How eBay Worked a Comeback

David Paul Morris/Bloomberg News

John Donahoe has led a revival of eBay. “Our multiyear effort is paying off,” he said.

Remember Myspace, Friendster, eToys, Webvan, Urban Fetch, Pets.com? Like meteors, they burned with dazzling brilliance before turning shareholder dollars to ash. EBay, Yahoo and AOL, the dominant Internet triumvirate circa 2004, seemed destined for a similar fate. The conventional wisdom has been that once decline sets in at an Internet company, it's irreversible.

But that was before 's latest earnings surprise, which sent its stock soaring and had analysts scrambling to raise their projections. “Can Internet companies ever turn around? The answer has been no,” Ken Sena, Internet analyst at Evercore, told me this week. “But now, there's eBay. The answer may turn out to be yes.”

If so, eBay's success has big implications for struggling companies like Yahoo and AOL, not to mention more recent sensations that have already lost some luster, like Zynga, Groupon and even Facebook, whose shares tumbled this week after its first earnings report as a public company disappointed investors. “EBay has demonstrated that it's possible to turn the corner even against long odds,” said David Spitz, president and chief operating officer of ChannelAdvisor, an e-commerce consulting company.

EBay shares hit a peak of over $58 in 2004 and made its chief executive, Meg Whitman, a Silicon Valley celebrity. But by November 2007, when she stepped down to enter politics, the telltale signs of decline had set in. Its stock was slumping. Its dominant online auction business had matured, and growth had slowed. Sellers complained about higher fees and poor support. That year, eBay wrote off $1.4 billion on its poorly conceived $2.5 billion acquisition of the calling service Skype, recording its first loss as a public company. Analysts worried that eBay had lost its quirky soul, and was abandoning the flea market auction model that had made it distinctive and dominant in online auctions. By early 2009, its stock was barely over $10, down over 80 percent from its peak.

Ms. Whitman was succeeded by a former Bain & Company managing director, John Donahoe. “One of the unique things about the Internet is a company can be a white-hot success and become a global brand and reach global scale in just a few years - that's the good news,” he told me this week. “But then somebody can turn around and do it to you. There's constant disruption. One of the first things I had to do here was face reality. EBay was getting disrupted.”

Little more than four years after taking charge, a buoyant Mr. Donahoe sounded like the chief executive of a surging start-up when he announced eBay's latest results on July 18. So thoroughly has eBay been transformed that he didn't even mention its traditional auction business. “Our multiyear effort is paying off,” he said. Profit more than doubled and revenue jumped 23 percent. “EBay is revitalized. We believe the best is yet to come.” In a stock market struggling with recession fears and the , eBay stock this week hit a six-year high.

How has eBay done it when so many others have failed?

Excitement about eBay's prospects has little to do with its traditional auction business, or even its core e-commerce operations, although its marketplace division posted solid results and had its best quarter since 2006, the company said. Most of its growth came from mobile retailing and its PayPal online payments division, a business it acquired in 2002 for what now looks like a bargain $1.5 billion.

As consumers embrace shopping on their smartphones, “mobile continues to be a game-changer,” Mr. Donahoe said. He noted that 90 million users had downloaded eBay's mobile app and that 600,000 customers made their first mobile purchase during the most recent quarter. “A woman's handbag is purchased on eBay mobile every 30 seconds,” he said. “Mobile is revolutionizing how people shop and pay.”

“It's hard to think of many companies that benefit from mobile,” Mr. Sena said. “Usually it means more competition. But clearly, eBay is one of them. EBay is offering a one-click payment solution. You don't have to type in a credit card number or PIN. It's just one click on your mobile phone.”

Mr. Spitz said he was recently stopped at a traffic light and the sun was bothering his eyes. By the time the light turned green, he had used his phone to order and pay for sunglasses. “This is what commerce anytime, anywhere means,” he said. “It's here.”

It\'s Hard to Like a Digital Exercise Monitor

EARLIER this month, I found myself obsessing over a digital pet as demanding as the Tamagotchi toys I collected as a child. Those virtual creatures lived on the screens of egg-shaped key chains and needed constant feeding and petting, which was accomplished with the press of a button.

My latest fixation wasn't an ersatz animal. It was the Nike FuelBand, a slim, black bracelet that has the mission of tracking the daily of anyone who wears it.

