By Verne Kopytoff and Dan Fost, SFGate.com
Meg Whitman, eBay's chief executive officer, still has her sunny demeanor, despite what has been at times a rocky year for her online marketplace.
Wall Street is on her back about slowing growth at the company. At the same time, critics insist that eBay's foray into Internet telephone calls via last year's $2.6 billion acquisition of Skype is misguided.
Whitman, 50, is steadfast about her company's bright future. Indeed, measured against most companies, eBay is doing just fine.
During the third quarter, eBay took in $1.45 billion in revenue, an increase of 30 percent from the same period a year before. Profit was $281 million, up 10 percent.
Since Whitman took the helm eight years ago, eBay has blossomed from little more than a startup where hobbyists auctioned dolls and antiques to a global giant where users can buy everything from cars to computers.
Her stature has grown with eBay's success: She is one of the Internet industry's longest serving CEOs and one of its most respected figures.
Whitman spoke with Chronicle reporters and editors about eBay's recent turbulence, the hot-button issue of online fraud and her plans for Skype. The interview has been edited for space and clarity.
Q: This year has been a rough one for eBay in terms of falling stock price and slow growth in the U.S. market. What happened?
A: A couple of things occurred. First was we started off the year very strongly and then we made, if you will, a merchandising mistake on eBay.com. We integrated the store inventory format listings into the core eBay marketplace.
There is the law of unintended consequences. We degraded the buyer experience in a way that we did not anticipate. It took us a few months to diagnose the problem, determine what the right fix was and to put the fix into place.
Q: How did it degrade the experience?
A: It used to be that when you would type something into the eBay search box you would get between 200 and 400 results. When we integrated the store inventory format listings, you often got 2,000 to 4,000 results. So people were not able to find what they wanted as quickly.
Secondarily, the store inventory format items were not as well priced as core eBay items. You wouldn't see items of a real value that you were used to seeing on eBay.
What people like about eBay is the great deal. You could see it in the metrics: Buyers exited, they didn't return as often and they didn't bid on as many things.
Q: Even absent this problem, Wall Street has been increasingly skeptical about eBay's growth outlook. What is it like being in charge of a company when Wall Street is applying so much pressure?
A: What we do is focus on the company's strategy and try to fulfill the purpose we have. We help people be successful doing what they love.
Then, we try to make sure that we have the right strategy, that we are executing against that strategy and we have the right people in the right job at the right time.
You need to do more of that when the external world is not going as you had hoped. Fundamentally we run the company the same.
Q: Even if Wall Street is complaining, you don't care?
A: We care because they are absolutely a stakeholder. We want to make sure we understand what their issues are and we try to explain our point of view if we think it's different.
Q: Isn't there also something about being a larger company, you can't have 30 percent, 40 percent growth every year.
A: I certainly think that the law of large numbers is in effect. But we want to be a fast-growth company. We are a fast-growth company. I think that we said at the beginning of the year that we can do better certainly than we did in the core eBay marketplace.
Q: You're not willing to concede that slower growth is an inevitable consequence of being large?
A: I think it would be unrealistic to assume that we're going to grow at 50 percent, 60 percent, 70 percent, 80 percent off a nearly $6 billion base.
Q: One of the issues I hear most about from readers is eBay fraud. By now, heavy users have probably been defrauded at least once. How do you convince them to keep on shopping?
A: I would probably dispute that statistic, because if every heavy user had a bad experience, we probably wouldn't have a business. Actually, the fraud rate on eBay is remarkably low.
We are a very large business with millions and millions of transactions. EBay is a safe and well-lit place to do business. That said, if one person has a bad experience, that's not a good thing.
Q: Is law enforcement equipped to help out?
A: Yes, they are. Particularly in Silicon Valley. We work every single day with law enforcement, not only here, but also in countries around the world.
Q: How much help do you get from high- crime countries such as Romania or China? Is law enforcement there cooperative?
A: They are. It depends on exactly what the issue is. We have a presence in China, so we work very closely with law enforcement in China. We don't have a presence in Romania, so that tends to be much more of a cross-border outreach kind of thing. We have found most governments to be cooperative.
Q: You use eBay. Have you ever been defrauded?
A: I have not, actually. When we buy and sell, we say that we are eBay employees, but I don't say I'm the CEO.
Q: What do you sell? Or do you buy mostly?
A: I buy. Almost no matter what I'm looking for, I check eBay first. It can be sporting goods equipment for my boys (Whitman has two children in college), it can be home decor, it can be sporting equipment for ourselves.
I just bought two flat-panel TVs on eBay. What I sell are things that the kids have outgrown and things we no longer need in the house.
I'm a casual seller. But there are times I put up 10 or 15 items on a weekend.
Q: China is an interesting market. You face pretty stiff competition over there with Alibaba. How's it going in China?
A: It is a very competitive market. I would say its one of our most competitive markets. Yes, Alibaba (whose primary investor is Yahoo) is one, but there are a host of new competitors that have come on the scene over there in the last couple of years.
