eBay growth focus turns to profits over revenue

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Over the past three years we’ve seen eBay‘s revenue grow by about 25% from roughly $2 billion per quarter to around $2.5 billion per quarter. When you look at the eBay growth of revenue on a graph compared to the pretty static net income it shows profits have hardly changed remaining at around $500 million per quarter. eBay now think they are positioned to grow their net income although top line growth may be slow.

As a merchant seeing slow eBay growth but higher eBay profits should be a concern – so where are they going to squeeze the money from? eBay say that there are two key drivers for the expected increase in margins – advertising and payments and eBay expect to grow both of these over the coming years.

“We continue to make foundational investments to improve the long-term health and competitiveness of our Marketplace this quarter while setting the stage for significant growth opportunities in Payments and Advertising.
– Devin, President and CEO, eBay

eBay Growth – Advertising

eBay are reducing their reliance on third party adverts by growing their Promoted Listings revenues paid for by sellers. eBay’s total Marketplace advertising portfolio is expected to top $600 million this year and within this eBay Promoted Listings will represent around $180 million – a touch under a third of eBay’s advertising revenue.

eBay now have over 400,000 sellers promoting over 160 million listings, leading to revenue growth of 120%. With aggressive expansion plans for this service eBay believe that their total Advertising portfolio has the potential to contribute $1 billion in annual revenue in the next few years.

eBay expect Promoted Listings to double in 2019, which will benefit Marketplace transaction revenue growth by more than 1 point while seeing more modest declines in non-strategic third-party advertising.

eBay Growth – Payments

eBay have hardly got started with Payments, having now transacted $38 million through eBay Managed Payments. They expect to ramp this up to 5% of sellers in the near future with the aim to migrate all users over the next few years.

For those worried about the appetite of buyers to pay without PayPal, eBay say that eBay guest users who are offered all payment methods, including PayPal, choose to pay with a credit or a debit card nearly 80% of the time. Existing users may not have the same appetite for non-PayPal methods, but realistically once they’ve entered their bank card details once they’ll never have to do so again until their card expiry date. From a Tamebay perspective there seems to be a lot of concern regarding eBay handling payments, but I’ve never once heard a buyer complain that they had to enter their bank details on Amazon or any retailer website – it’s the way ecommerce works everywhere except on eBay.

“With Payments, as we highlighted earlier, we are seeing good traction in our first test market. Prices for participating sellers are lower and we have leveraged our scale to negotiate beneficial pricing on processing cost. Based on our early results, we have increased confidence in our ability to deliver on an annual revenue opportunity of over $2 billion, with incremental operating profit of approximately $0.5 billion once the majority of the volume on our core Marketplace platform has transitioned.”
– Scott Schenkel, CFO, eBay

eBay Growth to slow but profits to rise

“In summary, we will continue to make investments to improve the long-term health and competitiveness of our Marketplace. We are evolving our approach and plan to further target our product and marketing resources to address the needs of both new and existing users. At the same time, we will invest aggressively to deliver significant growth opportunities in Payments and in Advertising. While this will result in a period of slower top line growth, we will grow operating income through margin expansion and will continue to aggressively return capital to deliver strong earnings growth.”
– Devin, President and CEO, eBay

For merchants the important takeaway here is that eBay Payments are coming and, even with eBay promising savings for most sellers, should increase eBay profits. eBay Advertising is a double edged sword as it will increase eBay profits but sellers will end up paying for it – still perhaps preferable to third party ads. The important message here is that as eBay increase Promoted Listings ad exposure they are worth experimenting with and to remember that it’s results based – you only pay when you sell. Featured and Anchor shop users also get a monthly voucher which they can choose to spend on Promoted Listings.

Overall, eBay revenues have grown but net income has remained static during Devin’s tenure and his multi-year turnaround plan for the marketplace. Now it’s time for them to grow profits and to match revenue growth they need a bump in net income of around 25% to $600-$650 million a quarter. Half a billion a year from eBay Payments and a slice of the $1 billion projected ad revenue should easily make this achievable.

