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Q1 2019 eBay earnings delights investors but not marketplace sellers

By Chris Dawson April 23, 2019 - 11:31 pm

eBay have pulled a rabbit out of the hat and delighted investors with their Q1 2019 eBay earnings, as demonstrated by their share price jumping more than 5% from a close of $36.15 to over $38 as soon as their results were published.

eBay reported Revenue of $2.6 billion with GAAP and Non-GAAP EPS per diluted share of $0.57 and $0.67, respectively. Analysts had expected around $2.58 billion revenue and EPS of $0.63.

There is also plenty to like with eBay’s growing buyer engagement with latest figures showing eBay grew active buyers by 4% across its platforms to 180 million active buyers, up from 171 million at this time last year.

Q1 2019 eBay earnings increased 2% on an as-reported basis and 4% on a foreign exchange (FX) neutral basis.

“We delivered a solid first quarter with revenue and EPS. Our initiatives to create a next generation payment and advertising experience are on track, we saw healthy buyer growth and disciplined cost control, and we continue to simplify the buying process while remaining focused on seller’s success.”
– Devin Wenig, President and CEO, eBay Inc

We are not expecting any comment from activist investors as eBay entered into a cooperation agreement with affiliates of Elliott Associates and with affiliates of Starboard Value, each of which have agreed to certain standstill, voting, and other provisions with eBay.

eBay marketplace contracts

What won’t please marketplace sellers is that as revealed in their Q1 2019 eBay earnings, the eBay marketplace actually contracted slightly when compared with the same quarter last year but eBay made more money. That means sellers are paying higher fees for fewer sales.

  • Marketplace revenue growth was 3% on an as-reported basis and 4% on a FX-Neutral basis.
  • GMV was down 4% on an as-reported basis and down 1% on a FX-Neutral basis

Q1 2019 eBay earnings Marketplace Revenue

In simple terms, eBay marketplace GMV was $21,571 million in Q1 2019 compared with $22,547 in Q1 2018.

The problem for sellers (not just on eBay but also on Amazon) is that it’s becoming more expensive to sell on marketplaces. eBay intend to scale eBay advertising to become a billion dollar business and in the first quarter, there were more than 800 thousand active sellers who took advantage of the program, promoting over 200 million listings. This drove over $65 million of revenue in the quarter, up nearly 110% year-over-year.

There are only two ways to grow a business’ profits – grow total sales or grow margins. eBay aren’t growing revenues and they’re making it harder to grow margins due to their own increased revenues which come from a 3% increase in the total fees that sellers pay.

For Q2 2019, eBay expects net revenue between $2.64 billion and $2.69 billion, representing Organic FX-Neutral growth of 2% – 4%, with GAAP earnings per diluted share from continuing operations in the range of $0.41 – $0.45 and non-GAAP earnings per diluted share from continuing operations in the range of $0.61 – $0.63. What sellers will be looking for is for growth in the marketplace without further increases in fees, whether headline rates or stealth fees through eBay Promoted Listings in order to remain competitive.

  • Alan
    3 months ago

    They continue to squeeze us sellers until we desiccate……

  • SAM
    3 months ago

    PAY more for less, shocker. They cannot grow the site it is done I would not be investing anything in eBay long term…short term thinking and short term profits…

    You keep biting the hand that feeds you.

    eBay treats it’s Army of sellers with contempt…the ranks are dispersing and have become disillusioned with it, the customers (buyers) have already left TBH.

    It is a pity was a great site in it’s time…just ran by the wrong people…

  • Naem
    3 months ago

    Ebay has deliberately raised the bar to the extent that almost every seller has lost the top rated status meaning no more 15% FVF.

    We tried our best to keep up with it but have now lost the status too and now we are paying around £700 a month more.

    eBay figures are going up?……………….Humm…

    In the last two months we had a pleasure of talking to ebay support. It is very apparent that they have now been instructed to treat sellers like enemies.

    Now its ebay vs sellers.

    Advice for sellers, raise the prices up on ebay (you have to anyway) and drop them on your own website. We have tried it and are seeing a rise in sales.

  • 3 months ago

    How desperately sad Ebay has gotten –
    ” eBay’s sold-item growth was again 0%, for the fourth consecutive quarter ”
    Fact – Ebay is only growing by itself because of the Promoted listings fees and other money grabs into the Sellers pockets.

