Much Ado About the Wrong Things: eBay and Amazon

Everyone loves epic rivalries. Lakers vs Celtics. The Beatles vs The Rolling Stones. Liverpool vs Manchester United. Coke vs Pepsi. Biggie vs 'Pac. Having a measure to compare one's self can be a great motivational tool, and the intensity of competition can bring out a great performance. However, obsessing over two icons can be deleterious as well. That's because there are so many different ways to measure and interpret the results. Focusing on the "victor" can easily turn a blind eye to the inherent greatness in each. Is the Lakers' legacy cheapened because the Celtics have a slight 2 championship title lead on them, especially when you consider that combined these two teams have claimed almost half of all the NBA championship titles in history? Is the magnificence of "(I Can't Get No) Satisfaction" diminished by the thoughtfulness of "Yesterday?" Does the fact that Pepsi has NEVER outsold Coke in its 108-year rivalry take away from the lead PepsiCo has over the Coca-Cola Company because of its snacks division? Much has been made about an eBay vs Amazon matchup, with the recent rounds going to Amazon. Should that somehow take away from eBay's great business? Should it limit the amazing opportunities still ahead for eBay? No. eBay's business is still solid. It still posts numbers other companies--yes, including Amazon--would drool over. On income, margin, and cash flow, eBay seems to have the edge (numbers from Q309 quarterly reports):

• EBAY / AMAZON
• Net Income: $350M / $199M (winner: eBay)
• Operating Margin: 28.4% / 4.6% (winner: eBay)
• Operating Cash Flow: $563M / $374M (winner: eBay)

So what gives? Public companies are often measured by stock price. And stock price is driven by growth. Amazon's growth has outpaced eCommerce growth in the US while eBay has trailed. But this hasn't always been so. The turning point for Amazon came around 2006. What happened? I don't think Jeff Bezos sat around thinking: "How can I beat eBay?" Maybe he did, but I don't think it's what has driven Amazon to make the smart choices it has over the past few years. Instead, I think Mr. Bezos sat thinking: "How can I build a great company?" or "How can I provide the best possible experience for my customers?" He hunkered down and kept the company focused on building itself into a great business and a company worthy of its current admiration. Over the past few years, Amazon introduced customer-focused improvements like: Amazon Prime, how it treats its zShop Sellers (especially its media sellers), media features like Look Inside and digital download, fantastic Amazon product reviews, and continuing the core strength it has in great merchandising. I think Mr. Bezos focused on three things: price, selection, and customer experience. These created a virtuous cycle that has fueled Amazon's growth. So the question shouldn't be "who is better" or "how can eBay beat Amazon," but rather "how can eBay be better" or "how can eBay learn from Amazon's example". How can eBay follow suit? By ignoring external comparisons to Amazon and focusing on the customer. By rediscovering its strengths and the things that it does better than anyone else. By creating opportunities for people that they can't find anywhere else. I'll discuss this more in-depth in future posts. I leave you with eBay and Amazon's mission statements. First, Amazon's: "Our vision is to be Earth's most customer-centric company; to build a place where people can come to find and discover anything they might want to buy online." Next, eBay's: "Provide a global trading platform where practically anyone can trade practically anything." Those sound pretty darn close to each other, don't they? eBay's core beliefs send a stronger message: "We create opportunities for people. We care. Because we know people depend on us. We make a difference in the world." This is the eBay that people loved. This is the eBay that saw unparalleled growth. This is the eBay that still is but needs to remember, Bird may have had better stats than Magic but the Lakers still beat the Celtics more often than not. --- UPDATE: A few friends of mine at Amazon mentioned Jeff's napkin diagram, which aligns quite nicely with most of the things I mentioned above. In a timely coinkidink, I ran across this wonderful analysis from Scot Wingo. Jinkies. Here I thought I was just spouting the usual, half-thought-out, tangled mess that constantly clouds my head and it turns out Mr. Wingo beat me by a few months with a much better articulated analysis. Kudos to you, sir. Well, at least it's nice to know I'm not completely nonsensical.
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