From the moment I wrapped the band around my wrist, I was enamored with the idea of a device that could help me collect data about my habits and behavior, so that I could try to improve them. The only trouble was that the device didn't seem to work very well.

The FuelBand, which awards virtual points for various forms of exercise, doled out rewards with little apparent rationale. One lazy Sunday, I lounged around my apartment with my and an endless pot of coffee, barely moving. But the band delivered a cheery message: I'd hit my goal for the day. Huh?

Others have noticed this inconsistency, too. Casey Chan, a writer at Gizmodo, found that the band awarded more points for eating a slice of pizza than for walking up a flight of stairs.

Joseph Teegardin, a Nike spokesman, said last week that the company assigned points to a range of behaviors. To tally those points, the accelerometers in the wristband monitor activity and match movement patterns to a Nike proprietary index. He added that the device worked best with activities involving wrist movement - dancing and basketball, for example.

The device's inconsistency was frustrating. After a few days, though, I forgot about my newfound pet altogether, leaving it in a public restroom and then, after retrieving it, putting it in my back pocket and later accidentally sitting on it. Until then, the wristband had certainly been affecting my behavior. I felt Fuelshamed, embarrassed each time I glanced at the band's dull surface and found it illuminated by a lonely red dot, a signal that I wasn't active enough to appease the machine.

The FuelBand is part of a new, ambitious breed of fitness tracking devices and apps that promise to transform their owners into personal data collectors, able to analyze and improve the minutiae of their daily lives - where they go, what they eat and how much they move.

These gadgets and software have attracted legions of fans who want to know how far they run on a jog or how many they burn on their way to work. The FuelBand, however, is trying to move into new territory by creating its own index for awarding points, called NikeFuel, based on a variety of activities and then calculating a daily total. It's meant to give its users a generic goal, but it can also lead to confusion, given the ambiguity of the metrics.

THE and guilt I experienced as my FuelBand honeymoon wore off is not uncommon, according to people who study behavioral science. The collected data is often interesting, but it is hard to analyze and use in a way that spurs change.

“It doesn't trigger you to do anything habitually,” said Michael Kim, who runs Kairos Labs, a Seattle-based company specializing in designing social software to influence behavior. “Habits are based on cues that happen every day, which leads to a routine and then a reward or achievement, which could just be something as general as an endorphin rush.”

Of the FuelBand, he said, “You just see a pretty number that isn't always enough to be a trigger.” The FuelBand connects with smartphones and a Web-based interface, which shows users a cute animation of a dancing alien as a reward for reaching a goal. But Mr. Kim, whose résumé includes a stint as director of Xbox Live, the online gaming system created by Microsoft, said the gamelike mechanisms of the Nike device and others like it were “not enough” for the average user. “Points and badges do not lead to behavior change,” he said.

The FuelBand and its counterparts also allow users to announce their achievements on various social networks. But frequent updates could annoy the friends who see them. “Does anyone really want to see how many miles you ran, what you weigh, along with what the weather is where you are and the songs you're listening to?” said B. J. Fogg, who directs the Persuasive Technology Lab at Stanford and has conducted research tests with the FuelBand and other forms of wearable technology.

But Mr. Fogg said he believed that the FuelBand might be useful in another way. Simply donning it can work as a fancier version of a string tied around your finger: a reminder to complete a task or errand, he said. It could be the nudge you need, for example, to get off the subway a few stops early and walk the rest of the way home, or to jog a few extra laps around the track.

“You aren't going to be any less active than you already are by wearing it,” he said.

But its benefits, such as they are, may not be sustainable. “The biggest problem people have is losing the device,” Mr. Fogg said with a laugh. “Is it reasonable to expect someone to wear it every day for the rest of their life?”

It isn't for me. My once-beloved FuelBand now lives on a crowded dresser, surrounded by jewelry I've grown tired of wearing.

Of course, these monitoring devices could be miniaturized further, and could develop more impressive capabilities. Steven Dean, who organizes gatherings in New York for self-trackers - people who collect data about everything from their caffeine intake to their number of smiles - said we were in the early stages of information gathering and analysis. He compared it to documenting a rash on his skin, photographing it and keeping a record of its response to various allergy creams.