34 Responses

  1. Basically they want to charge you more for less in 2019. If you can afford to Pay you can play…of course that depends who you are.

    I would say over 50% of our eBay sales are coming with stealth fees now, more in their pockets and less in the merchants. They basically are hiding your listings unless you pay the kings ransom.

    PayPal seem to be telling a different story also. Transactions they say are down, it is just that eBay is charging you more to actually trade.
    Plus WHY so long to announce the figures????….bit of fudging.
    They are basically growing a tiny bit, (What Trumpet is up to with the cheap china post may have an effect), but they are making themselves more at the merchants cost.

  2. So we all pay more for eBay advertising…… but how can they possibly advertise everything from everybody?

  3. Maybe another way to increase revenue would be to stop giving away so many free listings and lower final value fees to all the private sellers all the time. If they want to use the site then pay for it. ebay claim private sellers use ebay to make cash to spend on ebay, what everdiance do they have of this? If they want to use the site then make them pay like the rest of us or give them a ebay voucher they have to use on the site.

  4. I think based on the fee increases and emphasise on sponsored listings over the last 12 months certainly, anyone who didn’t expect eBay to come out with “higher” profits in their earnings report a year later should probably not be in business themselves.

    It was obvious revenue growth would be pitiful. They’ve done nothing to attract new business. This last year has been purely about profit growth and that’s why the share price is so crap at the moment. Long term investors are not really interested in too much profit, it’s revenue growth that really excites them.

  5. Well maybe if ebay got to grips with business sellers listing as private that would generate some listing fees?!!! Sick of it now. Searched for an item a while back and I kid you not, the 1st 36 items were all from the same ‘Private’ seller, who strangely also had over 100 other items along the same theme advertised. They even boasted of bulk discounts and sourcing other items. But… when you go to report these listings, the choices are hardly ideal. Why isn’t there an option which simply says business seller trading as a private seller>?!
    Anyway, i took the time to report 20 of the listings….. and yes you guessed it, they stayed up. So after a few weeks i repeated the excercise…. still there. In fact i often report a list of items and keep doing it… yet not once has any been taken down or changed. Do ebay even look at reports? Yet if I make one single error… they are on me like hoarde!
    Ebay don’t care about honest sellers, they are simply easy revenue. Anything that requires any effort whatsoever ….. well that can continue just fine.
    Now what was that new guy at ebay called and whats his email…. i shall be directing him to some of these listings.

  6. Hahaha!!! their very poor figures are now beginning to unravel in Public.

    The site is finished it will take many years but they are just starting the journey down the slippery slope and we all know it picks up momentum as it goes. As more and more bread and butter sellers move to other platforms to increase their margins and start to make money.
    The only way they even manged to post those figures was by hiking shop subscriptions and FVF’s. Then they introduce 30 day returns why well again unravel it and here is what happens.
    Previously a person buys a pair of trousers for £50 they open them and don’t like them or they do not fit. So they return them inside the 14 day deadline ebay refund fees etc. Poor old eBay nothing made. Even if they are damaged now.

    New system of 30 days customer buys same pair of jeans and wears them to a wedding (scruffy wedding) and spills some red wine on them they wash and wash them but it will not come out. So they return now as unwanted after 28 days.
    You say hang on eBay these are not how i sold them and they are unfit for re-sale.

    eBay just say ok you can refund 50% and hey ho! they still make half the fees £2.50 ish

    You on the other hand have now really find yourself out of pocket as you are not a Tesco or Argos making 75% to 80% on each sale you only make about 15% just attempting to hang onto their shirt tales with pricing as low as you can go.

    So yet again the Dinosaur that keeps on taking tries to tell you its what the buyers want. (b*******s) its what the dinosaurs shareholders want.

    Come on On Buy and eBid keep on growing our sales as you have in the last 3 months and we can drive the old Dinosaur back where it belongs.

