EcommerceBytes-NewsFlash, Number 2396 - October 21, 2010     1 of 1

Making Sense of eBay's Third-Quarter Marketplace Results

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eBay announced third-quarter earnings on Wednesday. Total net revenue for the company as a whole was up 1% in the quarter year-over-year, (or 10% excluding Skype); net income was up 23.5% to $432 million - or 14% excluding Skype. First, a look at the numbers as they affect marketplace sellers, and then a recap of what eBay CEO John Donahoe and CFO Bob Swan had to say about the Marketplaces business during a post-earnings conference call with analysts.

Net transaction revenue for eBay Marketplaces was up 3% in the third quarter year-over-year to $1.185 billion, with 54% of that revenue coming from international marketplaces.

US Marketplaces GMV (the value of goods sold) not including vehicles was up 2% year-over-year to $4.9 billion. Top rated sellers generated 35% of core GMV in the U.S., and their same-store sales accelerated 2 points to 9% year-over-year.

Total Marketplaces GMV excluding vehicles was $12.6 billion, an increase of 6% year-over-year (currency neutral). Fixed-price listings accounted for 60% of total GMV.

The Marketplaces business includes eBay Classifieds and specialized sites such as StubHub, a tickets marketplace. The number of active users on eBay's global Marketplaces was up 4% year over year in the third quarter 2010 to 93.2 million.

eBay CEO John Donahoe told analysts the marketplaces turnaround remained on track. eBay saw solid sold-items growth that was partially offset by lower Average Selling Prices that Chief Financial Officer Bob Swan attributed to a broader selection of well priced inventory.

eBay Marketplaces Segment Margin (measure of profitability) fell below 40 to 39.7% in the third quarter; eBay said it was primarily due to the Buyer Protection programs and currency exchange, partially offset by eBay's "operational excellence" initiatives.

Excerpts from eBay's Earning Conference Call
The first question out of the gate from Wall Street analysts to eBay CEO John Donahoe in a post-earnings conference call was whether eBay's Marketplaces business was on track to exceed ecommerce growth rates next year as Donahoe had promised when he outlined his turnaround plans.

Donahoe said, "I think we will grow revenues roughly in line with global ecommerce this year. You'll recall that 60% of our business is outside the U.S. and when we look at the weighted average growth rates of the markets, we think we're more or less on track for that. Now obviously underneath the surface, we have a portfolio of different markets. In the UK, for example, we are growing faster than market. In Germany we're growing roughly in line with the market,... and obviously in the U.S., we're growing more slowly than the market.

"And as I look into 2011 - I don't think we'll get the U.S. up to market growth rates, although I intend and believe we will close that gap significantly. And our ambition is still to grow the global portfolio faster than the weighted average of ecommerce growth rates. Frankly I'm going to worry about that 4 months from now."

An analyst asked about the changes eBay made in certain Consumer Electronics categories that changed to a more product-based than seller based approach (see this September AuctionBytes Newsflash article). Donahoe said it was still too early to tell.

Another analyst asked if eBay had seen the full benefits of the fee changes eBay made at the end of March - Donahoe said no. He said Q2 was a little rocky, Q3 eBay stabilized a bit as evidenced in the sold item growth, "and as you mentioned, we're now getting to next set of adjustments, which are primarily reducing duplicate listings in some of the hard goods categories." He said he thought that would improve the buyer experience.

He said eBay was also increasing exposure for higher ASP items "because we think those got a little pushed down with all the SIF inventory coming on" (a reference to the Store inventory format being pushed into core search results at the end of March. "Duplicate listings is absolutely part of the adjustment process." (See this AuctionBytes article to learn about eBay's new duplicate listings policy going into effect next week.)

When asked whether eBay would acquire a Private Sales site (a reference to sites such as Gilt.com), Donahoe said eBay was always keeping its eyes out. "We felt a year ago these sites tended to be richly valued" and said eBay has Daily Deals and Outlet shops and private-sales-like capabilities. "Over time we certainly wouldn't shy away from partnering or buying a Private Sales entity if we saw an opportunity that would accelerate our progress."

Donahoe said mobile commerce was exploding, and eBay was leading the way; the company expects to exceed its goal of $1.5 billion mobile GMV. Overall buyer satisfaction is improving based on Net Promoter Scores related to Trust, Value and Selection, he said, and eBay Bucks was gaining traction with 3 million shoppers enrolled since August. Members of the loyalty program spending five times more than those not enrolled.

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About the author:

Ina Steiner is co-founder and Editor of EcommerceBytes and has been reporting on ecommerce since 1999. She's a widely cited authority on marketplace selling and is author of "Turn eBay Data Into Dollars" (McGraw-Hill 2006). Her blog was featured in the book, "Blogging Heroes" (Wiley 2008). Follow her on Twitter at @ecommercebytes and send news tips to ina@ecommercebytes.com.


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