We struggled when we first switched to the global trading platform (the standard Web site eBay uses in most countries). When we entered into China, we acquired a company called EachNet, and we made the decision, as we did in most other markets in the world to cut over to the global trading platform.
When we did that, we lost some momentum. Alibaba picked up some momentum. We had to stabilize our market share, which we did after about nine months. We have been holding share there for the last year and a half.
Q: What share is that?
A: It's hard to know, but I'd say its about 40 percent us, 60 percent them.
Q: Can you give us your thoughts on doing business in China given the civil- rights issues there?
A: We do not have the issue that many of the portals have doing business in China because in China, we are not serving news, we're not serving really anything that has to do with commentary.
Q: Has China's government approached you at all to hand over information about your users?
A: They have not, to my knowledge.
Q: Are the top-selling items different across the globe?
A: Interestingly, the category mix varies somewhat by country, but it's more similar than not. We often say that eBay is as relevant in China as it is in Argentina as it is in Germany.
The top categories are usually computers, consumer electronics, apparel, that kind of thing.
Q: You recently reached a settlement over complaints about (eBay's online payment service) PayPal's customer service. Why did it take until 2006 to get resolved?
A: There were a number of issues brought up post acquisition of PayPal that were brought against PayPal pre-acquisition. PayPal was a fantastic startup. But it was a startup.
In the earliest days, they didn't answer the phone because there was likely a customer on the other end of the phone who they didn't want to talk to. There were a number of customer service issues post acquisition and we knew that we were going to end up having to settle some of those suits.
Q: Skype, the Internet calling service that eBay acquired last year for $2.6 billion, is the talk of the tech industry. What was the thinking behind that acquisition? A lot of people are still scratching their heads.
A: We saw how fast this property was growing. Skype today is adding in excess of 300,000 new users a day.
This is one of the fastest-growing Web properties ever. People are just flocking to Skype. We saw that, we saw the opportunity to really change how communications take place.
Q: The obvious synergy is that if you want to buy something on eBay, you click on the Skype button and you get the seller on the line. But at that point, can't the buyer and seller cut their own deal, leaving eBay out of the transaction?
A: We think in some ways that communication can be to the marketplace what payments was the marketplace. What PayPal did was it accelerated the velocity of trade in the marketplace.
To the extent that you're thinking about buying a car on eBay or a high average sales price item -- the ability to talk to that seller makes you more likely to purchase that product.
Our belief is that most people are basically good and that you actually will close that transaction online. There's protection to you by closing that transaction online. But if it actually increases the velocity of trade on eBay or off, then our users are better off and we will ultimately be better off.
Q: What makes you think that you can beat Comcast and AT&T in the Internet phone business. They're much bigger companies.
A: Skype has a remarkably rich functionality that is incredibly simple to use. There's many competitors in Internet calling, not only the telecom competitors, but little startups. But in the last year, Skype has actually extended its lead in this space.
Q: Speaking of acquisitions that are hard to make money on - let's talk about Craigslist, the online classifieds site you bought a piece of. How is that investment working for you?
A: We love being a 25 percent, I think, 27 percent owner of Craigslist. I think we've owned that share for 2 1/2 years now. It has been a very nice relationship. They run completely autonomously.
Q: Was that a kind of defensive stake?
A: It's not for the revenue (laughs). The stake became available through one of their shareholders and we thought, "You know what, we don't know where this is ultimately going, but we think it would be interesting to own a minority stake in a company that has really revolutionized the online classifieds service."
Q: Craig wasn't really happy with that?
A: I think that they were unhappy that their selling shareholder was disgruntled. But I think they were actually delighted where that 25 percent ended up.
Q: How did that conversation go?
A: "Hi (laughs). This is Meg. By the way..."
Q: When you're not running eBay, what are you doing?
A: My husband and I have two children. But we're empty-nesters for the first time.
All of a sudden we have lots more time. My children are in college. At 2 p.m. on a Sunday afternoon, we're like "What? We have time?"
We hike Windy Hill (Open Space Preserve in Portola Valley) a lot. We ski, we fish, my husband runs, we exercise every day, we read, we see friends, we go to the movies.
Q: The women's movement is 40 years old now. Why aren't there more women CEOs?
A: I think it's going to take a bit more time.
Q: That's a long time already.
A: It is a long time. But this is fundamental social change, which when you think about it, does take an awfully long time. I think it takes in the hundreds of years, not the tens of years.
Q: Hundreds of years?
A: It's generational. Today, I look at the young women graduating from college and business school or master's degrees or engineers, and they have a completely different view of what's possible from what I did, even 30 years ago.
Q: How does the tech industry fit into the larger picture? It's not exactly known for women in the highest ranks.
A: I think the statistics would say that there are fewer women in leadership positions in tech industries than certainly consumer packaged goods or other industries. I think that probably comes back to the numbers.
