"We thought auctions were a religion," Donahoe says in the video excerpt above. "Auctions are nothing more than a format." Writes Ina Steiner of AuctionBytes, where you can find the full video: "This is a rather amazing statement for the head of eBay to say, given that auctions are such an important differentiator" for the company.

Indeed, but they're also a pain in the neck: eBay's auctions are famously a favorite playground for fraudsters and scammers and occasions for heated disputes between even legitimate buyers and sellers. Multiply those headaches across millions of users, and you can understand why the company's MBA CEOs — first Meg Whitman, now Donahoe — have decided to shift the company's focus elsewhere. Whitman pushed eBay into sales of new goods while jacking up auction fees; Donahoe has emphasized the growth potential of PayPal, as well as bulk sales from partners like Buy.com.

But solving tough problems is, ultimately, the best way for a business to protect its profits from competitors. Take, for example, PayPal, the acquisition that has become eBay's crown jewel. The company beat back rival startups as well as huge competitors like Citibank above all else on the strength of its relentless approach to combatting fraud, co-founder Max Levchin explained in the book Founders at Work:

The financial industry people understood the risk, but they weren't willing to do the sort of stuff we did... I remember all these companies announcing that they were going out of business and they expected PayPal to go out of business soon too, because the fraud numbers were so staggering they could not see anyone handling this sort of thing.

Levchin ultimately solved the fraud problem with a combination of human investigators, and computer algorithms to funnel select cases to those investigators. He eventually decided PayPal was a "security company pretending to be a financial services company." It's possible Donahoe realizes that eBay is, likewise, a security company pretending to be a retail services company; he has talked about revitalizing the core of the company and focusing on small sellers. But when he brags to a retail conference about taking auctions to 25 percent of eBay business from 80 percent, it sends the signal that eBay is retreating from his company's central lucrative challenge rather than attacking it. And who wants to bet on a quitter?

Apple, where cofounder Steve Jobs returned to power in 1998, is up 600 percent since the beginning of 2002. Amazon.com, where Jeff Bezos has reigned as CEO more or less uninterruptedly since the online retailer's founding, tripled its worth. Google, where cofounders Larry Page and Sergey Brin form a troika with hired-hand CEO Eric Schmidt, has also tripled in value since its inital public offering in 2004. These gains remain despite the stock market's punishing fall.

What about Yahoo, eBay, and Microsoft, where founders handed over the company to professional managers? They are all back where they started almost seven years ago. Under former CEO Terry Semel, Yahoo had a brief golden age in 2004, where it outperformed all the other big Internet companies; it ended just as Google began its relentless rise. Meg Whitman overstayed her welcome at eBay, presiding over its stagnation before handing over the CEO job to John Donahoe — like Whitman, also a management consultant by training. Microsoft CEO Steve Ballmer has proven that he's no Bill Gates; the stock has flatlined under his leadership.

Under Yang, the stock has gone down, down, down, interrupted only by the hope that Microsoft might buy the company and in so doing, give its employees the leadership and sense of purpose they so desperately crave. Does that disprove the value of founders? No. Rather, it suggests that by abandoning his company when it was merely a toddler to be reared by strangers, that he was never much of a father figure to begin with.

He overheard an eBay executive call the company a "total lost cause." Taken by itself, the conversation, which we've copied below, comes off as just another understandably disappointed in life middle manager griping to a friend. But given the mounting bad news, doesn't train rider's rant comes off a more evidence that eBay is as "fucked" as he says?

- Didn’t you know I’m working for eBay now?
- Yeah, [redacted] months now.
- It’s fucked.
- Maybe a year ago. But it’s fucked now.
- Total lost cause.
- I’m a Senior Manager, [redacted] . Yeah, dealing with [redacted].
- They had me in for 13 interviews.
- Yeah. Fucking ridiculous.
- Fucking stupid.
- Haven’t got a clue.
- The Managing Director’s an idiot.

In the video, Omidyar talks about how retailers shouldn't be rewarded "by virtue of their stature outside the online community." And yet isn't that exactly what eBay has done for Buy.com? Donahoe is set to address eBay sellers in a keynote Friday morning at its annual eBay Live conference. How will he explain the Buy.com deal? It will surely take the very best corporate doublespeak — the sort that only a former management consultant can come up with.

VeriSign chairman Jim Bidzos
An employee's advice to senior management:

Don't drag out the divestiture process in an effort to get a few extra bucks. And if you're going to kill the whole thing, be honest with employees about opportunities.

AMD chairman and CEO Hector Ruiz
An employee's advice to senior management:

AMD needs to go back to basics. What business is AMD in, who do you need onboard to lead the company in that business, who do you need that can create demand for the product, and what do the customers want? Ignore the "how" and focus on the "who." Stop treating employees like costs and more like assets. Threatening cubical hoteling and pushing the "do more with less" story is oppressive, not inspiring. The most marketable talent will leave first.

