eBay is planning television ads for PayPal, fee changes and U.S. acquisitions in the year ahead company executives told analysts after announcing Q1 earnings. eBay Marketplaces saw Gross Merchandise Volume growth of 11% foreign-currency neutral in the first quarter of 2014 year-over-year and revenue growth of 9%. PayPal’s net Total Payment Volume grew 27%, while payments revenue grew 20% in the quarter, year-over-year. eBay grew its overall revenue by 14% in the quarter.
In a surprise announcement, eBay said it would repatriate as much as $6 billion net in foreign earnings, something many U.S. tech companies have been slow to do since they take a big hit in taxes when bringing offshore cash to the U.S. In eBay’s case, it took a hit of $3 billion in order to be able to bring home most of its foreign earnings, which according to The Wall Street Journal was about $9.7 billion.
eBay could use the cash in a number of ways, including the acquisition of U.S. companies or to help it execute its $5 billion share buyback program. (It would not have to repatriate cash to make foreign acquisitions.)
eBay CFO Bob Swan addressed the move in a post-earnings conference call with analysts, saying, “The reality is, we’re seeing growing opportunities in the U.S.” He mentioned the stock buyback program and said eBay was executing aggressively. “Additionally, we’re an acquisitive company, and we need to ensure we have the resources available to capitalize on targets that become available both domestically and abroad.”
“Just to be clear,” Swan continued, “we are not announcing any large, U.S-based acquisition, nor are we committing to finance our share buyback with offshore cash. What we are doing is ensuring we have the capital available for U.S. needs.”
eBay CEO John Donahoe said eBay delivered a strong first quarter, “with enabled commerce volume up 24 percent and revenue up 14 percent. We are committed to delivering sustainable shareholder value and focusing on what matters most to our investors. We are executing our growth plans, capitalizing on the synergies in our portfolio and aggressively executing our $5 billion share buyback program.”
Marketplaces GMV growth decelerated one point from the fourth quarter as international strength was partially offset by a deceleration in the U.S., CFO Swan reported. “Fixed price represents 76% of our business grew 19%, but auction volume declined 9 points due to changes in consumer preferences and slower consumer selling.”
Swan said StubHub saw a material deceleration in the quarter “due to competitive dynamics and a change we made to all end pricing.” While the fee changes will have an effect for the rest of the year, Swan made it clear the company had no regrets.
“We have and will continue to protect our franchise and make fee changes as appropriate to compete and win much like the changes we are making at StubHub for the year,” he said.
When asked what fees eBay would be changing, Swan declined to provide more specifics, saying eBay would take the competitive actions necessary to protect the franchise it had built.
Later in the call, Donahoe referred to the strong fixed price growth (19%) and the decline in auctions (down 9%), saying eBay had made a price change last year in C2C along with some search changes. He said eBay would focus on C2C to try to get back to zero-growth rates – a possible clue to fees changes eBay might be considering.
As for payments, Donahoe said “we’re thrilled to have Braintree in our portfolio,” saying it was the first wave of mobile apps for the sharing economy and had 100% share on apps like Uber and Airbnb. He said eBay was trying to get PayPal “out where the action is” and will continue to invest in mobile and the technology platform.
eBay will unveil a new brand campaign for PayPal – not a “big splashy” one – using digital marketing channels and selective television advertising.
Marketplaces segment margin was 39.7%, down 240 basis points due to investments in trust and marketing. eBay Marketplaces transaction revenue grew 10%, while Marketing Services revenue grew 4%.
eBay Marketplaces saw a 14% year-over-year increase in the number of “global active buyers” – note that eBay had previously measured “active users,” and in this quarter’s report it also added off-platform businesses like Korea and StubHub to the global active buyers metric.
eBay reported an increase of 11.4% in Sold Items. PayPal grew on-eBay volume 15%, and global on-eBay penetration increased to 78.9%.
eBay’s enterprise business saw total revenue growth of 8%. Same-store-sales grew 11% year-over-year, while total Gross Merchandise Sales grew 16% year-over-year. It would appear to be an indication that retail customers’ growth was flat while it picked up additional customers, but eBay disclosed it shifted Magento from Corporate to eBay Enterprise, which may be contributing to those figures.
eBay also decided to eliminate buyer format and category information in its earnings report; it removed Vehicles and Real Estate GMV from volume based metrics and shifted revenue to MS&O; and it added off-platform listings to item selection count.
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