If you look at the number of graduating engineers today, it's not 50-50. Most of the tech leaders are still coming from the engineering side, or at least the math and science side.
Q: Where were you in the sixth grade and who was your role model?
A: I went to East Side School in Long Island, N.Y. I was an athlete. I was a swimmer, but I also played basketball, and lacrosse and tennis. I played anything.
There's weren't that many role models who were women at the time. But I think that probably my dad was very helpful in this regard, because I remember him saying "You can do whatever you want to do. It's about putting your nose down, its about doing the very best job you can do and working really hard."
My mother is a bit of a maverick as well. She worked as a stay-at-home mom with the three of us and was actually one of the very first Americans to go to China when the wall came down, or the curtain came up, or whatever it was in 1973.
Q: You said in the past that a CEO should probably serve 10 years. You've served eight. What are your plans? Will you follow your own advice?
A: The first piece of advice I wish someone had given me as a freshman CEO is to keep your mouth shut. Somehow I didn't get that advice, which is don't talk about when you're coming or when you're going because it just creates a set of questions that probably aren't productive.
Q: What do you expect out of Washington now that power in Congress has shifted?
A: We made it a point to work with both Democrats and Republicans since I came to eBay. Our story to both Democrats and Republicans with regard to eBay is that we empower small business.
Whether you're a Democrat, whether you're a Republican, whether in France, the U.K. or Australia, every government values small business because it is the engine of job growth.
Q: How successful do you think the tech industry has been in lobbying?
A: I think the tech industry has gotten better in trying to make our views known in Washington. But like in every other industry, we don't always agree.
I think each company has improved its ability to represent the views of our customers in Washington. Most of us didn't really know how it worked in Washington. So it's been a new skill that many of us have learned.
Q: We're very interested in the Web 2.0 boom. But in a lot of ways, the same dangers have emerged as the previous Internet boom. Are we in another bubble?
A: I don't think so. I do think that people remember 1998, 1999 and 2000. I think you will not see a repeat at nearly the level that we saw in 1999 to 2000.
What is exciting about the time in which we live is there are lots of new companies being born. There was huge activity in 1996, 1997, 1998 and 1999. Then we went through a bit of a dry period in terms of new companies. And now you are seeing a rise again.
Q: You came to Silicon Valley as an outsider. What drew you here?
A: I was asked to come out and interview for eBay. I was very happy running Mr. Potato Head and Barney and Teletubby (as a Hasbro executive).
Ultimately the headhunter called back and said, "Please get on the plane because I think you're perfect for eBay and eBay is perfect for you." To not make him mad, I said I would come. I was sure I didn't want this job, but I might want the next job that he had.
I came out and spent time with Pierre Omidyar (eBay's founder) and Jeff Skoll (the former president) and I had an instinct that they were on to something very big.
Q: At another juncture, an old employer came calling -- Disney. Was that tempting at all?
A: I agreed to go down and meet with them because, of all the companies in America, I have a fond spot in my heart for Disney. We all grew up on Disney stuff. I loved my time there.
I quickly concluded that there was tremendous running room here. It was the right thing for me to do to stay at eBay.
Q: There's a perception that Google is hiring the best and the brightest and that all the other companies are missing out. What is you take on that?
A: I think they are hiring very smart people. I don't know how many people we hired this year, but we've hired some really good people as well.
Q: EBay is serving as a platform for the television industry to sell commercial time. Will eBay change the way television advertising is sold?
A: We were asked to see if we could use our marketplace to make a somewhat inefficient market into an efficient market for television advertising.
We get asked this all the time. People come to use and say, how about you do securities trading? How about you create markets for all kinds of different things?
Most of the time, we say no to those kinds of requests. We have more than enough to keep ourselves busy.
This one was interesting enough that we were able to create a custom marketplace for the television industry.
Q: Auctioning television advertising looks a lot like what Google did with online advertising. Did you feel like you missed the boat on that? You're an auction company and it turns out that online advertising is all based on auctions.
A: No. One of the things that has stood eBay in good stead is that we are a fairly focused company. What we wanted to do is to continue to extend our lead in e-commerce, extend our lead in global online payments and then, obviously, bring Skype onboard.
Companies simply can't do everything. We feel comfortable about the choices that we made.
Q: Auctioning online advertising seems like a natural fit, though.
A: You have to remember about the way much of the text-based advertising came to be. The way in was search. The mechanism by which they sold the ads was by auction. But without the search platform there would not have been a text-based advertising business.
Q: Do you have a favorite thing bought or sold on eBay?
A: I suppose one of my favorites was the wedding dress guy. This man had gotten divorced and somehow had ended up with his wife's wedding dress. But he told this story, then put on the wedding dress -- the guy -- then decided to sell the wedding dress on eBay.
He became a celebrity. He was on Good Morning America. He was on all the local news stations. It was just one of the those quirky things that makes you smile.