    EXTINCT!!!!!!!!!!

    eBay built by genius’s run by clowns Funded downtrodden little people.

  7. I come here now & again only to see the same few people banging their heads on the same eBay wall. I read reports of much greater substance on Ecommercebytes who fearlessly get their teeth into eBay on a daily basis…. Tamebay is too tame to report the big issues and shamefully has tea & biscuits with them. Go have a look and see for yourselves…there are so many issues that are never reported here. I gave up with Tamebay long ago. Wouldn’t be surprised if they are in direct league with eBay. Tam ebay. Think about it! I wonder if this post will get deleted?

  8. I also regularly read eCommercebytes for the articles, but not the comments – the perpetual whining about eBay is frankly boring and unproductive.
    At least with Tamebay some of the comments discuss the changes from a constructive viewpoint.
    There is so much collective knowledge on sites such as Tamebay that if the focus was on sharing tips and experiences on “How can we make these changes work for us?” rather than “Bloody eBay – they are on their way out and good riddance!” then sellers could make tactical decisions that would help them deal with the fast moving conditions.
    Shall we give it a go? Here’s a start – we have found with Promoted Listings that if they continue for more than about 6 months unchanged then the impact lessens, so we pause or end the campaign and then restart after a week.
    How has that worked for you?

  9. I have been a big seller of shirts on Ebay since 2010. Now unless i Promote my advert and give Ebay 10 to 13% the advert dosen’t sell and the sale goes to somebody giving the 10 to 13% promotion fee.

    Example today 8 sales, 5 adverts have been sold via promote your listings….I will not be buying any more stock next year…I aint working to give ebay 20% to 25% fees.

    I could understand the promote your listing if the buyer will pay more but they wont as soon as you increase your prices to pay for the Ebay promotion your sales stop…

  10. @Alan….Any advice you have will help…I’m not being negative just looking for ideas as I’m really concerned for 2019. My profit margins are small so cant really give Ebay another 10 to 13% as my customers just dont buy the product if we include it in the price

  11. Thanks for the insight Alan, that’s really interesting. I wonder if the maths should include all the sales though? So as Derek says he had 8 sales and 5 were through Promoted listings, should the 10% fee include all 8 sales and therefore work out at less per sale?
    Promotions and PPC are necessary across the Internet now, and we’ve recently seen Google focus on it’s own adverts more rather than showcasing eBay and Amazon.
    It is extremely difficult to be a reseller – our most successful clients are all white label sellers.
    However we have also seen that the bigger companies do not have such great titles, they often don’t fully complete item specifics and allow listings to renew for months without ending them so if smaller sellers do all these things it can help.

  12. The highly paid suits haven’t got a clue how to grow their business, apart from by squeezing sellers. What happens when there is no more juice to squeeze out of sellers? There are just white fluffy clouds floating between their ears. Meanwhile Amazon keeps growing. It’s time they sold out to someone who knows what they’re doing.

    EBAY IS DOOMED, it might take a few years but the writing is on the wall.

  13. @Laura Mathieson

    My normal fee to Ebay is 10% so with the promoted listing they actually took 23%. That is some fee. Ebay are actually making a big markup than me…worry times

  14. From all the postings here it seems there are real problems with promoted listings:-

    1. What are we paying our Ebay fees for now, if our items cannot be seen?
    2. Posters here have said that promoting listings doesn’t seem to increase overall sales, but benefits Ebay in higher fees.
    3. Logically, if nearly all sellers promote, then everyone is back to square one, just paying more to sell on Ebay.

    Most concerning of all is Ebay’s stated expectation of little future growth. This is a worry because it means they aren’t attracting buyers.

    Given these circumstances, Ebay sellers should be demanding a DROP in fees.

    It’s noteworthy that Wenig didn’t mention fees in his increased margins spiel.

    Watch out for next spring’s seller release and expect those fees to rise yet again.

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