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.
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.
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.
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.