Ina Steiner EcommerceBytes Blog
News and insight focusing on ecommerce.
by Ina Steiner, Editor of EcommerceBytes.com
Thu Mar 28 2013 15:35:35

Live Blogging eBay Analyst Day 2013 Part 2

By: Greg Holden and Ina Steiner

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In Part 1, Greg Holden live blogged the morning session of eBay's Analyst Day (with some assistance from Ina Steiner), and here in Part 2, we are live-blogging the afternoon session, being webcast from San Jose.

This morning, eBay executives from each of the company's major operating units spoke about their plans for the future at a high level. They also announced some new features coming to the site - here are a few, be sure to read Part One:

eBay Marketplaces: Cross border trade and social networking features
eBay Marketplaces Technology: Look for next gen search and Commerce OS
PayPal: We can double our business (2009 - 2015)
GSI Commerce: Message primarily aimed at large retail chains

Note that as eBay executives make their presentations, we'll be summarizing their key points - this is not meant to be a transcript.


Bob Swan gives us the after-lunch financial numbers:
 
2009-11: Turnaround; 2011-13: Positioning for the Future; 2013-15: Capitalize on the Opportunities.
 
Mentions Skype: "We just didn't believe it was going to make us the company we wanted to be."

eBay and PayPal are meeting or exceeding projections made at 2011 Analyst Day, he says The company will also deliver more than $1B in savings by "operating smarter."
 
Balance sheet: $11.5B total cash balance in 2012 (US $3.8, Int'l $7.7)
 
50% Americas, Europe 36%, Asia 14% as far as share of eBay revenues.
 
eBay has enabled more than $175B in commerce volume for the companies it works with.
 
In the next three years, eBay plans to expand its addressable market to about $300B in volume in 2015 (compared to $175B in 2012).
 
The role that mobile plays in the business will expand substantially over that time. (no definite number figures though)
 
The company's "take rate" will change from 8% in 2012 to about 7.5% in 2015.
 
He anticipates a good question: "Can you guys make any money in this Omni-Channel world?"

The money shot:



How will your take rate remain the same in the midst of inflationary pressures: "We believe over the next three years our take rate will sl decline but profit from sales will remain stable and transaction loss from risk management will remain stable." Continued 62% transaction margin. (Think about that, folks: eBay makes a margin of 62% on a transaction.)

These are 2015 goals: (See slide for exact numbers, please)
Marketplace will grow to 11B or 14 percent roughly.
Projecting approx. 24% growth in PayPal from 5.6B to 9.5-10.5B in revenue.
GSI: will grow from $1.1B to 1.5 to 1.7B and the "take rate will go down.

Total revenue for eBay: $21.5-$23.5B for 2015
Non GAAP EPS 15-19%
Free Cash Flow greater $11B
It's Question Time!

Question and Answer Session

Q. for David: You guys had a great vision for value you will deliver to retailers and consumers. Financial institutions you deal with are not getting it yet. How do you address the ones who don't get [that you are trying to expand the pie rather than taking a bigger piece of it]?

A. PayPal CEO: It's all a question of time. Consumers know when they're having a better experience or new experience inside of a restaurant or whatever.

Q. Question on margins: Have been 40%. Is that just where they are going to be in marketplace? On payment side, there are a lot of things out of your control. What is the worst-case scenario?

A. Swan: PayPal at a 65% transaction margin business and eBay with almost an 80% transaction margin business, the opp to improve margins is big and easy. The challenge is, where are the growth factors that we see? We can expand margins. Over the next three years we think this is the right use of capital for the business.

q. Justin Post: Two Qs for Bob: Looks like 16% growth for this year. can you get more in the out years? What are eBay's competitive advantage with your competitors?

A. On margin, our expectations are roughly 27% for the enterprise in 2015. The implications on EPS growth are capital allocations are consistent with what they have been. We do not assume any acquisitions. Those would be aded to the base plan. Flat margins at the enterprise level.

A. Donahoe: On the retail questions: We're not the only one doing this. Retails say, you don't compete with us.They view us to be a partner, not a competitor. We have never held inventory, never will. We only monetize when they sell something. At the end of the day that is a powerful force.

Q. For Devin: On marketplaces, the US business is starting to grow faster than international. It seems like the US market has always been a test market in terms of innovations. You get the benefits of that that are then extended to international. The benefits you have experienced in the US, how do you expect them to play out in UK etec. And second, shipment, getting product to customers, and global logistics.

