eBay Q2 results – conference call thoughts

July 16, 2008

ChannelAdvisor ChannelAdvisor By ChannelAdvisor

Instead of combining results and thoughts on the call, this Q, I tried to separate them out somewhat so refer to this ‘first thoughts’ post for a quick view of the results.

I’m putting comments/observations from the call into three buckets vs. doing a chronological transcript as those are available all over the b-sphere now.

  1. Body language – What’s the mood?  Any tips on positives/negatives around eBay core?
  2. eBay core – All eyes are on the marketplace business, so I tend to focus on this.
  3. PayPal/Skype – Anything interesting that came up around PayPal/Skype.

Body language

  • JD hinted that the early results from the MP changes are positive/exciting.
    • Strong set of assets, bold changes
    • Changes needed for collective good
  • Rajiv is retiring and Lorrie will take his place.  This effectively
    seems to take a ‘layer’ out of the management structure and while I
    think Rajiv is an asset, I’m a big fan of a flatter org and I know
    eBayers will appreciate this.  Steph has an expanded role, details are here.
  • During one Q+A, Youssef asked about Q3 and any softness in guidance.  Swan talked about the economic concerns, they are impacted by unit volume in vehicle.  Format changes in vehicles and Motors impact.
  • Consumers are migrating to lower-ASP items across all categories (ASPs were cited as a big factor to GMV slow-down – see slide 10).  eBay encouraged Wall St. to watch sold-item trends as ASP/GMV girate around based on economy and changes.
  • We will continue to coupon and do less marketing
  • We will likely make category-based changes
  • We WANT to have more poweseller discounts

eBay Core

  • In the accompanying presentation, I noticed there’s more data on GMV growth.
    • In the US, Q207 was $6.7b and Q208 was $7b – a .3b increase or a 4% y/y growth (not negative as I originally feared).
    • For Intl, Q207 was $7.8b and Q208 was $8.7b – a .9b increase or 11.5% growth.
  • This is before FX comes out so the GMV growth slow-down appears to be international.
  • According to the slides, Active user growth was 6% y/y ex-china, that appears to be an about the same as Q1.
  • JD covered some of the changes eBay has made to the marketplace business and talked about the buyer focus.
    • DSRs, BM, etc. working
    • Number of powersellers with DSRs > 4.8 have doubled
  • Bob Swan went through a neat slide here.
  • Couponing – during the Q+A, the question was asked about how much they are doing. Marketplaces revenue was impacted by 3 points – a) lower take rate, b) higher discounting for powersellers and c) coupons.  coupons are contra-revenues.
  • Large seller discounting – (I think the questioner was talking about buy.com, but Bob answered around powerseller discounts)
  • Bob also mentioned that sales+marketing are down as they are using coupons (this could be around google spend).
  • Q: Any category specific pricing, timeline?
  • A: Evaluating results
  • Q: Buy.com – how do the economics work?
  • A: Buy has great service and is an example of incenting and rewarding all sellers (small to buy)
  • Q: GMV growth was 4% – lowest in years, what did you put into your guidance?
  • A: Swan: focused on velocity (back to slide 10 essentially) and long-term that will lead to gmv growth. Making progress on successful item growth.  GMV growth was hit by lower ASPs.
  • Q: If you strip out motors, GMV growth was 12%, if you look at FX, is it 4% impact?
  • Q: Will we continue to see slowness of Motors,etc.? around Korea, etc?
  • A: Implications going forward – GMV from vehicles will continue to be weak, long-term the model is changing.
  • Shipping costs are down 10%
  • NPS is up
  • Swan hinted that they will monetize things in different ways and thus sold items can also have different monetizations.  Mentioned paypal penetration and advertising as beneficiaries of velocity.

Paypal/Skype/Misc

  • Nothing really to add here, the call (Q+A) was almost 100% focused on the MP biz.

Conclusions

Some good colour on the marketplace change. I can see eBay’s conservative 2H08 stance given all the macro-economic issues out there.  Given Wall St’s short-term nature, I think they’ll view the Q as mostly negative in that there were some increasingly negative trends around GMV growth and active users.  I’ll keep an eye on analyst notes tomorrow and post a summary of what they are thinking.

Seeking Alpha Disclosure – I am long google.