“I may not know what to make of the information I've collected, but at least I have it,” Mr. Dean said. “I could show the dermatologist what I looked like two weeks ago rather than guess.”

EVENTUALLY, wearable devices will help people understand more of their bodies' behaviors and find ways to tweak them. Already, personal data streams can be exported to smartphones or computers for use in digital weight scales and heart and blood-sugar monitors. Future devices could nudge their owners in real time, letting them know if they were near a gym and hadn't worked out in a few days. Or they could warn patients to stay away from ice cream shops.

“This is just the start in terms of pure data capture,” Mr. Dean said.

In Interview, Romney Brings Arab Spring into Presidential Race

By DAVID D. KIRKPATRICK

Mitt Romney on Saturday explicitly sought for the first time to turn the Arab Spring into an issue in the United States presidential race. In an interview with an Israeli newspaper to set up his visit to Israel this weekend, Mr. Romney made several provocative statements distinguishing himself from President Obama.

Mr. Romney discussed the Arab Spring revolts as a problem rather than progress, he asserted against some evidence that the Obama administration had abandoned an agenda of pushing for democratic reform pursued by George W. Bush, and he characterized even the most moderate and Western friendly Islamists- those in the political parties leading legislatures in Tunisia and Morocco- as political opponents. The last runs counter to the Obama administration's strategy, endorsed by some Republicans in Congress, of building alliances with moderate Islamists where possible.

- Read the full interview

Apple Said to Consider Stake in Twitter

, which has stumbled in its efforts to get into social media, has talked with in recent months about making a strategic investment in it, according to people briefed on the matter.

While Apple has been hugely successful in selling phones and tablets, it has little traction in social networking, which has become a major engine of activity on the Web and on mobile devices. Social media are increasingly influencing how people spend their time and money - an important consideration for Apple, which also sells applications, games, music and movies.

Apple has considered an investment in the hundreds of millions of dollars, one that could value Twitter at more than $10 billion, up from an $8.4 billion valuation last year, these people said. They declined to be named because the discussions were private.

There is no guarantee that the two companies, which are not in negotiations at the moment, will come to an agreement. But the earlier talks are a sign that they may form a stronger partnership amid intensifying competition from the likes of Google and .

Apple has not made many friends in social media. Its relationship with Facebook, for example, has been strained since a deal to build Facebook features into Ping, Apple's music-centric social network, fell apart. Facebook is also aligned with Microsoft, which owns a small stake in it. And Google, an Apple rival in the phone market, has been pushing its own social network, Google Plus.

“Apple doesn't have to own a social network,” Timothy D. Cook, Apple's chief executive, said at a recent technology conference. “But does Apple need to be social? Yes.”

Twitter and Apple have already been working together. Recently, Apple has tightly sewn Twitter features into its software for phones, tablets and computers, while, behind the scenes, Twitter has put more resources into managing its relationship with Apple.

Though an investment in Twitter would not be a big financial move for Apple by any stretch - it has $117 billion in liquid investments, and it quietly agreed to buy a mobile security company for $356 million on Friday - it would be one of Mr. Cook's most important strategic decisions as chief executive. And it would be an uncommon arrangement for Apple, which tends to buy small start-ups that are then absorbed into the company.

But such a deal would give Apple more access to Twitter's deep understanding of the social Web, and pave the way for closer Twitter integration into Apple's products.

Twitter has grown quickly, amassing more than 140 million monthly active users who generate a vast stream of short messages about their lives, the news and everything else. An Apple investment would give it the glow of a close relationship with a technology icon, and would instantly bolster its valuation, which, like that of other start-ups, has languished in the wake of Facebook's lackluster market debut. In fact, word of the talks comes at a time when some are asking whether expectations for the potential of social media companies have gotten out of hand, and shares of Facebook, Zynga and other companies have wilted.

But Twitter does not need Apple's cash. Earlier this year, Dick Costolo, Twitter's chief executive, said the company had “truckloads of money in the bank.”

The truckloads, according to people familiar with the matter, add up to more than $600 million in cash on hand. This comes from the $1 billion in financing it has raised over the years and, more recently, from a healthy flow of advertising revenue.

Regardless, Twitter is widely expected to pursue a public offering within the next couple of years, whether or not it agrees to deals with investors like Apple.

