No, Vinny, I think Dagan's point is they are different business models. EBay doesn't *every* buy the merchandise sold through its site. All it does is provide a service for connecting buyers and sellers; its revenues come solely from people paying for the connection service.
Like other service industries, then, its gross margins are very high. That's simply its business model, and nice because of the high margins and no returns <g>.
However, Dagan, is EBAY being valued properly, and is it being valued on the basis of it having gross margins that are way above other businesses? By that theory you'd find that classified ad publishers would be riding on top of the world, no? There's on-line classified ads, where gross margin is very high. But I don't think they're valued the way EBay is, or UBID...or BID.COM And there are other good businesses with similar models and similar gross margins that are not valued the way EBay is. So to look at gross margin and use that to belittle the current and future valuation of BID.COM is spurious if not disingenuous.
These auction sites are hot Internet properties, and it becomes very difficult to find a way to properly value them. Most of the value, I think, comes (well, after the momentum factor) from a judgement of the value of the management and its ability to continue to grow the top line, not the bottom. At least for now. And that makes BID.COM a fine property to own.
WUWT |
