UPDATED: eBay Inc Reports Second Quarter 2008 Results

Patricia1On July 16, 2008 at 6:44 pm Said:

So…..what do you all make of the 7 percent drop in Ebay stock after hours today? Do you think the weakness in core auctions is finally sinking in to wall street?

petewheatOn July 16, 2008 at 8:36 pm Said:

This is a quote from a Reuters article today.

” EBay is having trouble attracting new users beyond the discount shoppers attracted to its auction format for which it’s famous. Active users rose a mere 1 percent in the quarter, even as listings surged 19 percent from a year ago.
In its auctions, average selling prices fell 6 percent due in part to discounts in Germany, a shift by U.S. and UK consumers to lower-priced goods, and efforts to curb fraudulent higher-priced listings, Chief Financial Officer Bob Swan said.”

Sellers like BUY can almost by themselves account for the 19% increase. The idea of a shift by U.K. and U.S. consumers to lower priced goods means what exactly? as I thought the eBay market place was already appealing to low end buyers. I don’t see how curbing fraud enters into lower prices unless you have been achieving higher Value Fees with allowing fake items.

MechelleOn July 16, 2008 at 8:37 pm Said:

yes Patricia I think so

When you tell the public that the marketplace is weak and give a negative forecast for the rest of the year it causes people to say – woahhh.

They are probably intelligent enough to realize that the marketplace is essential to the growth of all other eBay holdings. Simply put (and as I have said before) without us eBay has nothing.

If the marketplace is weak that will result in paypal being weak. If the marketplace falls paypal will dwindle. We are the tool that builds paypal- it is our using the system that allows it to permeate the rest of the e -commerce market. When someone new buys from one of us on eBay they open a PayPal account, and because so many people have a paypal account from eBay other merchants and merchant services have picked up paypal which means those people who entered eBay to shop from you or I and opened a paypal account will likely use the easy in your face button for paypal when making purchases outside of eBay, rather than punching in all the card crap.

So when investors hear the marketplace is weak- and most importantly active users only grew 1% they know things are looking worse than what eBay is projecting and forecasting.

They are probably also concerned that the eBay marketplace is not swinging high with our economy so low. Auctions should be storming right now, but they are not- interestingly freaky.

“The company was quick to point out that while its marketplace is experiencing some weakness, there are other revenue streams that it is increasingly relying on, including classified ads, PayPal and Skype. PayPal’s revenue in the second quarter was up more than 30% while Skype was up more than 50%.”
(eBay Shares Tumble (Update), TheStreet.com- Pia Sarker)

“In the clearest sign of a slowdown in its core business, Ebay said the value of goods sold through its sites, known as gross merchandise volume (GMV), rose only 4 per cent in the three months to the end of June, excluding the effect of exchange rate changes, half the growth rate of the preceding three months.” (Ebay slips 7% as key measures decline, FT.com- Richard Waters)

But analysts remained skeptical that eBay was showing progress in its efforts to re-accelerate its core auction business.

“GMV and active user trends suggest (a) real turnaround (is) not yet in sight, ” said Citi analyst Mark Mahaney in a note.” (UPDATE: CEO Says EBay On Track Despite Auction Concerns, CNNMoney.com- Scott Morrison).

“”While PayPal revenue, Skype revenue, and margins were encouraging, we believe investors were looking for eBay’s GMV to improve, which has not taken place,” said Goldman Sachs analyst James Mitchell in a note.” (UPDATE: CEO Says EBay On Track Despite Auction Concerns, CNNMoney.com- Scott Morrison).

Well, maybe things will be better next time with your ad revenue

“Chief Financial Officer Bob Swan noted the company increased guidance for the rest of the year and he stressed that it was focused on driving traffic to its sites, which it will be able to monetize not only through listing and sales fees, but also through advertising and its PayPal unit.” (UPDATE: CEO Says EBay On Track Despite Auction Concerns, CNNMoney.com- Scott Morrison).

However, the problem with eBay wanting to rely on the ads is that those ads won’t bring in much revenue without us- the traffic generators. Not sure how many people are going to stick around once they see their product they just purchased to sell their merchandise on is framed with ppc ads. I think Q3 just might surprise everyone!

hmmm, maybe eBay is learning not to put all their eggs in one basket just the same as we are!!