A. First, It isn't always that we test in US. I do think a lot of what we are doing now is globally applicable. Clearly, more than half of what we can do we can roll out into global markets. Yes, we're a global platform, and probably we have tipped innovation back to the US now. Shipping: so, over long distances we are playing more and more of a long role in shipping. Global Shipping Program's goal is to make shipping as easy internationally as it is nationally. We have a partnership with Pitney Bowes. If you have a Russian buyer, and you are in the US, you can ship to a warehouse in Kentucky, and eBay will take it from there. We are just scaling this now in the US.

Q. Jay Friedman: With regard to financial institutions, specifically, and issuers, would you characterize your relationship with issuers as the same or better or worse than it has been over time?

A. For issuers, I think it is the same that has ever been; I foresee it better going forward.

Q. Are your assumptions on the PayPal side stress-tested? If every card were to introduce some equivalent fee with regard to their network access fee?

A. It is stress tested based on funding sources consumers use based on our best guess of how things will play out and how we believe consumers will change funding sources over time. W4e take all that into context and say we believe our margins will be 62% etc.

Q. With regard to funding sources are your assumptions that ACH remains the same? How do you direct more consumer behavior towards ACH.?

A. If you look at the majority of transactions offline, debit is bigger than credit. We expect consumers will continue to want to pay with their bank account online as well as offline.

Q. With all the improvements int he user experience at eBay where is the gap now between the user experience and expectations. And with PayPal is there any strategy for addressing consumer perceptions?

A. I would say the perception is lagging behind the actual eBay user experience. People who have the actual user experience, people who do it, love it. Our biggest gap is in inactive users. With regard to PayPal, Devin has brought in a really sharp focus on user experience. Kind of stalled out there for a while and he put up a refresh of the mobile experience, and getting it out to developers, so I think PayPal is catching up to perception. More than any time since I've been here, five years ago we had lost our innovation mojo, but it is profoundly different today, with the focus on the quality of the product experience and the rate with which we can innovate.


Q. How does market in Russia compare to India and China? Same kind of pent up demand? Are those opps as big as Russia?

A. They are all a little bit different. They all have a lot of consumers importing via eBay. Wendy looked at how much demand was coming on eBay.com, eBay UK from BRIC and emerging markets. We were stunned. Our strategies on how to capitalize on that different from market to market. Russia is our number one priority because we feel we can crack that open. India, just got a license on payments there. May develop more slowly. Brazil, PayPal got payment capability there last year, and that market is on fire. Lastly in China, we have strong export. We are waiting to get our payments license in China. Devin opened an imports site into China and we'll be pursuing that.

Q. One big business you have is marketing services. How will that $2B business grow, and why? Devin, one of your big markets geographically is German, what are yo doing to accelerate that?

A. (Swan) Adjacencies are businesses that extend the core capabilities we offer. In PayPal it's more credit. We think the prospects for growth in credit are very attractive. DemandGen--ability to drive traffic t large retail sites. I said that would grow 15% over a three0year period.

A. (Wenig) Advertising will grow on eBay this year but we made a decision not to compromise the user experience. If we can place ads that are intelligent, that direct a buyer or seller to eBay, we will do that, but we won't compromise the user experience. As far as Germany, there are some unique things, it is more sluggish, we have a trust gap based on the way Germans pay (bank transfer, electronic transfer). We are taking steps to build trust back into the service around eBay buyer protection and take friction out of the payment system. There is a big emphasis on trust in Germany.

Q. Some of the presentation today was focused on retailers and enabling services. But how do you communicate to those retailers that they should look at EBay as a technology supplier. What are you doing to communicate that?

A. The real truth is, their approaching us was how this all started. GSI brings us a lot of relationships; we now have exposure to many of the largest retailers, and we wanted to focus on proof points--to prove that there are products behind the words. We'll be raising awareness higher and higher. We feel there is growing awareness among retailers.

Swan: Our numbers assume that as we become more engaged with the analysts in the industry, they will bear the burden of sharing our capabilities with the world at large.

Donahoe: We like to under promise and over-deliver. We lot to build products that create real value for consumers.




Q. Thinking about Google and Apple and their devices that are prominent in the marketplace today. Why shouldn't we be more worried that these guys can in short order can make a compelling solution in their device and they can promote it because it's in their device?

