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eBay Experiments to Drive Expansion

Posted on Wednesday, May 29th 2019

After a few lackluster quarters, eBay (Nasdaq: EBAY) recently delivered results that surpassed all market expectations. The company continues to experiment with its sales model to drive additional revenues. While it may still not reach Amazon’s might, the market is pleased with the steps it is taking to retain interest.

eBay’s Financials

Q1 revenues grew 2% over the year to $2.64 billion, ahead of the market’s estimates of $2.58 billion. Net income was $608 million and adjusted EPS was $0.67, better than the market’s forecast of $0.63.

During the quarter, eBay generated $550 million of operating cash flow and $368 million of free cash flow from continuing operations, repurchased $1.5 billion of its common stock, and announced $125 million in cash dividends.

Among operating metrics, its active buyers grew 4% across its platforms, to 180 million. Within the segments, revenues from Marketplace platforms grew 3% to $2.2 billion and GMV fell 4% to $21.6 billion. StubHub revenues were flat at $230 million, while registering a GMV decline of 3% to $1 billion. Classifieds platforms revenues grew 4% to $256 million.

Over the last few quarters, eBay has been focused on driving advertising revenues through promoted listings. During the quarter, more than 800,000 active sellers took advantage of this program and helped bring in $65 million in advertising revenues. Overall, advertising revenues grew 4% over the year to $256 million with revenues from promoted listings reporting a growth of 110% over the year. eBay expects advertising to be a $1 billion revenue opportunity for itself and it clearly has a long way to reach that target goal.

For the current quarter, eBay forecast revenues of $2.64-$2.69 billion with an EPS of $0.61-$.63. The market was looking for revenues of $2.66 billion with an EPS of $0.60. eBay expects to end the year with revenues of $10.83-$10.93 billion and an EPS of $2.64-$2.70. The market was looking for revenues of $10.87 billion with an EPS of $2.67 for the year.

eBay’s Expansion Efforts

In a surprising move, eBay opened a concept physical store in UK’s Wolverhampton. Launched as a month-long retail experiment, the store will allow 40 local, small businesses to host free workshops to attract customers. The stores will transact using QR codes instead of cash to help eBay perform analytics over footfall, sales, and transaction volumes.

This is not the first time that a digital store has experimented with a physical store. A few years ago, Amazon began experimenting with physical pop-up stores. But in March this year, Amazon announced plans to shutter down all of the 87 stores that were operated as part of a year-long experiment. It will be interesting to see how eBay fares with its experiment.

Meanwhile, eBay remained focused on improving product experience for new users. During the quarter, it launched an expedited registration process at multiple points across its experience. It is also helping sellers by providing them with new guidance to improve their product aspect coverage, which is driving improvements in its structured database catalog, search, and product pages, and ultimately, conversion. It continues to invest in visual search and reported that customers were performing more than 150,000 visual searches a day. It is expanding its Guaranteed Delivery program and now claims to deliver a coverage of 25% volume in the U.S.

For the sellers, eBay made it easier to manage listings. Sellers can now see competitive pricing data side by side when listing or managing their inventory. It also improved recommendations on items, that its AI tools claim, will benefit most from Promoted Listings.

Within the Payments segment, it continued to ramp sellers and volume in its intermediated experience. It launched Google Pay in early April completed the integration of PayPal on its new platform. It is working on regulatory approval to begin rolling out its Payments platform in Germany next. Germany is among eBay’s largest international markets, and a successful launch of a payments platform in that market will provide a good testing ground for international expansion.

Its stock is currently trading at $36.13 with a market capitalization of $31.5 billion. Nearly a year ago, it was trading at a high of $40.86. Like most other stocks, it had fallen to a year low of $26.01 in December last year.

Photo Credit: Mike Knell/Flickr.com

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