Although eBay reported increased profits, Wall Street hammered their stock.
(Please Note: I am not a stock analyst and this is not investment advice. I am reporting on eBay’s numbers from the perspective of an eBay seller and trying to figure out what these numbers mean to us).
eBay Reported earnings yesterday after the close of the stock market yesterday. The market reacted immediately. eBay stock was down 4% in overnight trading and today it is down 15% to $23.74 from yesterday’s close. Everyone had been watching to see if eBay would turn business around with their new policies. Although eBay reported growth and profits, most of the gains did not come from eBay itself –but from other eBay businesses.
When you look behind the numbers, eBay Inc., the corporation that owns eBay, PayPal and Skype did pretty well. Revenues and profits from PayPal, Skype, and classified advertising sites like Kijiji were up, and eBay increased its earnings from advertising revenue, but sales on eBay itself looked pretty weak. One of the telling things was what eBay did not say. eBay opted to report listing and GMV growth by combining results from eBay Germany, eBay UK and eBay US (eBay.com). I would love to know the figures for just eBay US but eBay didn’t break those out separately.
Even when combining the results for all eBay Marketplaces, it was obvious that Average Selling Prices and Sell Through Rates are under pressure. eBay’s CEO, John Donahoe even remarked that eBay has no control over Average Selling Prices.
These results reflect what I have been hearing from eBay Sellers over the last few months. More and more sellers report that their ASPs and STRs are falling and the only way they are keeping even is by increasing listings. And in fact that is what eBay’s results seemed to mirror. Listings were up sharply buy conversion rates and average selling prices were anemic.
One bright spot for eBay, increased advertising revenue, is another sore spot for eBay sellers. Chief Financial Officer, Bob Swan, reported: “Marketing services growth of 43% was fueled by advertising growth of 183% "as we further optimized ad placements," and the classifieds business, which increased 65% over last year. “ Sellers argue that banner ads on eBay search results and other pages take shoppers away from the platform. Advertising revenue grew 183% and eBay indicated that this is so profitable they plan to increase activity in this area.
eBay noted that they are facing the same economic challenges that all online sellers are. It will be interesting to see how Amazon’s growth comes in for the same period. If they see soft sales then it will indicate that the economy is responsible, but if Amazon comes in with good numbers that will reflect that eBay is not executing as well.
If you would like to learn more about eBay’s results, here are some links to several news items that give different analysis:
Reuters Story on Yahoo Finance
I am still taking the position that we really have to wait another quarter (after September) to know if the recent changes on eBay will help or hurt our sales and profits. The truth is that the changes do need some time to work, and gas prices, food inflation, lack of consumer confidence and general slowness in the economy are no doubt affecting business of all online sellers. It will take a little more time for this to play out.
There was one piece of good news. Donahoe indicated that eBay will be adjusting listing prices by categories. They have recognized that some categories have higher sell through rates and/or lower margins, so they will adjust listing fees and take more of their fees on the back end when a sale is made.
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