The recession is making it hard for retailers right now, but online auction site ebay is especially hurting from efforts to diversify its core business.

For over a year now, eBay has been expanding its offerings to include retail items, and putting itself in closer competition with retail giant Amazon. But that has come at the expense of its core business. 

Ina Steiner, the editor of AuctionBytes, a news service for eBay sellers, has found that eBay’s Web traffic has been steadily falling since last fall. She attributes that drop to the company’s current “identity crisis.”

EBay efforts to diversify have started to confuse consumers. In addition to the site’s user generated auctions, eBayhas started to include more direct “Buy it Now” options and links to professional sellers.

According to The New York Times:

“At the highest level, the site has switched from trying to promote
itself as a place for a full range of merchandise to one that
emphasizes used and off-season goods.”

But that hasn’t proven good for business. In the first quarter of 2009, revenue fell 18%, to $1.22 billion. Gross merchandise volume (the
total value of goods listed on the site) slid by 16% during
the quarter.

eBay’s page views in May 2009 dropped 32% compared to May 2008, and
compared to May 2005, page views were down by 40%, with a 7% drop from
May 2008 to May 2009.

Since March, the online auction site has tried to refocus itself on its core auction business, and there have been some early signs of rebound with those efforts. The Wall Street Journal thinks the company’s stock is currently undervalued, but eBay’s wobbily year proves that expansion cannot come at the cost of confusing users.

Image: ActionBytes