    Thankfully since the GTC fiasco, more and more Ebay sellers are importing their inventory to the Ebid marketplace, which you never pay more than 3% FVF per sale.

  • 3 months ago

    Sponsored listings is a long term bad thing. Just look at who is using it the most.

    You’ve got the Chinese location abusers. That means at the very least, deliveries will not be arriving on time and buyers will be unhappy with that.

    You’ve got overpriced items beating the well priced items, because sponsored listing costs are often passed onto the buyer. What will happen when buyers realise they are overpaying?

    You’ve got sellers who use ebay to advertise rather than sell, with website details plastered over their images and listings, diverting future sales and taking ebay buyers away from ebay. Once they know how cheap it is elsewhere, why would they come back?

    All of these factors are going to drive buyers away. Based on traffic since the start of the year, I think we’re maybe already seeing it.

  • 3 months ago

    I’m a financial analyst covering EBAY for years. We are very sceptical about mgmt and the direction of the co – and esp about the Elliott plan to asset strip the business (for example, who will pay 4x sales for Stubhub when it declines for last 2 Qs, has failed to grow Intl sales, and has a decent margin only in 4Q). What you all likely miss is that EBAY is being drained of cash – $1.5bn went to buybacks and another $125m on a dividend – while product development cost dropped $37m to $297m (even with higher investment in Payments). If you’re interested in seeing our work on EBAY, feel free to reach out – this board is a great source of real world feedback that doesn’t seem to influence the CEO’s $18m pay package.

    • 3 months ago

      Interesting take on the draining of eBay cash… but if we look at the decade or so that eBay owned PayPal almost all of eBay’s cash in those days was diverted to PayPal acquisitions. They probably don’t know what to do with the cash these days!

      Stubhub performance was perhaps worse than the eBay marketplace, eBay has signs of growth such as buyer acquisition whereas there’s nothing quite so positive on Stubhub. Classifieds was the stand out.

    • 3 months ago

      Chris – Excellent piece. In overly simple terms, Wenig and co. have only managed to run eBay less-awfully than last year. (Bravo!)

      By cutting just a bit of eBay’s excessive low-hanging fruit (like their out-of-control marketing spend on eBay subsidized sitewide flash-sales and a series of layoffs of their grossly overstaffed 14,000 headcount organization with too many layers of overlapping middle-management), as eBay increases seller fees and pitting seller against seller for visibility on yet OTHER seller’s own listings pages via Promoted Listings, eBay was able to beat estimates on both the top and bottom lines. (again bravo).

      Meanwhile Wenig mischaracterized (apologies, Yank spellcheck) seller sentiment of his cash-cow, Promoted Listings (in my opinion, he lied) saying, “… one of the things that I’m happiest about is that the seller NPS on this, if you will, their happiness with this product is extremely high. It’s been one of the most successful new products we’ve rolled out from a seller perspective ever and they are adopting it.”

      (For those unfamiliar with the acronym, “NPS” is short for “Net Promoter Score” – a Bain/Fred Richheld concept for, simply put, customer loyalty and satisfaction).

      With Wenig making such an assertion as this to investors, he should back up this claim with independent, 3rd-party seller surveys to support his claim that sellers happiness with Promoted Listings is, in fact, “super high”.

      Unless Wenig can back up this claim, has Wenig possibly breached his fiduciary responsibility to shareholders with a deliberately misleading assertion that sellers are “very happy” with Promoted Listings?

      It is my contrary observation that most sellers dislike (despise?) having to use Promoted Listings in order to get visibility of their product and would much rather not have competitor ads smothering screen real estate on buyer devices when viewing their listings.

      ~~~~~~~~~~~~~~~~~~~~~

      Richard, I follow Scott Galloway on Twitter and I saw his interview with you he shared earlier this year on the breakup of big tech. Appreciate you sharing your insights with us on your take on eBay’s cash burn and spin-off challenges. I am most definitely interested in seeing your eBay work (I also saw the Facebook/Google duopoly deck your firm published in ’17). Great stuff.

  • Jim
    3 months ago

    We just go over the top and head for the machine guns

  • 3 months ago

    Well, US marketplace was -6% or -7%+ yoy if you adjust for Promoted Listings business. That’s just dreadful.

