E-Commerce Vs. the Economy

Amid a chilly climate for business and consumer spending, how are e-tailers and product manufacturers faring?

For more than a year, eBay has been rolling out incremental changes to it marketplace in an attempt to improve the experience for buyers. The company has tweaked its site's user interface, and enacted several policy changes aimed at promoting reliable, high-quality sellers, changes that have drawn considerable opposition from many of the merchants with stores on the platform.

"Buyers will continue to see improvements in trust, value and selection as we enter the holiday season later this year," Donahoe said.

But Mahaney warned that absent a major effort to shore up the company's marketplace business -- even something as drastic as abandoning the auction model that eBay was built on -- the company's "fundamentals could continue get a lot worse before they stabilize."

The quirks of eBay's e-commerce platform can at times put it at a competitive disadvantage against its principal rival Amazon, as well as traditional retailers that have established robust online stories, such as Wal-Mart and Target.

In the first quarter, sales of eBay's fixed-price listings increased 12 percent, while auction sales dropped 20 percent from last year.

"What I really want to sense is paranoia, frankly, out of the management team. I want to hear them address what's their core problem," Mahaney said.

On today's call, Donahoe was short on paranoia, but did acknowledge that eBay's e-commerce business would grow slower than the industry-wide sector throughout 2009. Next year, he said he expects eBay to perform in line with the industry, and outpace it in 2011.

"While we saw some signs of stabilization in the first quarter, we still have a lot of work to do," he said.

Shares of eBay were up 7.4 percent in after-hours trading.