PayPal did with eBay. in fact, i'd say YouTube could inspire its own group of ecosystem wannabes.

watch this space ;)

- dmc