A. Great question; when you control the operating system you can do a bunch of things that you can't if you don't. Large tech companies that have tried to enter payments outside of the ecosystem, do well, but the moment you try to manage the madness and the margin associated with this those are all large barriers for companies to do this. We are great partners as well. I think we're in good shape.

Q. Retailing and the discover partnership in particular. You project 7M merchants by 2015--why not accelerate that as fast as you can?

A. We're going to go as fast as we can, but the reality is that we're not going to start marketing this massively to consumers until we know that we have enough value proposition for them. You need to change consumer behavior at scale. It's going to take a little bit of time.

Donahoe: In this PayPal Omni Channel world, we're not looking at this quarter by quarter by quarter. We layout, here's our three year plan. Then find places where we can get real consumer traction. Once we learn we have real traction on something we'll grow it.

Q. Real time local inventory is really cool, but what is the pain point from the perspective of retailers? IT and feeding inventory to you? And Google Local giving very inaccurate information?

A. On question of how do you get inventory up, Milo is in stores across US, and powering eBay now. Many others are sitting on Magento. Others haven't and that will be a more solutions oriented approach. The local curio store isn't going to be a big driver of GMV but will be a big customer acquisition vehicle. As far as curating (stores that will be on eBay Local), we'll step in and do that ourselves.

Q. Traditional retailers: There is clearly a tendency of these guys to be fighting back. Have done well with price matching. How much of this, having proof points to show them, is they need to see you guys showing more success in particular verticals, such as fashion, you have been successful there, and as you do more you'll see more retailers wanting to do more with you.

A. When I stood here two years ago and talked about online and offline our company had zero experience with large retailers. Two years later we own GSI, we have dozens of people who are driving real value for retailers. I see retailers wanting more help, especially with mobile. How do I get into the mobile flow? is the question we get most often. They're seeing an increase with the eBay mobile app. As this evolves our solutions are getting to address what their needs are.

Q. On PayPal and growth TPV (Total Payment Volume). Why not offer rewards a la Visa and Mastercard?

A. If you look at transactions in the offline world today, most are debit, which offer no rewards to the consumer. People don't necessarily want rewards for every transaction.

Q. I presume you have costed it out, what a loyalty program for users of PayPal would cost?

A. Yeah, we don't feel we need to go there. The credit products out there can be meaningfully better.

Q. Cassini: Will you bracket for us the potential impact from this algorithm? And John, as we think about Omni Channel, the message is eBay Inc. offering ecommerce technology services, when do you think about bringing these customers leads?

A. You heard me mention that currently is contributing to a third of the buyer experience conversion. The way we're thinking about Cassini is it will be a couple year rollout to get all aspects of Cassini live, We're thinking maybe 30 to 50% of that conversion that we'll continue to drive through keyflows--we're thinking between 30 and 50% of that buyer experience.

On the second part, with any retailer, we say, we don't want to compete, we want to help you grow your business. We always talk in terms of growing their business because that's all they care about.

Q. Hoping you could talk more about Bill Me Later and how you see that evolve over the next few years. Whether the offline world, it could be an option, or if you are thinking about markets outside the US?

A. Bill Me Later is part of PayPal, and will be brought in to all of our product experiences. When we are talking about the credit opportunity, we don't distinguish if you're online or offline. BML is a treasure trove of algorithm writing and specialists that will help us with all the data we have too.

We think the business will grow by 30% over this time frame. As you know, we're a bank, in Europe, Luxembourg bank and that serves as the funding source for our loan portfolio. That lowers our processing costs. That is a phenomenal business in a strategic context.

Q. (last question): You talked about shipping, about consumer engagement, how about some type of loyalty in shipping service to compete with Amazon Prime?

A. We looked at that and we're not sure that is necessary. We see great velocity in what we're doing. We think our sellers and buyers are really appreciating the experience. We don't see that as a necessary piece to compete.

That's all folks!




Comments (17) | Leave Comment | Permalink

Readers Comments

Perminate Link for Live Blogging eBay Analyst Day 2013 Part 2   Live Blogging eBay Analyst Day 2013 Part 2

This user has validated their user name. by: Ming the Merciless

Thu Mar 28 17:05:51 2013

As far as sellers go, The Ho underpromises, underdelivers, and underperforms.

If any analyst reads this, they're being than truthful with you. I suspect you already know this and simply prefer to ignore the odor emanating from the accounting kitchen.

One, two, three, four!
Tell the Ho he's got to go!