EMC CEO and chairman Joe Tucci
An employee's advice to senior management:

Senior management needs to respect its employees, listen to feedback and not bury its head in the sand as it relates to issues of sexism and lack of diversity. The culture continues to be predominantly young white men and this is largely because people hire who they know. "Breaking the glass ceiling" requires a lot of sacrifice! They will cite a few examples of high profile women, but these are the exception, not the rule. Work/life balance is not a priority in this company. Most of the highest ranking professional women in this organization are unmarried or do not have children. They need to recognize the need for more flexible work options that promote the importance of family. And most importantly, there need to be consequences for illegal and unethical behavior, regardless of who commits it! People cannot be protected from this. There are too many blind eyes turned when sexual harassment, illegal business practices, or other unethical acts occur.

Yahoo CEO Jerry Yang

An employee's advice to senior management:

Be more open to the workforce opinions. Be more humble. Be less political. Listen more, do more, and quickly.

eBay CEO John Donahoe
An employee's advice to senior management:

Streamline the process so people can focus more on getting their work done. Share more of the details of the vision for eBay and the competition of eBay.

Symantec CEO John Thompson
An employee's advice to senior management:

Open your eyes to how the actually successful companies are doing it. Use your talent pool and clear the way to innovate internally. Shift the focus from salesmanship to inherent quality. Build products that sell themselves rather than needing an aggresive sales cycle to move.

Hewlett-Packard chairman, president and CEO Mark Hurd
An employee's advice to senior management:

Stop screwing the employees. Stop reducing benefits every week. Stop saying you plan to invest in research and development when you are actually reducing everything except your bonuses. Start treating people as people. Get some moral fiber.

EDS chairman, president and CEO Ron Rittenmeyer
An employee's advice to senior management:

As I said above, either learn to trust the junior leadership you put into place or replace them. Set goals and then GET OUT OF THE WAY and allow the leadership the flexibility to execute to them. If they don't perform, release them. The micromanagement culture has to stop.

IBM chairman, president and CEO Sam Palmisano
An employee's advice to senior management:

One thing is missing though, an acceptance of the fact that there are "superstars" in the world, and that these superstars perform several orders of magnitude better than regular employees. What is missing within IBM is the ability to seek out, and nourish these superstars. Over time superstars will leave IBM because they will get much more recognition in other organizations. This has an impact on IBM's ability to deliver some things.

Microsoft CEO Steve Ballmer
An employee's advice to senior management:

There is a severe lack of leadership in the company. With so many things going on it takes executives too long to commit to business decisions and too long to pick up on competitive responses to disruptive technologies.Microsoft promotes based on 2 facets - technical knowledge and political saavy. What Microsoft does not promote based on is leadership ability, managerial ability or business saavy.

(Photo of Ballmer by AP/Sarbach)

This time, to improve results, eBay will integrate PayPal data — "data about what people actually purchased and bought," Donahoe said — into its search algorithm. How timely, since eBay has only owned PayPal for more than five years now.

Something needs to change. Check out the top result for a search on the term "Wii." Somehow I don't think eBay's earning a lot of revenue on listed items like this one.

Candidate: Jeff Jordan
Resume: Former Disney exec.
Credentials: Came in with Whitman. Ran PayPal and eBay's North American operations.
Why it won't happen: Jordan got the ax 18 months ago, after blame settled on his shoulders for an eBay slowdown three years ago. Now he runs OpenTable.

Candidate: Bill Cobb
Resume: Former PepsiCo exec.
Credentials: When Cobb got the gig of president of eBay North America, Whitman made it known he'd eventually compete for her job.
Why it won't happen: Not too long ago, Cobb lowered listing fees, flooding the eBay market with cheap goods. This slowed the auction giant's growth and lead some analysts to call for the company to embrace the role of "value" stock. That's not what eBay's board or shareholders want. Also, Cobb already reports to Donahoe.

Candidate: Rajiv Dhutta
Resume: Head of worldwide sales for semiconductor firm KLA-Tencor.
Credentials: Former CFO and head of strategy now runs the PayPal division.
Why it won't happen: He also used to run Skype after championing its acquisition. So that's that.

(Photo by liewcf)

Whitman's reign can be roughly divided into two parts: 1998-2005, and 2005-2008. Her first seven years were lucky indeed. eBay was one of the few companies to weather the bust well. Its purchase of PayPal in 2002 turbocharged its growth, allowing it to extract fees from sellers not only when they sold their goods, but also when they collected the money.

But since then — a period which coincides with Donahoe's tenure at the company — eBay has struggled. Google's inexpensive search adsincreasingly provided a new kind of competition; while Whitman fumbled around trying to respond to that threat, Jeff Bezos lured away some of her top merchants to a revitalized Amazon.com. In most of Asia, eBay still has little market share. And buying Skype, as many predicted from the start, proved a costly distraction.

A revision to Whitman's Law: CEOs should only stay seven years, max. With all the troubles Donahoe has either inherited from Whitman, or made from himself, he'll be lucky to stay half that long.

Ever since the Skype acquisition officially went sour, Whitman has faced increased pressure to step down from her post. Analysts have begun to push for eBay marketplaces exec John Donahoe's ascension.

It's got to be unsettling, Meg. Maybe some comfort food would help? We know a great place just across the street.

(Photo by jurvetson)