It takes a lot to anger the normally unruffled Meg Whitman, president and chief executive of eBay. Google managed it in May when it tried to hijack an eBay sellers’ conference. Ms Whitman says: “We thought it was a direct, competitive intrusion in our most important community event of the year.”

But whereas some Silicon Valley executives would have used the incident to sling as much mud as possible, – after all, Google is said to have tried to lure eBay’s customers to a rival payment system – that is not Ms Whitman’s style. Instead, she exudes a blend of serenity and steeliness. Traits displayed by her company’s subsequent decision to pull its $100 million (£50 million) advertising account with Google.

Ms Whitman may have to take a more animated stance – and look a lot meaner – in 2008 if eBay is to convince Wall Street that it is not just another dot-com business with a glorious future behind it. In October the group reported a 30 per cent increase in quarterly revenues, to $1.89 billion, but posted a quarterly loss for the first time in eight years after being forced to admit it dras-tically overpaid for Skype, the internet telephony group that it bought in October 2005 for $2.6 billion.

EBay was forced to write down the value of Skype – a service that allows users to make free calls over the web – by $900 million after failing to reap sufficient profits from the business. It paid an additional $500 million to end the earn-out agreement it had hammered out with Skype’s founders, claiming that the deal was holding Skype back.

Supporters say that, no matter the red ink, the Skype acquisition remains sound as it brought one of the web’s best-known brands under eBay’s wing. That is a stance Ms Whitman, who made her name as manager of Hasbro’s Preschool Division, is likely to agree with.

By contrast, however, an increasingly vocal chorus of detractors say that the Skype fiasco has raised doubts over Ms Whitman’s judgment – a situation made worse when, at the same time as unveiling the massive Skype writedown, she gave warning that a slowdown in retail spending in the United States would also hit sales at eBay’s core auction business. This was before the full extent of the global credit crunch and its likely impact on consumer spending was as clear as it is today.

The new year started in a similarly downbeat fashion, with analysts at Deutsche Bank reiterating their “sell” call on eBay citing fears that the business is facing severe problems in attracting buyers to its auctions. “We continue to believe that eBay faces fundamental challenges in generating demand,” Deutsche said, noting that page views of eBay’s site in the US are steadily declining, driving up marketing costs.

Ms Whitman, 51, dismisses concerns that a 5 per cent decline in item listings means that activity is slowing, suggesting that the figures are a result of a number of changes to the site “still making their way through the system”. She also says that increasing the number of active users, of which there are 83 million, is less important than it had been. In Germany, for instance, “there’s hardly anyone left who doesn’t use eBay”, and that the focus must now be on “engaging them, getting them to come back more often and be more active”.

Ms Whitman is more contrite about Skype. “We were disappointed, but I’m not feeling too bad about the monetisation of Skype,” Ms Whitman says, adding that the three-year-old service would generate $400 million of business this year.

Part of the problem, she says, is the focus by analysts on “average revenue per user” at Skype, which she admits is tiny (most analysts put it at less than $2 a year). However, Ms Whitman insists that average revenue per user is not the most important measurement because Skype is “not a telco”.

EBay will continue to focus on trying to persuade people to use Skype as their communications hub and “figuring out how to grow revenues”, yet there would be no “big push” to integrate the service with the auction site by promoting video-calling between buyers and sellers as a way of reducing fraud. This will “happen naturally”, Ms Whitman adds.

She is dismissive of any suggestion that Facebook and other social networking sites pose a threat to eBay. Facebook brings together groups with common interests, so if it introduced a payment system allowing members to trade goods, might eBay not find its users migrating? “If you look at the kind of applications that have become popular on Facebook,” Ms Whitman says, referring to services such as iLike that allows Facebook users to recommend songs to friends, “they are not commercial applications – they are social applications”.

She goes so far as to suggest that the business model of social networks is not yet assured: “Communication for communication’s sake I’m not sure has longevity. In the land-based world we have community centres throughout the US – nobody’s ever in them.” EBay will continue to focus on where the “next-generation disrupters” are coming from, she says, and make acquisitions – as it had done with Skype – accordingly. Whether to compete with such a firm, or simply buy it, is a “judgment call”.

Ms Whitman would not say specifically which areas the company is considering, but acknowledges that one of the “trends of the moment” is towards open platforms, as highlighted by Google’s recent OpenSocial initiative.

EBay’s ability to integrate with such platforms, she adds, would be limited because the company holds important financial information about its customers and has strict obligations under money-laundering laws.

However, the company’s future may come down to success in the east. EBay had struggled to gain customers because the Chinese site did not appeal to the locals. “We started by translating our site and our Chinese users would say: it’s not Chinese enough. We’d say: ‘what do you mean? It’s in Chinese!’ But it was subtle things, such as the way the page was laid out, managing user flow and how you read.” About a year ago, eBay asked a local firm, Tom Online, to overhaul the site. The move has paid off. Since relaunch late last year, the new version has won significantly more users.

From a $14.83 sale to billion-dollar fortunes

1995 French-born computer programmer Pierre Omidyar founds AuctionWeb (a story that it was created to help his fiancée trade PEZ sweets dispensers was later revealed as a PR fabrication). The first item sold is a broken laser pointer for $14.83 – bought by a self-described “collector of broken laser pointers”

1996 AuctionWeb agrees first third-party licensing deal, to sell travel tickets

1997 Name changed to eBay – the second choice, after echobay.com was taken

1998 Goes public at $18 a share, raising $63 million. The stock gains more than 160 per cent on its debut session, valuing eBay at $2 billion. Mr Omidyar becomes a billionaire. Meg Whitman becomes president and chief executive

1999 UK site goes live. In the US, the site is forced to block the sale of a human kidney

2002 Buys PayPal, the online payments service, for $1.5 billion in stock

2004 Tiffany & Co, the jeweller, sues eBay – one of many groups to complain about counterfeit products being offered on the site

2005 Buys Skype, the internet telephony company, for $2.6 billion in stock and cash. Shares hit record high, at close to $60. Ms Whitman named most powerful woman in business by Fortune magazine

2007 eBay writes down value of Skype by $900 million and pays $500 million to the group’s founders to close an earn-out agreement. Charges send eBay to first quarterly loss in eight years and company warns of uncertain outlook. Forbes says Mr Omidyar is the 76th richest person alive, worth $8.8 billion, and estimates Ms Whitman’s personal fortune at $1.4 billion

2008 Shares at $33, nearly half their peak

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