Earnings call : eBay's income fell in Q4 2008
22/01/2009 at 00:39
eBay’s earnings call for Q4 2008 tonight saw the company post its first ever decline in revenue. eBay CEO John Donahoe blamed this on an “almost unprecedented external environment”, where all ecommerce saw negative growth for the first time. Overall revenues for the entire company were down 7% year on year.
The real bad news was for eBay’s Marketplaces businesses, which include the eBay sites, Shopping.com, StubHub, Kijiji and other classified sites, where year on year revenues were down 16%. GMV fell 12% compared to Q4 2007, and was up only 1% against Q3 2008: it was a cold, cold Christmas on eBay this year. Worse still were Motors, with GMV down 30% y/y, and Shopping.com, which declined 50%, blamed on changes made by search engines.
“I’m as frustrated as anyone”
Despite these frankly dismal figures, eBay’s management remain convinced that the track they’re on is the right one. JD pronounced himself “as frustrated as anyone” that the radical changes made during 2008 haven’t produced the results eBay had hoped for, but he blamed this squarely on the economy; it’ll be interesting to see Amazon’s results next week to find out if they were able to buck the trend or not.
There are some glimmers of hope; JD said that sellers with DSRs of 4.8 and above saw their sales grow 17%. As this was presumably at the expense of “disadvantaged” sellers, I’m not sure it says much about the health of the eBay marketplace overall, but it does suggest that one of eBay’s goals, to reward merchants who offer a better buying experience, has been met.
In response to a question, JD avowed that eBay is “still committed to individual small business sellers”. eBay has “no stated goals to change the seller mix”, but remains committed to having a variety of smaller and larger merchants on the site.
The outlook for 2009 remains upbeat. In a statement, JD said “While the holiday season was tough and competitive, our overall results for 2008 were strong. We will build on our strengths in 2009 while managing our business prudently in the continued challenging environment.”
PayPal
In a pattern we’ve come to expect, PayPal is the jewel in eBay’s crown. 2008 saw off-eBay payments exceed on-eBay payments for the first time; total payment volume grew 14%, and active accounts increased 23% to 70 million. There’s no question that PayPal is doing extremely well, even in the current economic climate, but in response to a question, JD apparently ruled out a spin-off of PayPal, saying that synergies between eBay and PayPal were still good.
Skype
Asked a similar question about Skype, however, and he seemed to hint that a sell-off might be on the cards in the medium term. “Synergies are minimal” between Skype and the rest of the portfolio, so eBay could be selling. Skype had a good quarter, with 35 million new users added (just how many of those are brand new to Skype, I guess we’ll never know) and revenues of $145 million, up 26% y/y. SkypeOut minutes (which are pay-for) increased 61% y/y, driven by particularly good performance in Asia. I think perhaps it’s time for someone to make more of Skype than eBay really seems to know how to do.
More info
eBay Ink’s summary of the call
Press release (with lots of numbers)
Call recording, with slides
ebuyerfb says
1:48 am on 22/01/2009
You are probably right but it might also mean that people are being forced to sell cheap stuff with no margin to keep their DSRs up just so they can sell their main product. I’ve often found sales are great when I’m not making any money.
toby says
2:15 am on 22/01/2009
Were sales for 4.8 DSR sellers up, or did they throw some/all their former S&H charges into the price to get good dsrs? or did they shift some/all former S&H charges to item price to keep their dsrs up, thereby “increasing” their reported sales? Who knows how they calculated that anyway, “Buy” has 4.8 dsrs and went from nothing to massive sales.
whirly says
7:38 am on 22/01/2009
#1 “You are probably right but it might also mean that people are being forced to sell cheap stuff with no margin to keep their DSRs up just so they can sell their main product.”
Correct.
Stuart says
9:08 am on 22/01/2009
It’s great to have the economic downturn to hid under but to be honest ebay shouldn’t be. If you look at the high street for example most of the companies that are still doing well and often better than before, are business selling stuff cheap like Primark, Aldi, Lidl etc etc so ebay should be booming!!
I don’t know why its not, I am guessing the changes and maybe the general reason is customers are simply turning away from it as its had its day maybe? You speak to most people about ebay and at sometime or another they have had a problem on there, either with a seller or ebay or paypal.
It will be intresting to see what happens after this new rule of only 1 buy it now listing per item, this is going to remove a big chunk of ebays revenues to!
In this climate ebay SHOULD be booming!
shiftyswifty says
9:17 am on 22/01/2009
Sellers think that if they offer “FREE” P+P and incorporate it in their selling price their stars will go up, I can tell you they won’t !
This star system gives you a false impression that YOU can alter your stars by offering incentives, like free P+P to pump up your stars, but in fact all you are doing is pumping up more fees for ebay.
They never got a bean commission off P+P, ang it grieved them so if you incorporate P+P they get more fees in starting price and more Final Valuation fees on the price
All of this American BULL SHIT isn’t working and sellers are leaving in their droves because of American SPIN when it comes to changes.
Must offer paypal because it’s safer….YEAH.
Must offer free P+P because it stops rip off P+P ….YEAH !!
How about treating buyers and sellers like adults and let us decide how we want our auctions to run and how I want to be paid and pay
Reducing the options to pay IS NOT the way to go ….offer what you like, a sale is a sale, don’t limit the ways one can pay
I tried for 3 months this “FREE” P+P lark and my stars went DOWN !!!
20,000+ sales in the past and at one time £700+ per month fees for ebay, close on £8500.00 a year fees, and not counting paypals fees also.
