The message from eBay Q2 2007 Investment Conference Call is that numbers up great, business is up (at least closing rates for sellers are, listings are down but that’s ok). We’ve got cash in the bank, we’re generating cash, everything is great. Top management is stronger than it’s ever been and they know what direction they’re driving the eBay businesses in for the future. The titbit hidden away that made me smile was “Geographic Tax Savings”, I guess that’s “Thank you Luxembourg (and an encore)”.
So what does that mean for sellers? For that we need to look beyond the numbers to what’s driving them.
SIF in Core
Firstly Meg admitted that they totally underestimated the effect of putting SIF listings into Core, and even more so they failed to forecast the full effects of taking them back out. This has caused a ripple effect and fully a year later the marketplace is still feeling the shockwaves of these changes from the first half of 2006. Sellers are still evaluating how best to sell, should it be auction or fixed price, ebay or alternative platforms. Sellers are starting to see higher conversion rates and this should continue. It also made eBay sit up and realise that the user experience could be improved, but more on that later.
So the figures behind higher conversion rates, new listings are down 6% on last year, (SIF listings are down 25%) but GMV (Gross merchandise volume) is up 10% in the US and 14% Internationally. Average selling prices are up and more listings are closing with bids, that’s good news for sellers. Or at least it will be once they work out the balance of auction/BIN/SIF to use. Although conversion rates may be up that doesn’t mean sellers have figured out what’s working and what’s not working and Meg pointed out that the SIF in Core cleanup is still ongoing.
Advertising
eBay have experimented with different advertising formats and they’re working. This includes both Classified Listing Format on eBay and products such as Kijiji and Gumtree. Shopping.com is now the leading comparison site in the UK, US and Australia and partnerships with Yahoo and Google are progressing well. Expect to see Classified Format become available in more categories and on more eBay country sites in the future.
User Experience
Social Commerce is the new catch phrase. Windorphins caused a buzz in the blogoshere and Stumbleupon was acquired this quarter. eBay want to improve the user experience and Meg mentioned: Finding 2.0 with best match to get to the items you want faster and more easily. Making auctions more fun – Bid Assistant (buyers were scared to bid on multiple items in case they won more than one), visual countdown timers showing buyers how long remained to get their bids in with eBay count down, feedback 2.0 to increase buyer confidence, a new eBay home page coming soon, increased customer support for both buyers and sellers.
eBay are testing a number of innovations and rolling them out such as Blogs, My World, eBay To Go, we should expect to see more in the future.
Live Feature Testing
Great news is that eBay have developed the ability to test new features with a limited but random number of users. That’s happening with Motors 2.0 in the US at the moment. Gone are the days when a change was rolled out site wide and then tweaked, now the ripple effect of changes can be monitored prior to full implementation and tweaks made before impacting the entire business.
Addressing the slow down in Germany and the US
I don’t recall eBay being quite so open about the fact that both the US and German markets have stagnated in recent years. I’m guessing it’s because they’re starting to gain momentum again. Meg was in Germany last month and said they’ve diagnosed the cause of the slow down and have a great plan in place to move forward. Conversion rates have started to rise and tweaks that have proved successful will be implemented in the US.
Well that’s great, but what does it mean for us in the UK? Well eBay will be monitoring the market closely and with the experience gained from the US and Germany will be able to implement changes in UK and rest of Europe before the markets slow.
That spat with Google
Finally a mention… so what happened when eBay ran a “routine test” to withdraw advertising spend on Google and redeploy the funds on other sites such as Yahoo, MSN and ASK? Well it had no effect on the quarters performance and they gained valuable insights into redeploying spend on other sites. eBay are spending on Google again but will be spreading their advertising thinner in future both online and offline.
The Numbers
I guess I’d best mention them…GMV growth was 2%, Advertising – classifieds and SDC GMV up 77%, PayPal 32% growth, Skype growth is up in Europe and Asia but slower in the US. Overall they’re raising revenue expectations for Q3/Q4, reckon they’re doing a pretty good job, and have $3.8 billion cash in the bank.
eBay’s share price closed at $34.05 prior to the Investor Conference call and in after hours trading has dropped 65 cents.
8 Responses
Randy spots an interesting omission – no mention of Express. Maybe that means they’re dropping that particular failed experiment.
I hope so. Lots of other eBay sites from France to India have a feature where you can search *only* for items that would qualify in the UK and US for Express – business seller, accept Paypal, new item, all costs itemised, etc. – which is worked into Core listings. I think it’s a much better way of doing it.
eBay Express??? Oh…err…. I’d forgotten it existed 😯
So have the buyers.
“Meg pointed out that the SIF in Core cleanup is still ongoing.”
I wonder what that is supposed to mean?
Kate, I think it means “sellers still remember when they could list stuff in Shops for no money and it’d sell. We’re having problems getting them to cough up for core listings.”
To put it into perspective this is the question and answer that Meg gave
Derek Brown – Cantor Fitzgerald: Why do you believe sellers are so slow to respond to improved conversions, improved ASPs, with more listings? Where do you think the obstacles are for them to get more product onto the site?
Meg Whitman: I think there’s a couple of things. One is, Derek, this is a big ecosystem and we made a very significant change a year ago when we incentivized store inventory format listings at the expense of core. We actually really also changed the mix of fixed-price and auction in a way that I don’t think was actually appropriate for the marketplace.
So I think they are sorting through fixed-price versus auction. They are sorting through average selling price on eBay’s platform versus others. They are sorting through the volume that has always been the hallmark of eBay and continues to be the hallmark of eBay. I think as we get through some of these overlapping quarters in the marketplace, it settles out. As sellers increasingly see these increased conversion rates, listings will follow demand.
But I think we actually upset the balance of this marketplace last year even more than we had understood when we were in the middle of the shift in core issue, because it wasn’t just lower-priced listings; it was the nature of the listing. It was fixed price versus auction. I think it was a pretty big shock to the system that is only now coming back into balance.
It’s interesting to look at the last Cheap Listing Days…. If you skip the category specific promotions all the Cheap Listing incentivies auctions and auctions alone. eBay are trying hard to rebalance the marketplace even if sellers are yet to be convinced auctions are still a viable way to sell
12th July 2007 : eBay UK
10p insertion fee for auction items with start price of less than £15.
14th June 2007 : eBay UK
10p insertion fees for auction-style listings only.
9th – 10th June 2007 : eBay UK
Half price insertion fees and free Gallery in Home and Garden and Clothing categories.
31st May 2007 : eBay UK
5p insertion fees on 99p or lower start auction-style listings.
19th – 20th May 2007 : eBay UK Motors
Free insertion fees for auction and BIN listings.
3rd May 2007 : eBay UK
Half price insertion fees for auction listings only
Ebay need to realise that auctions don’t work as well as they used to. Buyers have got used to being able to just buy stuff without waiting a week for an auction to finish – that’s OK for rare/collectible stuff but it no longer works for readily availible items. I can list a (fairly common) CD on an auction for £2 and get no bids at all, or list it as a BIN for £2.99 and sell it straight away – as long as I am happy with £2.99 what am I going to do? (Besides the £2 auction if it sells at all may well go for just £2).
So I’m only using auction now for items where I expect to get more than a few quid, whereas a couple of years ago I never bothered with BIN.