Perminate Link for Live Blogging eBay Analyst Day 2013 Part 2   Live Blogging eBay Analyst Day 2013 Part 2

This user has validated their user name. by: Ina

Thu Mar 28 22:24:31 2013

From listening to the presentation by Mark Carges about Cassini, aka next gen search, I decided to try it myself. A search for old town vapor wellkit on eBay shows I am seeing Cassini.

Results say: 0 results found for old town vapor wellkit

but then say:
More items related to "old town vapor wellkit"

and display some items

Is anyone else noticing this?

Perminate Link for Live Blogging eBay Analyst Day 2013 Part 2   Live Blogging eBay Analyst Day 2013 Part 2

This user has validated their user name. by: Ming the Merciless

Thu Mar 28 22:41:35 2013

I get zero results about half the time using obvious keywords.

Their search engine doesn't work well or as intended most of the time, and everyone is losing money since they eliminated ending soonest as an algorithm.

None of the overpaid minions in San Jose, Draper, or Phoenix, however, will tell the Emperor he isn't wearing any clothes.

Perminate Link for Live Blogging eBay Analyst Day 2013 Part 2   Live Blogging eBay Analyst Day 2013 Part 2

This user has validated their user name. by: Ming the Merciless

Thu Mar 28 23:23:17 2013

By the way, can't any of these guys afford ties?

Perminate Link for Live Blogging eBay Analyst Day 2013 Part 2   Live Blogging eBay Analyst Day 2013 Part 2

This user has validated their user name. by: Ming the Merciless

Thu Mar 28 23:23:18 2013

By the way, can't any of these guys afford ties?

Perminate Link for Live Blogging eBay Analyst Day 2013 Part 2   Live Blogging eBay Analyst Day 2013 Part 2

This user has validated their user name. by: iheartjacksparrow

Thu Mar 28 23:23:37 2013

I noticed something interesting this evening. I was searching for a particular doll, and changed search to the highest prices first. I then searched for a different doll, and when those items came up, search had changed back to Best Match. Previously, once I changed search to showing highest prices first, all subsequent searches would also display the highest prices first. I don't know if this is part of the Cassini changes.  

Perminate Link for Live Blogging eBay Analyst Day 2013 Part 2   Live Blogging eBay Analyst Day 2013 Part 2

This user has validated their user name. by: Rexford

Fri Mar 29 11:37:19 2013

Ina, I have been seeing that lately.

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This user has validated their user name. by: Rexford

Fri Mar 29 11:40:21 2013

Ming, that's funny.  $29MM bonus and the Ho looks like he's going to the Easter buffet at Howard Johnson's.

Perminate Link for Live Blogging eBay Analyst Day 2013 Part 2   Live Blogging eBay Analyst Day 2013 Part 2

by: Bloggo This user has validated their user name.

Fri Mar 29 13:33:41 2013

Joke Of The Day:
"We think our sellers and buyers are really appreciating the experience."

Perminate Link for Live Blogging eBay Analyst Day 2013 Part 2   Live Blogging eBay Analyst Day 2013 Part 2

This user has validated their user name. by: Basset

Fri Mar 29 15:44:19 2013

Yes, I've noticed at least within the past week I've been getting different search results view, with the ''more items related to'' below the results. So that is Cassini?

They have been CLOSE but not quite the same thing I am searching for.

I think it comes into play when you end up with very few to zero results on your original search. If several results display, the ''more items related to'' is not there.

Perminate Link for Live Blogging eBay Analyst Day 2013 Part 2   Live Blogging eBay Analyst Day 2013 Part 2

by: Bloggo This user has validated their user name.

Fri Mar 29 18:46:03 2013

"we have tipped innovation back to the US now" Innovation?  These people are truly delusional.

Perminate Link for Live Blogging eBay Analyst Day 2013 Part 2   Live Blogging eBay Analyst Day 2013 Part 2

by: gutspiller This user has validated their user name.

Fri Mar 29 20:23:46 2013

I normally never use the Ebay US site. Read a lot about search being broken. Didn't even realise how bad the situation was.

First did a search and couldn't get a result. When I started browsing the different categories, the only thing Ebay would show was that there are 0 items in this category.

So can't buy a single item even if I wanted to.

