ChannelAdvisor Scot Wingo By Scot Wingo

eBay’s Q1 2016 Results: A Deep Dive From a Seller’s Perspective

Yesterday, April 28, 2016, after the market closed, eBay announced its Q1 2016 results.  eBay exceeded Wall St. expectations and raised Q2 guidance.  From a seller’s perspective the results were a mix of some positives and negatives.

Before jumping into our analysis, here is our dashboard of key metrics we monitor:

ebay_q1_dashboard_complete

Starting Q4 of last year, eBay started breaking out ‘eBay Inc’ into three components and that’s important to understand and peel the onion on some of the results. Before we dive into the analysis, here are the three big pieces of the new ‘eBay Inc.’:

  • Core Marketplace – The main eBay marketplace, what we call ‘core’.  This component has GMV and revenue.
  • Stubhub – eBay’s ticketing company that was acquired back in 2007.  This component has GMV and revenue.
  • Classifieds – eBay operates craigslist-like classified sites in the US (eBay Classifieds)  and a variety of other brands in the US.  Like Craigslist, they are mostly free with some $/listing revenue in categories like jobs and autos.  These are operated in different sites that are not ebay.com and you can see a list here: http://www.ebayclassifieds.com/m/ClassifiedsNetwork.  These sites monetize by charging for listings (usually like Craigslist, they charge for job listings, autos and a couple of other categories).  This component does not have GMV, but does have revenue.

With that background, here are the positives and negatives from eBay’s Q1 2016 results:

eBay Results – Positives

Here are the highlights from eBay’s results:

  • Overall, eBay exceeded Wall St’s expectations on revenues and profits.
  • StubHub grew 34% y/y – double the e-commerce growth rate and classifieds grew 17% y/y – also above e-commerce.
  • eBay’s guidance for Q2 was above what Wall St. was looking for (Wall St was at 2-5% and eBay came in at 3-5%).
  • Mobile – eBay has admitted that their recent mobile app release was problematic and Devin Wenig announced on the call that they are in beta with a new release that hopefully will turn that trend around.
  • eBay clarified that they historically had two demand levers: CRM (email marketing) and search (implies Google SEO and AdWords aka “paid search”).  They have made it a priority to experiment with social (a Snapchat audience matching test was mentioned) to add more sources of demand.
  • eBay also talked about a new suite of apps coming soon.
  • eBay made big progress on the SDI initiative that we detail in a dedicated section below.
  • Finally, eBay also announced that they are going to launch a bunch of new categories soon.

eBay Results – Negatives

  • eBay’s US GMV growth of 3% continued to be well below the growth of e-commerce. Plus, because the StubHub GMV is usually included with the eBay core GMV, it can be hard to understand exactly what is going on with the core business which is our primary focus.  Here’s an example where eBay’s GMV in the US grew 2.8% (rounded to 3%), but when you take out StubHub, which is much smaller, but grew 34%, you see that it contributed .5% (500bps) to that GMV growth rate:

ebay_q1_stubhub_impact

  • International GMV grew 6% ex-fx (It’s not clear how much StubHub GMV is international, so in the above example, I assumed it was all US which may overstate its impact on the growth rate, but it will cause a similar decrease on international if it is applied there as well.
  • The most predictive metric for both eBay and Amazon is the number of buyers they are adding and the growth trend of that metric. If you don’t get growth from adding buyers, you have to really crank up frequency (eBay uniquely calls this GMB or Gross Merchandise per Buyer).  Active buyers slowed Q/Q with  800,000 buyers added, 4% growth, and eBay said that GMB declined 5%.  Continued SEO headwinds were called out as the root cause here.

Structured Data Initiative

As with Q4 15, in Q1 16 eBay spent a LOT of time on the call updating their Structured Data Initiative, here are the highlights:

  • SDI now covers 60% of listings with 38% ‘processed’ (I believe this means matched in the catalog)
  • 79m items were added to the product catalog.
  • 10% of SEO traffic is now due to the SDI pages
  • eBay added another 1.6m reviews (I believe this is on top of the Q4 1m – so that would be 2.6m product reviews total).

We are getting a lot of SDI questions from sellers and this post isn’t the best place to give a comprehensive update, but we are working on one that will be out soon – stay tuned.

I’m an eBay seller what should I do?

First, it’s important to be patient here.  eBay is 9 months into being an independent company and only half-way through the 18-month strategic plan they outlined in July 2015 after the PayPal split.  Remember, it takes a while to turn a big aircraft carrier around and with 162m active buyers  plus $20b/Q in GMV, eBay is a massive e-commerce aircraft carrier.

Second, the single biggest ‘action item’ for sellers is getting smart about, auditing and making sure you are on top of SDI.  eBay has so far been collecting the SDI data on the back-end. As they roll it out on the front-end, if sellers aren’t ready, they will lose share rapidly.  Those sellers that have honed their SDI game, will take that share.  Before Holiday 16, I’d work on getting your SDI black-belt.

Conclusion

Q1 2016 was a mixed quarter for the eBay core marketplace.  They continue fighting battles on many fronts: SEO, mobile, C2C, currency fluctuations and Amazon plus all the other pure-play and omni-channel retailers that are upping their e-commerce game.   Stay tuned for more coverage on SDI.

This blog post was written by Scot Wingo, ChannelAdvisor Co-founder and Executive Chairman.

 

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