Apple and Twitter are logical partners in some ways. Unlike Facebook or Google, Twitter has no plans to compete with Apple in the phone business or elsewhere. And as Apple has found, social is just not in its DNA.

“Those guys are a great partner,” Mr. Costolo said of Apple in a recent interview. “We think of them as a company that our company looks up to.” Mr. Costolo would not discuss any potential investments or anything else related to the company's relationship with Apple.

Spokesmen for both Apple and Twitter said on Friday that their companies did not comment on rumors.

As Facebook and Zynga Drop, Some See a Shift in Silicon Valley

SAN FRANCISCO - Another couple of days like this and the great tech bubble of 2012 might recede into history.

Several companies that were supposed to be the foundation of a new Internet era plummeted this week as analysts and investors downgraded their dreams. There were instant echoes of the crash of 2000, when the money stopped flowing, the dot-coms crumbled and Silicon Valley devolved into recriminations and lawsuits.

Shares of stumbled to a new low Friday after its first earnings report revealed a murky path to any profit that would justify its lofty valuation. The heavily promoted $100 billion company on the eve of its May debut is now a $65 billion company and persistently headed south.

, the social games company that uses Facebook as a platform, was battered even worse on Thursday, leaving its value at less than a quarter of its peak last winter. Netflix, which is trying to move from physical discs to streaming video, and the coupon company Groupon have also been under severe pressure, leaving them at a fraction of their recent worth.

Feelings of disillusionment are far from universal, and came even as The New York Times reported that , the most successful tech company, had been discussing an investment in . Social media is flourishing; a billion Facebook and 500 million Twitter users would vouch for that. But as just about every Internet company is grappling with the transition to a mobile world, turning groups of people into cash-generating customers on a hand-held device is clearly an immense task.

Nick Zaharias, an independent consultant who advises institutional investors, said his clients were “infinitely more skeptical.”

“For future deals that are pitched as social deals,” he explained, “they're not going to pay up. The multiples are going to be far, far lower.”

The issues facing each tumbling company are slightly different. But they all have the problem of selling something - imaginary tractors, Internet films, discount deals or, in Facebook's case, someone “liking” a product - that is not quite real and perhaps less than essential.

“The gleam has come off the word ‘social,' ” said Ben Schachter, an Internet analyst with the Macquarie Group. “The ground is now shifting underneath these companies' feet at a speed that we didn't see even in the late 1990s.”

Groupon and Netflix have been in the investor doghouse for a while, while with Facebook there seems simple regret that its grandest ambitions might not be reached (“The jury is in: Facebook is not and will not be a second ,” the research group IDC said).

With Zynga, however, there was a sudden sense that building a blue-chip business from virtual goods might be virtually impossible.

“Shocking,” Mr. Schachter wrote in his report after Zynga revealed in its earnings report on Wednesday that it might make less than half of what it had hoped to earn this year from its more obsessive players who pay actual money for virtual goods like tractors - its only real source of income. Increasingly, gamers want to play on the run, and Zynga's mobile games are not a runaway success.

For all the pain that stockholders of Zynga and the other companies must feel, it is not yet March 2000, when all tech stocks went into free fall. The old-line companies, including Google, and Apple, are doing fine.

But the questions about whether the chief executives and other early investors in some once-hot companies might have been a little too eager to cash in are already beginning, just as they did 12 years ago.

Early investors in Facebook increased their participation in the public offering at the last minute by more than 80 million shares, netting them nearly a billion dollars more than the shares would have fetched Friday on the open market. (Mark Zuckerberg, Facebook's founder, was not among those increasing their allotment.) Zynga's founder, Mark Pincus, sold 16 million shares in an unusual secondary offering four months after the December public offering. He and other executives got $12 a share in those more optimistic times, four times the price on Friday.

Mr. Pincus was asked about those sales on Wednesday during the analyst conference call by the BTIG analyst Richard Greenfield. “I wanted to see whether he felt bad about it,” Mr. Greenfield said later. Mr. Pincus did not address the point.

If investors were battered and Wall Street was alarmed, Silicon Valley was unfazed.

The downward slide in public valuations would have an effect on private valuations, venture capitalists said, but it would be manageable.