    A 9% decline in avg. basket size (MP revs/active buyers) shows EBAY is getting picked off in the niche high-value categories it used to own (e.g. StockX in trainers).

    The pt. on the cash is that it takes away resource from innovation – and as you guys can see, EBAY is not trying to innovate now.

    • 3 months ago

      Innovate?? eBay??

      eBay’s first great innovation was the marketplace. eBay’s last great innovation that was a game changer was the eBay Mobile App and that was over a decade ago.

      Since then they’ve had Click & Collect and Global Shipping Program as fulfilment service innovations but that’s about it. Everything else has been tinkering under the hood.

      Yes Promoted Listings is an innovation, I think it’s about their third attempt at paid promotion and I get the impression eBay management only jumped on it when they realised it was working and then announced it as a great strategy.

      Catalogue is another thing that’s been tried multiple times and eBay have never quite gotten it right and unlike promoted listings they haven’t hit the right formula by luck yet.

      One might consider eBay Payments as an innovation, but I consider it more as a past total failure to exploit PayPal which should have been totally integrated with eBay as a single buy/pay sign in. If it had been integrated fully it could never have been spun off as easily as it was. It’s madness that after 24 years eBay are only just building payments into the marketplace. Can’t really count it as an innovation… more as a basic requirement and about bloody time!

  • 3 months ago

    For around SIX years we tried to steer ebay towards cataloging vehicle parts and reduce duplicates… Just as we’d get close to getting upper management to see the light they’d all either be laid off, moved or banned from leaving the office!
    Ebay have let opportunity after opportunity slip through their fingers.

  • Dav
    3 months ago

    John Donahoe started the real demise of eBay with the “disruptive innovation” nonsense over 10 years ago and Devin Wenig has accelerated the platform into a tailspin the last 4 years. The site algorithm and Cassini search engine is a disaster and is far too involved in controlling item placements and the hiding of listings. This is the first thing that needs to changed. But the problem is, eBay wants to control listings and who sells, so there’s little hope for any change. Not to mention the ads and competing seller listings they’re now plastering all over the site to get ad-clicks. Send buyers away from items and even off-site. eBay really does not care.

    Seems to me that a vast majority of those on the net talk of plummeting sales YOY and MOM and it was nothing of their doing. Sales suddenly stopped and never recover no matter what the seller tried. All eBay does anymore is make constant and often sneaky changes to everything, seemingly in order to confuse/trick sellers into paying more fees. Making all listings GTC is the latest example.

    Sales on the platform are declining, sellers and buyers have left or leaving. eBay must be counting old buyer accounts that haven’t been used in years because there’s certainly far less buyers and traffic. The only way eBay makes revenue anymore is to keep taking more and more from the sellers. Every which way they can think of. Promoted Listings, Stores, “bad seller” punishments, now GTC listings, they only want to collect more money for doing nothing without regard to sales. This is not sustainable as sellers will continue to leave when they keep getting punished by eBay for more money and sales keep declining. Greed is in control at eBay and has been for a long time. In due time this is all gonna backfire on them and many will enjoy watching it happen.

    One last thing, isn’t getting really hard to believe the numbers eBay presents at earnings? Funny how they keep beating by just a little bit every time. Something is rotten in Denmark methinks…

  • 3 months ago

    Can someone explain the sense of 3rd party ads on eBay?
    If eBay can make 10% on a £100 item sold from its site WHY would it want to get 30p for a click to a third party site where it’ll make nothing more?

    • alan paterson
      3 months ago

      @ Alan, it will make economic sense to ebay. You are only guessing as to home much revenue the third party adverts generate and there will be other benefits to the platform too.

  • 3 months ago

    Surely that’s like someone walking into your ‘sells everything department store’ and then you’re promoting and directing them across the road to a competitor!

    • Dav
      3 months ago

      Exactly. It’s like going into Target, you’re at checkout and ready to buy, but the checkout clerk says you really could save a lot of money on all this by going to WalMart and buying there. So you leave your cart, go to WalMart, and Target gets “ad-click” money for sending you away. This is more of eBay’s current plan than actually selling anything because they can’t come up with anything else for revenue. It’s all ad-clicks and further bleeding dry of the sellers at every turn. eBay goes for pennies and nickels instead of a dollar. Doesn’t really make much sense does it?

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