Where Credit Is Due

 | Mar 07, 2013 | 4:15 PM EST
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One company that's never mentioned as a titan of tech is eBay (EBAY).

It has long played second fiddle to Amazon (AMZN) in terms of ecommerce. And it's never associated with Internet giants like Google (GOOG), Facebook (FB) or even Yahoo! (YHOO).

But eBay CEO John Donahoe is one of the best-kept secrets in the Silicon Valley. What Donahoe has accomplished since taking over the top job from longtime friend Meg Whitman in 2008 has been remarkable. Since then, eBay's stock is up 75% while the Nasdaq is up 43%.

This performance belies what a basket case eBay had become when Donahoe took over. Whitman was the face of eBay almost from inception and presided over a tremendous period of growth at the company. However, she seemed to check out in her final three years, most notably spending billions of dollars to acquire Internet video service Skype. Meanwhile, the Nasdaq gained 19% while eBay's share price dropped 11%.

Donahoe quickly set about righting the online auctioneer, first unloading Skype and then appointing new talent in the management ranks. After dropping to as low as $10 a share in 2009, eBay stock has bounced back and is now around $53 four years later.

Donahoe has done a great job helping eBay migrate to mobile effectively. The mobile apps look great and users have made the shift. In the last quarter, PayPal Mobile volumes tripled year over year. Mobile payments represented 10% of PayPal's total volume in 2012. And eBay's marketplace volumes through mobile doubled year over year. The company now books $14 billion in revenue and $4 billion in EBITDA a year. Amazon, by comparison, is doing $61 billion in revenue and $2.5 billion in EBITDA annually.

The challenge for Donahoe and eBay is to close the gap between its revenue and Amazon's. Wall Street believes that Amazon's opportunity is bigger in coming years because it's starting from a bigger base.

Yet eBay, to this point, is more efficient in terms of profitability. It hasn't had to make the same-sized Amazon investment into distribution centers that drag down margins so much (although it's done so recently with its investment in GSI Commerce).

PayPal looks to be the biggest opportunity for Donahoe in the next five years in mobile, but the path is crowded with competitors. On the marketplace side, Alibaba's Tmall and Taobao have kept eBay boxed out of China, and they have ambitions to grow globally.

It won't be easy for Donahoe, but he deserves more recognition.

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