By Brad Stone, NYTimes.com
By the end of February, most of the employees at eBay's San Jose headquarters will collect their possessions, wave a final goodbye to their landline telephones and change cubicles.
But what John Donahoe, president of one of eBay's most important divisions, really wants is for his colleagues to change the way they work. "I'm a big fan of breaking patterns," he said.
Donahoe, 46, is a deputy to eBay's chief executive, Meg Whitman, 50, and, according to many people in the industry, her likely successor. In his two years as head of eBay Marketplaces--a division responsible for 70 percent of the company's revenues and an even greater percentage of its profits--he has set out to change the company's colors substantially.
Donahoe has led the acquisition of companies like the ticket exchange StubHub, helping eBay morph from a single auction-oriented marketplace into a portfolio of retail sites. This year, revenue-sharing deals brokered by Donahoe with Yahoo and Google will bring online advertisements to the auction site on a large scale for the first time.
His newest move, the cubicle swap, is intended to bring together the engineers and the businesspeople who work on specific projects, while weaning employees off their landline telephones and getting them to use the Internet calling service Skype, which eBay acquired for $2.6 billion in 2005.
Whether these initiatives work may determine if eBay can build on a healthy holiday season and combat competitive threats like Google's recent inroads into e-commerce.
"All our businesses need to do well, but John's success and the success of Marketplaces is absolutely essential to the company," said Whitman, who met Donahoe when they were consultants working in the San Francisco office of consultancy Bain in the early 1980s.
Donahoe joined eBay at the end of 2004 from Bain, where he had risen through the ranks over two decades to become its chief executive. At 6 feet 5 inches, he towers over colleagues while wooing them with a friendly, accessible demeanor.
Thomas Tierney, an eBay director who is also a Bain alumnus, said Donahoe had "an uncanny ability to connect with everyone from receptionists to chief executives."
Donahoe, the father of four, is known at eBay for his boundless energy, waking every morning at 4:30 a.m., often appearing in the eBay gym before 7 and working 70-hour weeks.
But he will need more than energy to reinflate eBay's stagnant stock price. Despite a recent boost from strong fourth-quarter earnings, eBay stock has dropped by half from an early 2005 high on concerns that the company has stopped growing as Internet users are enticed by buying opportunities elsewhere on the Web.
His division is posing the largest problems. Since he arrived, the rate of new users joining eBay has fallen. Subtract the eBay autos business, analysts say, and the average selling price of goods on the service has been stagnant at best, even as eBay increases the amount it charges sellers to list items on the site.
A result has been greater discord than usual among large sellers who use eBay to run their businesses and who feel as if their profit margins are getting steadily squeezed. Steve Grossberg, who sells video games on eBay, met Donahoe at the company's eCommerce Forum in January and told him that he was looking to sites like Amazon.com and Google to expand his business.
He said he was buoyed by Donahoe's response. "I got the sense from him that anything goes, and nothing is sacred," Grossberg said. "He's determined to fix it. He's the only one at the company who gets it, because he's not entrenched in eBay culture."
Donahoe's plan for eBay began, paradoxically, with getting certain products off its main auction site. When he joined the company, he said, sellers put anything and everything on the service, which is best suited for the sale of used items at bargain prices.
Selling newer products on eBay "didn't make any sense," he said. "It watered the experience down."
Much of his effort over the last two years has focused on creating what he calls--with a consultant's zeal for sloganeering--"tailored shopping experiences." Besides Shopping.com, which eBay bought in 2005 to allow shoppers to search for newer, in-season items, Donahoe led the acquisition of StubHub in January for $307 million.
Last year, he rolled out eBay Express, a site for buying new products more efficiently, which many analysts say does not yet have much traction. He also has helped eBay either create or buy a worldwide network of local online classified-advertising sites similar to Craigslist in the United States.
That was the first step. Now Donahoe hopes to reverse trends like declining member growth by improving the overall experience of shopping on the site. "I think when we are really objective with ourselves, we have to admit our user experience has not kept up with other e-commerce sites all around us," he said.
Last year, he cited fraud and abuse on eBay as major problems--an overdue admission, in the view of many company critics who contend that eBay tends to sweep such problems under the rug.
In one of several recent moves to address fraud, the company introduced an expanded feedback system in January, allowing buyers to rank the performance of sellers more comprehensively after a transaction.
Donahoe is also planning other ways to improve the user experience on the site, like paring down eBay's notoriously cluttered pages and rebuilding its search engine.
On a rainy morning in February, he received additional confirmation that such an overhaul was needed. He accompanied two members of eBay's research group to the San Jose apartment of Kanvasi Tejasen, a 30-year-old Lockheed Martin engineer who had agreed to have her online-buying habits studied by the company in exchange for $200.
With Donahoe (who makes $800,000 a year and has received about $10 million worth of eBay stock) sitting on her sofa, taking notes, Tejasen shopped for a TV tuner and visited rival sites like Amazon and Google. In one crucial moment, she plugged the term "4G iPod Nano" into the eBay search engine and received 1,700 results, which she said she found confusing. That set Donahoe scribbling furiously.
"We have to do a better job getting her what she wants," he said afterward. "If we improve search efficiency even 1 percent, it's worth hundreds of millions of dollars."
To make those changes, Donahoe recently hired Matt Carey, the former chief technology officer of Wal-Mart Stores. Carey, who spent more than 20 years at Wal-Mart, said he was working on building computer systems that could look at customers' past purchases and make educated assumptions about what they might be looking for.
Carey is also working on another initiative--what Donahoe calls "bringing eBay to the Web."
Today, Web publishers can put eBay listings on their pages only by using a set of relatively complex software tools, called the eBay Editor Kit. Donahoe wants to streamline that process, making it easier for, say, fans of New York Mets pitcher Pedro Martinez to put eBay and Shopping.com listings of Martinez-related items right on their Web pages. "John and I talk about this every time we're together," Carey said.
They are also working on ways to let large organizations create their own eBay-style marketplaces. Last year, for example, the Association of National Advertisers, a trade group, began testing such an auction service (letting advertisers buy and resell air time). But the largest customer is soon likely to be the social-networking leader MySpace.com.
For the last six months, people close to the conversations in both companies say eBay and MySpace have talked about letting MySpace users put eBay and Shopping.com listings on their pages. The partnership would expose eBay to a younger audience that came to the Web after eBay burst onto the scene.
Whitman and Donahoe declined to comment on any MySpace negotiations but said bringing eBay listings to other Web sites was a priority. "If people don't come to eBay, we will bring eBay to them," Whitman said.
In the meantime, Donahoe has other targets for his energies. He says he is thinking about ways to assist sellers further in buying advertising keywords on the Web's search engines and about finding ways to help eBay exploit the Skype software, which has been downloaded 140 million times.
"Sometimes I wish we could make things happen faster than we can," he said. "But one thing I've learned is that you don't do anything sudden on the eBay ecosystem."
He is not eager to rush, however, when it comes to addressing the delicate question of who will succeed his boss. Whitman says she has no plans to retire and regrets making a statement eight years ago that she foresaw staying at eBay for 8 to 10 years.
Donahoe says he does not think about it. "I have an awful lot of work on my hands just running the marketplace business," he said. "Plus, I love working with Meg, and I'm learning a lot."