eBay Q2 earnings call: more change is coming

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“It’s still early, we still have a lot more to do,” said John Donahoe in tonight’s Q2 earnings call. The message from eBay was that “we’re about where we expected to be”, that eBay’s changes are working, that things are improving despite the economy, but that more changes are coming in the second half of the year.

eBay’s second quarter earnings were $2.2bn, an increase of $361m from the same period last year, and in excess of most estimates.

Top of the pops, as it has been for a while now, was PayPal, reporting a net revenue increase of 33% year on year. eBay say “PayPal will continue to focus on greater penetration into the Marketplaces business and the acquisition of new merchants”: the word “ubiquitous” was used more than once in relation to PayPal’s presence as a payment method, so we will certainly see more stories of PayPal’s partnering with large online merchants. “Greater penetration into the Marketplaces business” has some interesting implications, and we can certainly expect to see eBay doing more to push sellers towards accepting PayPal as their sole payment method. I think the eBay UK year free of fees competition won’t be the only one of its type, and we can expect more PayPal-related CLDs. Whether this also means that eBay intend to extend compulsory PayPal beyond the UK and Australia remains to be seen.

Marketplace revenue increased 13%, which is around half the rate of this time last year. A number of factors were blamed for this: primarily the economy, with buyers choosing cheaper options within categories, and especially changes within eBay’s Motors business, which has seen a large percentage of its listings move to classified and local listing formats, e.g. eBay’s own Classified ads, and eBay-owned local ads business Kijiji.

I’ve heard many sellers comment in recent weeks that there is a mass exodus from the site, but eBay’s figures suggest that this isn’t quite the case. The number of eBay Stores internationally is up very slightly on the previous quarter. The number of new listings rose 19% compared to the same quarter last year: the fee restructuring is certainly working. The number of active users is steady: though eBay’s coupon strategy might not be pulling in the buyers quite as quickly as they’d hoped, I don’t see a company in crisis here.

JD said that eBay “will continue to make changes in the second half of the year”. Primarily, this is going to be a continuation of what they’ve already started. Bob Swann mentioned “less up-front, more back-end fees”, and when asked about category specific pricing, JD said “sellers make different margins in different categories, and our pricing should reflect that”.

Overall, JD seems to believe the “bold changes” he’s introduced are working. Since January, the number of PowerSellers with DSRs of 4.8 or more has doubled, which he attributes to buyers rewarding better service. There has been an increase in the proportion of successfully-sold items, and “this is the best indication that buyers are coming back and they’re buying”.

11 Responses

  1. Hmmm….a glowing report??? ha ha ha….is that why Ebay’s stock fell almost 7 percent after hours tonight? Mr. Donahoe better stop the insanity before its too late. He needs to read the financials closely because they have found the weakness in core auctions – the main reason why sellers have stopped or reduced their listings.

  2. #1
    You don’t think this might have something to do with the continuing international turn down in the stock markets then?

  3. I have not stoopped or reduced listings the only thing that stops me listing more is the need for sleep

  4. There is an exodus from the site among powersellers. Check sellerdome.com’s stats on inactive and naru accounts among the top 100,000 sellers on ebay – the numbers are rising quite steeply.

    Now perhaps, ebay doesn’t mind, since they can replace the missing listings with extra millions from Buy.com (which is why you should stop paying attention to listing numbers, as they no longer have anything to do with business revenue). But it’s likely the buyers will mind as the unqiue and cheap disappears from the site.

    The Christmas season will tell the true tale.

    Finally, any excuse-making about the bad economy is just that – excuse-making. Ebay was long known as a the site to buy used goods at a bargain. They should be absolutely BOOMING in this downturn, like every other downscale etailer – look at Target! look at Walmart! growth of 15% – 20%! For ebay’s growth to be flat is already a huge falloff from their market performance of past years.

  5. Ebay has a real fight on their hands if they are going to take on amazon. I don’t think teaming up with Buy.com while screwing all their small sellers is the way to go either. But there was a ton of great info on the Earnings call.

    I found the entire transcript of the Earnings Call is available at Seeking Alpha here:

    https://snipurl.com/2zzki

  6. Looking at Share Price the value of Paypal alone must be more than the current price, wonder if one of the big players will come and take them out, down 16% now

  7. #3 I dont believe that has much to do with it Lynne, discount etailors should be benifitting in the current climate.

    Marketplace is where the problems lie, and that’s what needs to improve, skype (338 million customers, behave lol) seems to be fairing well, but as usual its the brilliance of paypal that is holding the stock up, I wouldn’t be surprised if eBay / Paypal split at some stage.

    Marketplace isn’t such a market place anymore, the internet and its users have evolved and I don’t know think eBay knows how to fit in these days, its current format is to little to late and far to aggresive towards its sellers, lots of work to do for the exec’s, good luck to them, they are going to need it.

  8. A lesson on how to dodge the difficult question ?

    Operator

    Your next question comes from Brian Fenske, Lehman Brothers.

    Brian Fenske, Lehman Brothers

    There had been discussion about rolling out category-specific pricing. In the U.S., you’ve rolled out media. Is there any timeline for rolling out more category-specific pricing in the U.S.?

    Secondly, can you comment a little bit more about the deal you are doing with buy.com and how the economics work there, and how you manage that with other PowerSellers? Thank you.

    John Donahoe, Chief Executive Officer

    Sure, Brian, I’ll take that. First on category-based pricing, as you mentioned, we did roll out specific media pricing in the first quarter and we’ve communicated that it’s our intention to move in that direction, most likely in the second half of the year. The rationale is quite simple, that sellers make very different margins in different categories, and so we think over time that our pricing has to reflect that.

    With respect to buy.com, the buy.com relationship is one that really symbolizes what we want to do going forward which is really incent and reward those sellers to provide low prices to buyers and great service, and buy.com is in the process of doing that. I might point out that the movement to incent and reward great prices and great service to buyers is not limited to larger sellers. In fact, we have many small sellers who are achieving very high DSRs and are providing great prices and great service to our buyers. I really want to emphasize that we have many small sellers succeeding under these conditions as well as larger sellers. We intend to continue to incent and reward that across sellers, large and small.

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