eBay Q3 2019 Earnings have disappointed investors with a cut in outlook for the full year resulting in a ~3% drop in the share price since they closed before the announcement.
However it’s not all bad news. Active buyers continued to grow at 4% to 183 million global active buyers and eBay have concluded their operating review, resulting in three-year plan to improve margins and reinvest in customer initiatives.
eBay Business Units
In the eBay Q3 2019 Earnings, Marketplace platforms delivered $2.1 billion of revenue and $20.5 billion of GMV. However Marketplace revenue was down 1% on an as-reported basis and was up 1% on a FX-Neutral basis. Worse news for sellers, GMV was down 5% on an as-reported basis and down 2% on a FX-Neutral basis.
It’s worth noting that an increase in active buyers and decrease in GMV might not make sense – how can more buyers be buying less overall. The reality is that there is a known lag between new buyer activation and increased GMV generally follows a little later. However active buyers have been growing at 4% quarter on quarter so it really is time that the GMV kicked in and the slow down points to underlying problems with the marketplace.
StubHub platforms drove revenue of $306 million, up 5% on both an as-reported and FX-Neutral basis, and GMV of $1.2 billion, flat on both an as-reported and FX-Neutral basis.
Classifieds platforms delivered revenue of $265 million, up 4% on an as-reported basis and up 8% on a FX-Neutral basis.
“We performed in line with expectations in Q3 while improving the Marketplace experience, creating better customer outcomes, and maintaining momentum in advertising and payments. We also made progress on our portfolio review and completed a thorough operating review that has resulted in a three-year plan to drive margin improvement while enabling reinvestment in critical customer initiatives.”
– Scott Schenkel, interim Chief Executive Officer, eBay Inc
New revenue streams
eBay has now processed over $1.1 billion in payments for more than 20,000 sellers, with over $500 million of those payments processed in Q3. In September, the service reached 9.4% of volume in the US and has now launched in a second market, Germany.
First-party advertising also continued its momentum. More than one million sellers now leverage promoted listings, promoting over 300 million listings on the marketplace, which has resulted in revenue of $103 million, up 119% on an as-reported basis and up over 120% on a FX-Neutral basis.
Potential spin offs of StubHub and Classifieds
eBay have reported they have completed an extensive operating review resulting in a multi-year plan for operating efficiency. These efficiencies, combined with 2019 margin expansion and reinvestment, are expected to drive 3 points of additional operating margin by 2022 and create capacity to reinvest in critical customer initiatives.
eBay say that they continue to review the role and value of StubHub and Classifieds in its portfolio to determine the best path forward and anticipate sharing an update on the StubHub business before the next earnings release. This is an interesting statement and one might be forgiven for thinking this indicates StubHub is slated for sale and Classifieds may or may not be for sale but currently no buyer is in the frame.