Amid the Gloom, an E-Commerce War - The New York Times

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October 11, 2008

Amid the Gloom, an E-Commerce War
By BRAD STONE

WHEN the e-commerce giant eBay emerged from the last recession seven years ago with an aura of invincibility, its chief executive, Meg Whitman, boasted that “eBay is to some extent recession-proof.” As the online auctioneer’s revenues and stock price kept climbing, one of its primary rivals, Amazon.com, just limped along. How times have changed. Ms. Whitman, now co-chair of Senator John McCain’s presidential campaign, retired from eBay earlier this year as the company struggled with stagnation. Amazon, meanwhile, has emerged as one of the most vibrant and reliable retailers in the country. And in an unmistakable sign that Internet companies are indeed exposed to the gathering economic storm stemming from the credit crisis, Ms. Whitman’s successor, John J. Donahoe, laid off 10 percent of eBay’s 16,000 employees last Monday. Mr. Donahoe noted that eBay was already feeling the effects of the downturn. “This looks like it is going to be a more typical economic cycle that impacts consumer spending,” he said. “We are not immune.” That the economic crisis is washing up on Silicon Valley’s shores shouldn’t, perhaps, come as a surprise. Most tech companies are defenseless against waning advertising, business spending and consumer interest in big-ticket items like computers. Over the last three months, investors have punished tech companies like Google, Microsoft and Apple, extracting a fifth to a