eBay spent more on marketing in the fourth quarter, but sales were nearly flat at a paltry 2% growth in GMV compared to a year ago. US sellers took the biggest hit – eBay reported GMV decreased in the US by 1% in the fourth quarter year-over-year – this despite the fact eBay effectively “paid” shoppers to buy through the use of sitewide flash sales that eBay subsidized.
eBay CEO Devin Wenig told analysts during a post-earnings conference call on Tuesday:
“Non-structured data SEO pages are delivering less traffic and lower conversion compared to a year ago, and while we increased our marketing spend in Q4, we experienced lower returns than expected.
“As we entered 2019 we’ve aligned our tactics to directly address these issues and to capitalize on the opportunities ahead of us as we transition to a different eBay in 2020 with a comprehensive catalog, intermediated payments and a robust and high contribution advertising business.”
In outlining some of the steps eBay planned to take to address its GMV growth problem, Wenig said eBay would make some substantial changes to its marketing strategy and spend “as part of our continuous effort to maximize efficiency across the business.”
He said eBay would reduce certain marketing that showed lower return and would refocus its efforts on acquiring new buyers to drive growth.
That looks like bad news for sellers who rely on the eBay platform: Wenig acknowledged the impact that reining in marketing would have on sales: “While this will likely put pressure on GMV for a period of time, it will enable more profitability and a stronger foundation over the long term. We will continue to increase awareness around our brand, focusing on the value and uniqueness that differentiates the eBay experience.”
At least one Wall Street analyst wasn’t too upset at the prospect of eBay “optimizing” marketing spend, as he put it. Mark May of Citi said he believes that while GMV guidance could be at risk due to the reduction in marketing, “revenue guidance (take-rate) appears to be sufficiently conservative.”
In other words, more of the same – in the fourth quarter, eBay was able to handily meet its revenue targets despite the lackluster GMV growth. As the Wall Street Journal wrote, “On the positive side, (eBay) delivered solid revenue of $2.9 billion, in line with consensus estimates and toward the high end of the company’s guidance.” It’s proof that Wall Street looks at performance differently than customers (sellers).
Not that anyone was happy to see GMV stutter yet again.
Susquehanna International Group (SIG)’s Shyam Patil advocated selling off StubHub and Classifieds in his research note with the creative title, “eBay Inc.: Breaking Up Is Hard To Do…But Capital Returns Just Aren’t Good Enough Anymore.”
The analyst pointed out that eBay CEO Devin Wenig refused to address the pressure being applied by activist investor Elliott Management during the earnings call with analysts, and he predicted some contention over eBay’s stance against further breaking up the company.
“eBay continues to stress that it believes that Classifieds and StubHub are important to the overall business strategy, but struggled to provide specifics when talking about synergies between core eBay and the two assets,” Patil wrote. “For what it’s worth, eBay did state that it continuously evaluates the overall portfolio and is focused on creating value for shareholders.”
Patil himself went further, suggesting eBay sell not only Classifieds and StubHub, but optimize the core Marketplace business – perhaps by selling that business as well. “The more aggressive capital returns were good to see, but not good enough, especially as fundamentals continue to weaken.”
With the clock running out, Wenig outlined some key moves from his playbook. Among his plans:
- Focus on improving conversion and frequency rates for existing customers, including providing ways to compare values and surface unique inventory.
- Provide sellers with more data and tools with enhanced protections.
- Grow new users, including delivering new experiences and messaging to encourage first purchases.
- Provide new and existing customers with enhanced delivery and returns.
- Move more SEO pages to a catalog structured-data foundation, using Artificial Intelligence to opt in millions of listings.
- Continue to invest aggressively in advertising and payments.
eBay released full earnings and announced it would issue a dividend for the first time ever, you can read more and leave a comment on the EcommerceBytes Blog.