EBay’s CEO Resignation A Pyrrhic Activist Victory?

eBay’s activist investors gained a victory, and there’s a signal that changes are on the horizon for the company.

On Wednesday, the eCommerce giant announced that Devin Wenig stepped down from the role of chief executive officer, a position he had held since July 2015.

The CEO tenure stretches from the spinoff of PayPal to this month’s reports that the company was eyeing selling its stakes in StubHub and the company’s Classifieds business. The company’s fortunes over those four-plus years, as measured by top line, have been anything but a straight line upward and to the right.

The bumpy ride was hinted at in the somewhat boilerplate language offered up by the board, specifically through Chairman Thomas Tierney.

“Devin has been a tireless advocate for driving improvement in the business, particularly in leading the company forward after the PayPal spinoff,” Tierney said in a press release. “Indeed, eBay is stronger today than it was four years ago. Notwithstanding this progress, given a number of considerations, both Devin and the board believe that a new CEO is best for the company at this time.”

For his part, Wenig has said that he and the board were not “on the same page,” according to The Washington Post.

It is the “number of considerations” that bears delving into, to see what’s been and what’s coming. Most immediately, at the top of the management ladder, Scott Schenkel, senior vice president and chief financial officer has been appointed interim CEO by the board.

As has been reported by CNBC, Wenig had decided to step down amid a dispute over the sales of the company’s Classifieds business.

Controversy Over Classifieds?

As has been noted here and elsewhere, Elliott Management Corp., with a 4 percent stake in the company, had come into 2019 with demands that eBay make urgent changes, among them selling assets. Among those asset sales would be the sale of the Classifieds business.

CNBC’s report that the clash over Classifieds led to Wenig’s resignation begs the question as to just what the disagreement was about. Was it whether to sell or not, or perhaps a disagreement over price?

A snapshot of the latest quarter shows that for the period that ended in June of this year, total revenue growth was 2 percent year-on-year, while gross merchandise volume was down 4 percent to $22.4 billion as measured in the same periods.

Interestingly, StubHub volume was up 6 percent, Classifieds up 12 percent. But it has not been enough to move the needle from a drag on volumes sold or on top-line growth, where peers have grown by leaps and bounds.

Wenig said in the earnings release, in that segment “we continue to execute our playbook of building market-leading horizontal marketplaces complemented by scale vertical experiences in categories including motors and real estate.”

The Classifieds unit is said to generate as much as $1 billion in sales, which is a notable percentage of the $10.7 billion generated on the top line last year, and Europe has been a strong market (Germany reportedly half that value).

And, as Fortune reported in March, Europe’s biggest publisher, Axel Springer, was reportedly (and may still be) interested in buying the operation. The purchase price, as reported by Springer and Capital, would be about $10 billion. Paying 10 times the sales for an online ads business surely would catch any board’s eye, and we wonder what might have been a sticking point.

To be sure, a $10 billion payout would do much to bolster a net cash position that stands at more than $2 billion as of the latest quarter.

And it seems clear that the money from asset sales — should those sales be realized — would be earmarked for the core eCommerce business. As noted in the latest results, the platform itself has seen slower growth than other units and certainly lags that of competitors. It’s interesting that the firm that was once dubbed the “Craigslist killer” should see its fastest growth from the Classifieds unit, which often has been likened to Craigslist.

Through transformation, the marketplace model bringing buyers and sellers together evolved from auctions. Yet the platform economy has evolved, too, to the point where niches spring up (Etsy, for example, or second hand goods marketplaces, or Shopify to name just a few) so that the crowded virtual aisles of eBay have thinned. It is the marketplace segment that dominates at a bit more than three-quarters of the top line.

And in recent months, competition has gotten heated — so much so that eBay filed a lawsuit against Amazon last month, claiming the latter was poaching sellers, allegedly recruiting them through eBay’s private messaging service.

To get a sense of the challenges in place, earlier this month, RW Baird estimated that in the United States, Shopify is on track to become the second-largest eCommerce company, behind Amazon, and ahead of eBay.

The shifting competitive landscape is fluid indeed, and eBay certainly has been making inroads into new markets, such as through its recently announced 5.5 percent stake in India’s Paytm Mall, getting a further toehold in a market where eCommerce could be worth more than $72 billion in just a few years.

As to what comes next?

“I don’t want to compete with Amazon; I want to get as far away from Amazon as I can,” Wenig said last year. “I want us to stand for something fundamentally different. I want eBay to be a winner in discovery-based shopping. I want it to be a place where people think of first for the things they love, not just the things they need.”

His resignation and the continued asset sales may signal that eBay very much will compete more fully with Amazon. That’s signaled, too, by the 2018 decision to make Adyen its primary payments processor. eBay also has laid out the goal to take control of its payment destiny by building its own in-house payments intermediation system. The company recently brought a fulfilment center onboard, a nod to logistics, but it is only available for the company’s largest sellers.

To compete more fully with Amazon, eBay runs the risk of incurring more costs even as its top-line challenges remain — which signals a victory, perhaps pyrrhic, for those who wanted the leadership change.