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Will eBay Ever Start Advertising Again?

April 7th, 2009 by Skip McGrath

eBay continues to lose market share as their TV advertising stays dark

Having spent a lot of years in the corporate world and even a short stint with a big NYC advertising agency, I know that when business is slow advertising is one of the first things to get cut. However there were always a few very smart companies who used business slowdowns to increase their market share by holding or even increasing their advertising spending in a downturn.

It’s been quite a few years since I was in the advertising business, so I spoke to a friend of mine who is a TV media buyer for a big NYC ad agency. She told me that a decent network and cable TV campaign would cost about $40 to $50 million.   According to eBay’s 2008 balance sheet, at the end of 2008, eBay was sitting on over $4.2 Billion in cash and other cash equivalents. Using a $50 million budget, an ad campaign would use up about 1.1% of eBay’s cash on hand. (Math was never my strong suit but I think that is about right).

On the income side, eBay posted $8.54 Billion in revenue. On that basis, a $50 million advertising program would consume about 0.6% of eBay’s revenue.

There is no question that eBay is under pressure from Wall Street to perform and most companies react to that by cutting expenses in a recession, but eBay is exceptional in that it is sitting on piles of cash at a time when most companies are smothering in debt.  eBay could put this cash to good use by going back into TV advertising where it has been dark for over 2 years (or is it 3?).  Besides attracting buyers to the platform, a TV campaign would dramatically boost seller moral which continues to erode.

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