John Doanhoe Case

ADI IGNATIUS: Welcome to the HBR IdeaCast. I'm Adi Ignatius, editor-in-chief of the Harvard Business Review. And today, our guest is John Donahoe, the CEO of eBay. John, welcome.

JOHN DONAHOE: Thank you.

ADI IGNATIUS: It surprised me, eBay's 15 years old and it really changed the way the world does business when it began. But now, you've been around for a while. So I guess this a management question. How do you deal with the challenge of avoiding becoming an aging growth company now?

JOHN DONAHOE: Well, we don't have the luxury of becoming an aging growth company just because innovation is so fundamental to the industry in which we're competing. E-commerce is still in its early days. We talk about it being 15 years old. But, if you think about each five year phase of the Internet, they've been significantly different about what's been the key driving forces, what companies are the key driving forces.

And we're entering a phase in the next five years where I think they'll be more change in how consumers shop and pay, driven by technology. More change in the next five years then there's been in the last 10. And so, we're very focused on capitalizing on this period of-- I would almost call it an inflection point-- but this period of dynamic change in how consumers behave.

ADI IGNATIUS: But in some ways, I think it's fair to say eBay is still in its original incarnation. And as new competitors pop up, eBay is more like a traditional merchant as the new guys, the IndieGoGos and others, come up. And I wonder, do you feel like you're missing innovation opportunities or you need to scramble to come up with some?

JOHN DONAHOE: Well, no. Let me take an example. I think one of the most fundamental forces that's changing how we operate is mobile, right. And the smartphone. We were just talking about the iPhone. We launched our iPhone application last year. In its first year, it did $700 million in volume. This year, it'll do between $1.5 billion and $2 billion of volume. 12 million people have downloaded eBay's iPhone application. It's by far the largest m-commerce application in the world.

And what we're finding is, what mobile's really doing is it's bringing the Internet to you seven days a week, 24 hours a day, on your time, at your convenience, where you want to be. So we're finding people are shopping now-- they're sitting in a line at Starbucks and they start browsing on eBay. They see something they want to buy and they're buying it. And people are buying cars. They're buying clothing. They're buying consumer electronics.

The other thing mobile technology is doing is it's lowering the boundary or blurring the boundary between online and offline. We bought this little mobile company called RedLaser. I don't know if you're familiar with it. But you take your iPhone camera or your Android camera or your Blackberry camera. And you're in any offline merchant. You look at an item, you scan the UPC code, and it instantly tells you the price of that exact item on eBay, on Amazon, on Walmart.com, on BestBuy.com all across the web. So you can immediately price compare or get information.

And now last week, we bought a company called Milo, which is bringing local inventory in the local stores around you on-line. So again, we integrated that into RedLaser. So here's what consumers can now do. If you are walking down the street here in Boston and you want to buy a pair of Nike shoes, you walk into a shoe store and you enter the pair of shoes you want and scan it, and you can see the price right in front of you, the price all across online, and the price of those exact same shoes that are available on merchants in five, 10 miles around you. And so it's bringing the world's inventory to you. And we are absolutely out in front in innovation around mobile, innovation around local shopping, and a marketplace model's a very attractive model to do that.

ADI IGNATIUS: In terms of company culture, are you gradually becoming a PayPal company more than an eBay company?

JOHN DONAHOE: We're a consumer company. Our core mission is to connect buyers and sellers. And eBay's a way to connect buyers and sellers. StubHub's a way to connect a buyer and seller. Our classified sites around the world are a way to connect a buyer and seller. And PayPal's a way to connect a buyer and seller.

ADI IGNATIUS: Let me ask you about-- you've been in the top job for about 2.5 years now, but I think some people still identify Meg Whitman with the company. But just, if you could talk a little bit about the advantages and the burdens of following a high-profile CEO like her.

JOHN DONAHOE: Meg helped build eBay into what it is and did a phenomenal job in doing it. And so, I stand on the shoulders of what she created. But my job is not to try to be like Meg Whitman. I never could be. Plus, I never want to run for governor. I'll go on record. I never want to run for governor, having watched Mitt Romney and Meg.

ADI IGNATIUS: Careful what you say.

JOHN DONAHOE: But my job is to take this incredible company and its core values that Pierre Omidyar, our founder, created, and the business that Meg and that first generation team helped build, and ensure that we're positioned to succeed in today's world and in tomorrow's world. And consumers, as we discussed earlier, are changing how they shop and pay. The pace of change on the Internet and the pace of change in consumer behavior is enormous. And so, we come to it with a great set of core values, which are real important in our company, and a strong business.

So my job's to ensure that we make the changes necessary, both in our business strategies and our business models and in our culture, to compete and win in today's and tomorrow's environment. And that's what inspires me and that's what I do every day.

ADI IGNATIUS: Let me talk about acquisitions a little bit. You mentioned a couple that are core parts of the business now. But first, tell me about Skype. What happened and what was the thinking and why didn't that pan out exactly?

JOHN DONAHOE: Well Skype was an acquisition that eBay made under Meg's leadership in 2005. And again, our core mission was connecting buyers and sellers. And at the time, we thought Skype might be another way to connect buyers and sellers. And in particular, that it could have led to a lead generation model which was pay per call. So at the time, you remember