Moved to another site, sales DOWN proffits UP…..Ebay is in the gutter and it’s all self inflicted
shiftyswifty says
9:22 am on 22/01/2009
But that was the best one when they rolled out ….NO MORE INTERNATIONAL VISIBILITY !
No more visibility because it “Clogged up the system”….YEAH RIGHT OH !!!
Then a few months later you could go back to Full Visibility…FOR AN EXTRA FEE !!!…..But what happened to “clogging up the system” ?
MUGS !!!!
board_surfer says
9:26 am on 22/01/2009
The most worrying thing JD said :-
“Today, eBay is safer and easier to use than a year ago. Our pricing is more competitive, our success is more aligned with that of our sellers and the fixed price and auctions are becoming more balanced. But let me be clear, we still have a lot of work to do.”
By “we” im guessing he means sellers, who will still spend a huge amount of time dealing with things he changes.
whirly says
10:46 am on 22/01/2009
I wonder stock will hit sub $10.00 today.
Lisa says
11:03 am on 22/01/2009
It might not hit $10.00 today, but after Amazon’s earnings call on Jan. 29, it could well go below.
Chris Dawson says
11:58 am on 22/01/2009
I’m still struggling to understand why eBay might sell Skype because:
1) The writedown is written off and gone, it won’t be recouped by a sale.
2) It’s fantastically profitable, it’s paying it’s way and will repay the buy cost and write down over time.
3) It’s a standalone money spinner – it’s making a VERY healthy profit.
4) eBay have plenty of cash in the bank – what would they reinvest the money from a Skype sale in. There’s no point just having even more cash in the bank!
Until someone can explain what eBay would do with the money from a Skype sale, all the time it’s a standalone and not dragging the rest of the group down (and in fact is growing way faster than many other parts of the business so is actually contributing to profits health over and above it’s share), why would eBay want to sell it?
shiftyswifty says
12:19 pm on 22/01/2009
#10#
Probably because it’s easier and more viable to sell Skype than it is to sell Ebay
As you say it’s making a very healthy profit which is attractive for potential buyers where as Ebay is in decline and would not be so easy to get rid
TheKnickermafia says
12:32 pm on 22/01/2009
I am not surprised at the loss. Although to blame to current economic climate is an easy thing to to, as opposed to the hoard of changes ebay have implemented the past year or so.
I think its bull to blame the economy especially when ebay sales totally died for us (where a loss was made from listing on there) even with bargain priced linger items. Whereas our website has boomed and we have had very profitable growth!
Ebay….just admit that all the constant changes have affected your profit…as we all know the site should be booming in the current economic climate! After all you are meant to be able to get a great bargain on ebay
northumbrian says
12:54 pm on 22/01/2009
10
Selling skype might not be sensible to ebay as whole
but those that piddle in the same pot might get splashed on
John (ColderICE) says
9:29 pm on 22/01/2009
Message in a bottle to eBay and the Ebay execs, I got a quick message for anyone that will please listen?
http://3rdpoblogs.com/colderice/2009/01/21/message-in-a-bottle-dear-ebay-from-the-great-minds-of-circuit-city-leadership/
whirly says
9:49 pm on 22/01/2009
#14 Good article John, nice work.
hitch says
9:50 pm on 22/01/2009
Best move for Ebay shareholders would be to rename the business Paypal and sell off the Ebay part !
Cambridge_Blue says
2:21 pm on 23/01/2009
There is something wonderfully horrible but deeply sad about watching the the traincrash that is about to happen to eBay during this 1Q/2Q.
If it wasn’t for the fact that a lot of people and businesses are going to suffer even more during 2009 it would be funny – only it isn’t – just so sad and unecessary.
As a seller my contempt for ‘disruptive innovation’ is only matched by my desire to see the barmy ‘Bainite’ get his just deserts (the sack, no payoff and all pension rights revoked).
Dream on I here you say but in the end he will be removed because incompetance even on this scale has, in the end, to be recognised and addressed.
Trying to make eBay into AmazonLite is futile but trying telling that to an ex management consultant.
Hunker down, get ready for a nasty 2009, preserve your cash and do whatever it takes to maintain your margins on eBay.
Stuff the sales volume (within reason) it is all about making and sustaining profit for us!
Cambridge_Blue says
2:24 pm on 23/01/2009
?
Jimbo says
2:43 pm on 23/01/2009
While eBay blame the credit crunch, we blame ebay….
AL says
4:04 pm on 23/01/2009
#17 & #19
Spot on.
JD must be the only person in the world that is glad there is a recession on, otherwise he’d have nothing to hide behind.
I’m struggling with the analysts not being able to understand that it is more than the credit crunch and that ebay should be performing in this sort of economic climate. It would be funny except for the fact that people’s pension money is probably invested in their shares.
Jimbo says
5:08 pm on 23/01/2009
Just to clarify – I do not blame eBay.
Mark T says
10:54 am on 25/01/2009
#14
Some good comparisons
Tony says
10:34 pm on 25/01/2009
The sellers who get better visibility are getting better sales? There’s a shocker, let’s see how their sales are in 12 months. Meanwhile those below 4.8, the vast majority of whom don’t do a fat lot wrong are getting a shoddy service.
This isn’t rocket science, Ebay’s management have made too many bad decisions and it’s about time they took responsibility.
Whirly says
10:29 pm on 29/01/2009
by contrast Amazon had some wonderful trading figures.