eBay CEO Devin Wenig told Wall Street analysts on July 18th that he sees advertising one of eBay's most significant mid-term opportunities (the other is payments) - particularly Promoted Listing Ads. There are over 300,000 sellers promoting over 150 million listings, he said, "leading to revenue growth in excess of 150%."
But that's currently a tiny percentage of revenue - total Marketplace revenue growth was 9% (or 6% on an FX-Neutral basis. Here's how eBay is looking to increase its advertising revenue.
2) Increase the number of sellers who advertise.
One obvious way to boost ad revenue is to increase the number of sellers who advertise. eBay is now targeting "consumer sellers" with a dumbed-down version of its seller ad program - see today's news story about eBay Promoted Listings Lite
eBay also has some room to grow the program geographically - Promoted Listings Ads are currently available to all active eBay Stores subscribers in the US, Canada, UK, Germany, and Australia, and FRITES (France, Italy, and Spain). In the US, the program also available to Top Rated Sellers.
Moving to a catalog approach, as eBay is doing, may also help boost adoption. When sellers must compete for the Buy Box on a single Product page, they may be more inclined to consider advertising as a way to get visibility for their items.
2) Increase ad fees.
Sellers indicate how much they are willing to pay for Promoted Listings as a percentage of the selling price. eBay used to limit the rates at 20% of the selling price, but now it allows sellers to pay up to 100% of the selling price.
That's obviously not a good idea, since any seller who moves the lever to 100% would be in effect paying eBay to sell their items, since they must also pay a commission (Final Value Fee) and often pay insertion fees, not to mention all the other costs they incur.
But as greater numbers of sellers begin advertising, they will be likely to pay more for each ad as placement gets increasingly competitive.
3) Increase ad inventory.
Ads are appearing in more places on eBay's site, and in December, eBay expanded the availability of PLAs to Motors Parts & Accessories.
eBay is also testing a new pay-per-click advertising program called Highline Search Ads. Invited sellers can run ads that appear at the top of search results; they pay whenever a shopper clicks on the ad.
eBay is also going local with ads for services, starting in the UK, so sellers will have to compete for ad space with local service providers, such as plumbers and hairdressers.
The message to Wall Street is clear: eBay wants more money from sellers on its site through ad fees. It's up to sellers to determine if paying more fees to advertise their listings on eBay shows a positive return on their investment.