The Wall Street Journal-20080123-Next on the Block- A Bid to Succeed eBay CEO- Donahoe- Lead Contender- Noted for Managing Style- -10 Things We Need to Fix--
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Next on the Block: A Bid to Succeed eBay CEO; Donahoe, Lead Contender, Noted for Managing Style; '10 Things We Need to Fix?'
When eBay Inc. Chief Executive Meg Whitman invited John Donahoe to the company's San Jose, Calif., offices in early 2005, the Bain & Co. consultant thought she wanted to talk to him about a business project. Instead, Ms. Whitman asked Mr. Donahoe to join the Internet-auction company in a new role that would position him as a contender for her own job.
For Mr. Donahoe, it was a complicated request because his friend, Jeff Jordan, then president of eBay's online payment unit PayPal, was also thought to be in the running to succeed Ms. Whitman. Mr. Donahoe wanted to talk to his friend first.
"The fact that he put a discussion with one of the most powerful people in business on hold for a while, so he could chase down a friend, is what I consider to be one of the most significant acts of friendship," Mr. Jordan says. "He's a wonderful and talented and high- integrity guy."
Soon after, Mr. Donahoe became eBay's president of its auction business. Mr. Jordan, who left the company about a year later, is CEO of restaurant-reservations Web site OpenTable Inc.
Now, as Ms. Whitman prepares to retire from eBay after a decade serving as the Internet company's CEO, Mr. Donahoe, 47 years old, is seen as a leading candidate to succeed her. While the situation is fluid, a decision on the departure of Ms. Whitman, 51, could come within a matter of weeks, say people familiar with the matter.
EBay spokesman Hani Durzy declined to comment for this article. A person familiar with Ms. Whitman's thinking said the CEO believes "John is the right person at the right time to be leading this company."
When Mr. Donahoe came to eBay, he assumed a newly created position that put him in charge of the company's entire auction business, reporting directly to Ms. Whitman. Two veteran eBay executives -- Bill Cobb, who headed the North American auctions unit, and Matt Bannick, in charge of the international business -- began reporting to Mr. Donahoe.
Though Mr. Donahoe is widely seen as the leading candidate for CEO, Rajiv Dutta, president of the PayPal online-payment business, and Mr. Cobb are also considered contenders.
A company spokesman declined to make Messrs. Donahoe, Dutta and Cobb available to comment.
Running eBay could be a daunting task. Once a star in the Internet universe, it is currently transforming itself in an effort to reverse years of slowing growth on its auction marketplace, where individuals can trade online, selling to the highest bidder or at a fixed price. From its start as a quirky auction site, it has ballooned into a behemoth with 15,000 employees globally, 248 million registered users, and a portfolio of businesses ranging from online payments to online ticketing and Internet calling.
The company has made numerous acquisitions, is trying to re-engage buyers by simplifying its main Web site. But eBay, which reports earnings today, has been posting revenue growth of around 30% a year, down from triple-digit figures several years ago. Its stock was lackluster last year, even as the share price of rivals such as Amazon.com Inc. more than doubled.
Under Mr. Donahoe's leadership, auction revenue rose 26% to $1.3 billion in last year's third quarter from the year-earlier period. But it's difficult to measure the impact of his initiatives. Listings of items for sale, a key barometer of the auction business's health, fell 3%. The number of active users increased 4% -- one of the smallest growth rates ever.
Mr. Donahoe instituted changes last year to revamp the site by making it easier for users to find products and cracking down on fraudulent sales. EBay reported late last year that its conversion rates -- or percentage of items posted for sale that actually sold -- had increased, though it didn't reveal specifics. But it could take years for these changes to make a difference financially, Mr. Donahoe has acknowledged.
Mr. Donahoe, a former Dartmouth College basketball player, is an unknown quantity to many. After joining eBay in 2005, he spent about 18 months behind the scenes, rarely engaging with outsiders. For much of the time, eBay employees say, he was holed up with them and other executives, learning about and analyzing the auction marketplace.
Recently, Mr. Donahoe has taken a more-public role, speaking to investors and meeting more often with the site's partners and sellers.
He has impressed some eBay experts. Cantor Fitzgerald analyst Derek Brown, who recognized eBay's problems with sellers early, met one-on- one with Mr. Donahoe in September 2006 at eBay's headquarters. Mr. Donahoe showed "much more recognition of the problems and challenges than anything I'd seen from other executives," Mr. Brown says.
And clearly, Mr. Donahoe has impressed Ms. Whitman. They met as young management consultants at the San Francisco office of Bain, where Ms. Whitman was one of Mr. Donahoe's early bosses. While Ms. Whitman left the consulting firm for executive roles at companies including Hasbro Inc., Mr. Donahoe spent more than 20 years at Bain, rising through the ranks to become its world-wide managing director, managing 29 offices and 3,000 employees world-wide.
Mr. Donahoe, who has four children, was also credited by colleagues for being a good listener who delegated responsibility to others and gave them room to shine. While at Bain, he worked part-time for a year to help take care of his two young sons. When he left Bain in 2005, Mr. Donahoe sent a departing email to colleagues about eBay. "Obviously, it is a remarkable company with a unique mission," he wrote.
After learning eBay's auction business, Mr. Donahoe determined that it hadn't evolved with the rest of the Internet landscape. He restructured the company to focus on two areas -- buyers and sellers -- instead of concentrating primarily on sellers, who account for much of the company's revenue since they pay fees to list products for sale.
Ms. Whitman also charged Mr. Donahoe with leading companywide initiatives. In late 2005 and 2006, he headed discussions with Yahoo Inc. and Google Inc. about putting ads brokered by those companies on eBay's Web pages, which at the time was the largest Web site without third-party advertisements. Those revenue-sharing advertising agreements, potentially worth millions, allowed Yahoo to display ads on eBay's U.S. pages and allowed Google to display ads on eBay's international pages.
Sellers and eBay partners say Mr. Donahoe, unlike other eBay executives, has been open to hearing criticism. Scot Wingo, CEO of e- commerce company ChannelAdvisor Corp., and a colleague were sitting at a Starbucks in Boston during eBay's annual user meeting last year when Mr. Donahoe unexpectedly pulled up a chair at his table. "You guys are pretty attuned to what's going on," Mr. Wingo recalls Mr. Donahoe saying. "What are the 10 things we need to fix?"
"That was an unusual eBay approach," Mr. Wingo says. "EBay had a lot of people who had been proud about what they'd done for the first 10 years, and they didn't want to hear from partners."
Mr. Donahoe is "more about action than he is about words," adds Dan Rosensweig, Yahoo's former chief operating officer who has negotiated with Mr. Donahoe and is friends with him. "Despite the fact that eBay is experiencing problems, he seems to be focused on the right things from customer experience to working with their community to making the community more vibrant going forward." Mr. Rosensweig is now a partner at Quadrangle Group, a New York private-equity firm.