Perminate Link for Live Blogging eBay Analyst Day 2013 Part 2   Live Blogging eBay Analyst Day 2013 Part 2

by: nsc This user has validated their user name.
Web Site

Sat Mar 30 04:37:01 2013

To give credit where due, "More Items Related" is now actually showing similar items to the original search.

ebay used to be completely unable to identify similar similar items in Antiques and Collectibles. You'd look for Georgian Sterling and they'd show you ladies' shoes. So that is an improvement.

Perminate Link for Live Blogging eBay Analyst Day 2013 Part 2   Live Blogging eBay Analyst Day 2013 Part 2

This user has validated their user name. by: Ming the Merciless

Sun Mar 31 14:59:36 2013

Blue dress shirts also seem to be part of The Ho dress code.

This "we're just ordinary regular guys" in $2,000 suits, $250 shirts, and $1200 shoes charade is tiresome and disingenuous.

But it is an accurate metaphor for the endemic dishonesty and greed of this corporation.

How many small ebafia businesses and the good people who own them are The Ho and his henchmen willing to exterminate for more millions?

How many more, Ho?

Perminate Link for Live Blogging eBay Analyst Day 2013 Part 2   Live Blogging eBay Analyst Day 2013 Part 2

This user has validated their user name. by: Ming the Merciless

Sun Mar 31 21:06:49 2013

I think all the guys here should pick  out the most hideous tie they;ve ever been give and re gift it to The Ho.

Ties for oligarchical underprivileged.

Perminate Link for Live Blogging eBay Analyst Day 2013 Part 2   Live Blogging eBay Analyst Day 2013 Part 2

by: Mr. Me This user has validated their user name.

Mon Apr 1 14:30:32 2013

BLAH BLAH BLAH, Meaningless corporate speak .... the only "experience" that these ^&^&*( s are after is stuffing more money into their pockets....

Perminate Link for Live Blogging eBay Analyst Day 2013 Part 2   Live Blogging eBay Analyst Day 2013 Part 2

by: rebecca7 This user has validated their user name.

Mon Apr 1 14:49:19 2013

Re: “The local curio store isn't going to be a big driver of GMV but will be a big customer acquisition vehicle.”

In other words, eBay executives won’t respect or value the participation of  local curio stores, except to USE those small local businesses to funnel customers to eBay’s more profitable PREFERRED corporate partners.
 
eBay executives openly admit they view little stores as mere TOOLS to be exploited (until they’re no longer useful, presumably).

As a small, long-time eBay seller of used collectibles, pottery and porcelain, I know what that’s like.
 
I’ve been selling only a few hundred items a year and, because my customer base is selective, my items sometimes wait months for a buyer. As a result, eBay’s new search algorithm drastically lowered my listing ranks in “Best Match.”  I’m not profitable enough for the eBay corporation and its shareholders.

But my listings are unique and beautiful to browse, so I’m one of thousands of small sellers who make eBay INTERESTING.  We are the MAGNETS pulling in a wide assortment of millions of customers for eBay each year.

We are eBay’s “loss leaders,” but eBay loses nothing.  The only losers are eBay’s small sellers, who research, invest in, photograph, store, and pay listing fees month after month for MILLIONS of valuable, beautiful items offered on eBay, while eBay executives cherry-pick only the BEST and most profitable items (for eBay) to show shoppers in “Best Match” and Feed searches.  

eBay executives don’t have to buy, manage or ship ANY of the merchandise.  All the merchandise investment risk falls on individual sellers.

A seller might pay fees to list 300 items, but eBay’s new search appears to be rigged to show most shoppers only a small percentage, perhaps only 10 to 30 items.

eBay executives are using small sellers as MARKETING TOOLS, tricking us into giving them highly valuable opportunities to hijack and redirect MILLIONS of our would-be buyers toward eBay’s more profitable PREFERRED sellers, while selectively profiting from our few best pieces on the side.

They even trick us into paying fees for invisible listings and invisible, serviceless “Premium” stores. We actually pay for the privilege of being used and cheated.  Currently, eBay executives seem to be testing just how much pain sellers are willing to endure before we finally give up and leave.  Sales and search exposures have been fluctuating strangely for months now. They may want SOME of us to stay, because they recognize our usefulness, but they’re experimenting with sellers as guinea pigs, trying to find the tipping point between maximizing eBay profits while keeping the ideal number of small sellers minimally satisfied and functional.

It’s disturbing to learn now that eBay executives plan to extend their unique system of mass torture to every corner of world commerce.

Heaven help us all!



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