eBay 1st Quarter 2019 Earnings Call Transcript

[val2525]

Full transcript of the call:

www.fool.com/earnings/call-transcripts/2019/04/23/ebay-inc-ebay-q1-2019-earnings-call-transcript.aspx

"Edited" transcript of the call (not sure what "edited" means here). All quotes in subsequent posts are from the edited transcript:

finance.yahoo.com/news/edited-transcript-ebay-earnings-conference-023134244.html




Regarding Promoted LIstings:


While our GMV is down slightly year-on-year, our revenue is growing, and the gap between GMV and revenue will likely continue. This growth was partly driven by Promoted Listings where more sellers are opting to invest to grow their business. In Q1, we had more than 800,000 active sellers promote over 200 million listings. This helped drive over $65 million of revenue this quarter, up nearly 110%. As we've mentioned previously, as this business scales, we're reducing third-party ads, which are not accretive to our ecosystem. We're very pleased with our progress and remain on track towards $1 billion Advertising revenue opportunity.

Which is why the trending rate on PL is increasing weekly (in some categories). Wonder if eBay has factored in market saturation of PL at some point?





Devin N. Wenig, eBay Inc. - CEO, President & Director [13]

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In terms of Promoted Listings, it's still very early. If you look at analogs to eBay, other marketplaces that have rolled out products that are similar, our penetration and monetization rate are still in the early stage of scaling. And we know that because as great as it is that we've had 800,000 sellers promote listings, that means that there are tens of millions that have not yet. And we also are just in the phase of fully integrating from the buyers side where Promoted Listings show up in a unified search ranking, and there's a whole bunch of other plans to expand both the seller side and the buyer side. So we think there's a lot of runway, and that's why we said last quarter that we think it's $1 billion opportunity. Remember, we're being very selective about removing third-party advertising as this scales. But one of the things that I'm happiest about is that the seller NPS on this, if you will, their happiness with this product is extremely high. It's been one of the most successful new products we rolled out from a seller perspective ever, and they're adopting it. And remember, it's completely optional, nobody has to use it, and they're flocking to it. And to me, it's a way that you can, if you want, trade off some margin for some velocity. And there are many sellers that want to do that. So we're really happy with it. It's early, and it'll be a key contributor to the $1 billion advertising opportunity.


Sounds to me like eBay is going to count more on income from sellers using PL than from attracting new buyers to the site. Why pay for advertising when eBay can make more $ off the sellers on the site?

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Regarding internet sales tax and marketplace facilitator tax:

In addition, we saw an impact our business from the adoption of Internet sales tax in the U.S. as well as value-added tax in international markets. A number of jurisdictions have enacted legislation requiring Marketplace collection of tax. Without a small business exemption, this trend will increasingly impact small domestic sellers, making it harder for them to compete in an increasingly global and large merchant-dominated world.


I doubt any state will make a small business exemption for "marketplace" taxes. That's why the states are implementing marketplace taxes - to make it easier for small sellers. eBay is responsible for marketplace taxes, not sellers.

[val2525]

Regarding Managed Payments:

Question from Stephen D. Ju, Crédit Suisse AG, Research Division - Director [5]

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Okay. So Devin, I wanted to probe a little bit on the Payments platform and how that's going. You've announced $220 million in payments facilitated. And this is not a criticism per se, but that dollar number is still a very small percentage of the overall GMV and pretty far under the limits of your agreement with PayPal. So are you just being extraordinarily careful on the rollout, in the transition? Or are you encountering issues with the incremental buyer -- seller buy in? And any perspective on when you can theoretically onboard some of the other online payment platforms that otherwise were not available with PayPal so you can maybe think about expanding your buyer base?

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Devin N. Wenig, eBay Inc. - CEO, President & Director [6]

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Well, we're -- we are delighted with our progress on payments, and we're really -- we're gated by the operating agreement, and we're not that far from it now. On a run-rate basis, I think the number we gave you puts us close to 4% of U.S. GMV, and we're going to -- we'll go right up to the limit as we come close. There was no reason to go any faster than that. I will say we've had an outstanding queue of sellers. Remember, this is an optional program. Nobody needs to be part of it. And we have grown the number of sellers, and the pipeline is huge. And frankly, we couldn't even onboard all of them right now, so we've just been very gated. And remember, this has been done without PayPal until the very, very end. The entire trial that we've done so far has been done without PayPal. What we found is that it has not been an important gating factor to the onboarding of sellers. And we found that they're getting great performance, and we have a tremendous amount of influence over the means of buyer check payment at checkout. Those are the things we've learned in the last couple of quarters.

Remember, we've added a bunch of new payment mechanisms already that were never part of our ecosystem, most notably Apple Pay and Google Pay, and there are many more coming in Germany. One of the reasons we chose Germany is that there are many, many forms of payment: direct bank transfer, direct debit. It's a complicated market, which is the reason we chose to do it. But I would say we are exactly on track. We are very pleased with our performance on payments. We'll go right to the 5% line this quarter, and then we'll start scaling the 10%. And we are on track to begin a very rapid expansion of this program in 1 year and 3 months, but who's counting?

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Hmnn. Makes me wonder if eBay is looking for data that would support eventually dropping PP as a payment source.

[chapeaunoir]

And we are on track to begin a very rapid expansion of this program in 1 year and 3 months, but who's counting?

Evidently he is. 

I wasn't aware that 800,000 sellers out of tens of millions was 'flocking'.    Maybe he can't count after all.  

His comments about the marketplace taxes confuse me - maybe I'm reading it wrong but he doesn't seem to understand what marketplace taxes are, unless he's saying that big mega sellers in marketplaces won't feel buyer attrition due to having to pay sales tax as much as small sellers? I know its had an impact at Posh...presumably until people get used to it. 

[somany]

Tens of millions who have not done promoted listings, but if they come on board and do them, there is zero benefit to sellers for promoted listings. Does he get that? You raise the number of participants, you lower the benefit and sellers would quickly figure out they are paying higher fees for no additional sales. It’s a shell game, and they can expect to benefit for awhile but there is a point where sellers will say no more. Our board is already seeing it as boarders cut back, go elsewhere to sell, or quit altogether, so unless ebay is adding sellers at a greater rate than in the past, I would say the effect will be felt at some point in the not too distant future.

[somany]

What is “seller NPS”?

[kritter]

Net Promoter Score (NPS) represents the answer to the question “How likely are you to recommend our company/product/service to your friends and colleagues?”

[somany]

Thanks! No one ever gets a high score from me on a survey with that question.