eBay Analysis: Overlooking the Ling Temco Vought Case
February 17, 2009
Not long ago, I wrote about a trophy generation whiz kid who analyzed company and product failure. I pointed out that a seminal study shed light on the “new” developments the whiz kid was pontificating. The whiz kid pulled the post. I just read a post in a Web log that I find interesting most of the time. The author of “Why eBay Should Consider Breaking Itself Up” is Kevin Kelleher. You can read the story here. The premise of the story is one with which I agree. eBay has collected a number of eCommerce companies and failed to make any of them generate sufficient revenue to generate enough revenue to feed the cost maw of the parent. What made me shake my tail feathers was:
- The use cases or case studies of the Ling Temco Vought style roll ups do not warrant a mention in the article. Most business school students or investors burned when LTV went south.
- The failure to integrate acquisitions is not a problem exclusive to eBay. Mr. Kelleher left me with the impression that eBay was a singleton. It is not. Other companies with a similar gaggle of entities and similar cost control problems include AOL, IAC (mentioned by Mr. Kelleher), Microsoft, Yahoo. A key point is that the overhead associated with LTV style operations increases over time. Therefore, instead of getting better numbers, the LTV style roll up generates worsening numbers. In a lousy economy, the decline is accelerated and may not be reversible. There’s no sell off because time is running out on eBay and possibly on a couple of the other companies I mentioned.
- The impact of LTV type failures destabilizes other businesses in the ecosystem. I never liked the Vietnam era “domino theory”, but I think the possibility of a sequence of failures increases in the LTV type of failure.
You should read the story because the information about eBay is useful. If you have an MBA, you probably have LTV data at your fingertips. Historical context for me is important. Maybe next time?
Stephen Arnold, February 17, 2009
Comments
-
- Subscribe to Beyond Search
Feature archive
News archive
-