MechelleOn July 16, 2008 at 8:56 pm Said:

I didn’t say anything out of line Richard- geesh

dimesOn July 16, 2008 at 9:02 pm Said:

Fewer people willing to pay high prices on eBay for fear that the items are counterfeit?

Thousands of SUV’s and minivans and gas-guzzling pickups that no one wants?

Buy.com with its millions of listings (half a mill at a time with what, five day turnover?) = more cheap stuff that isn’t attracting anyone, given the flat user growth.

More than 50% of its net marketplace revenues are generated from international sites, where eBay isn’t as played out. In the US, we’ve been there done that.

Patricia1On July 16, 2008 at 11:05 pm Said:

Mechelle – I have a feeling the next screaming fit the sellers will have will be when the new auction page designs come out. Oh boy…they haven’t heard anything yet! I simply cannot imagine any of my paintings on auction with paintings from other artists on the same page I’m paying for! Ouch!!! Glad I’ve weaned myself off ebay except for a couple of listings now and then. This time last year I was selling 50 to 60 pieces a month and had a nice ebay store too! All that business was lost to me AND ebay and its a story I hear over and over again. I’ve learned to make do with less and the stress relief is well worth it. :-)

MechelleOn July 16, 2008 at 11:35 pm Said:

Yep, I think when they see the ads cascading their listings it’ll be all over. I am appalled they have them on the site at all. Especially the msn live earn cash ad- now they are paying the buyers to leave and them blaming us for the empty house.

Actually, the powersellers are a bit peeved to put it lightly that JD said the low increase was because of our powerseller rewards, as though he is now some how disappointed that things have gone better than expected. Of course not exposing the millions of dollars of free listings (that 19% increase) given to buy daily. Yep we didn’t bring in enough to cover buy’s bill so it is all our fault.

yes it is going to be very interesting- ha ha ha

BillOn July 17, 2008 at 12:44 am Said:

I noticed you can actually read ebay’s 2nd quarter earnings call transcript in its entirety at Seeking Alpha. You can click on the link below to view it:

http://snipurl.com/2zyxa

MechelleOn July 17, 2008 at 2:21 am Said:

Oh Boy, I just finished reading the transcripts- that was ugly!

The effort eBay put into selling PayPal , skype, and the Ads fell on def ears. They didn’t lose focus of the pie by getting swept away by the whipped cream though your efforts where clear.

The eBay marketplace is only 57% of the pie, 26 paypal, and 11% the ads placed throughout our market, skype and some odds and ends.

Paypal is making huge growth of that 26% 13% is from off eBay merchants.

So – 57% is the eBay marketplace transactions, 11% comes from the ads placed within the eBay marketplace to gain from the traffic we (sellers) bring to the marketplace, and 13% of paypal are solely eBay marketplace transactions.

So, as much as the “leaders” attempted to draw focus away from the failing marketplace by pitching the whipped cream as though it is now the filling, they didn’t eat any.

81% of the pie and the whip cream belongs to the marketplace.

It is so funny it is sad to read them trying to present the 19% as though it is the only thing important anymore. Hell, maybe they took that as sincere and it scared them off and that is why the sharp after hours drop. I don’t know, but it was so uncomfortable I felt bad for them- I really did.

GailOn July 17, 2008 at 4:51 am Said:

That 1% increase in active users can probably be attributed to current users registering additional IDs. When eBay has quality sellers like bonknut (50.7%) registering multiple IDs (e.g. stairwayhoundfind and shippaper) to list 1-cent books, I wouldn’t exactly call that a positive step for the marketplace.

A 19% rise in listings means absolutely nothing. The marketplace is still being flooded with garbage. What’s the actual STR?

dimesOn July 17, 2008 at 6:58 am Said:

Good point. I hadn’t considered the phenomenon of sellers getting new throwaway ID’s to improve their placement in Best Match.

dimesOn July 17, 2008 at 7:17 am Said:

Wow. The stock price is down to $23.99 and the market hasn’t even been open for an hour.

Avg daily trading volume is 14 million. It’s already at 20 million this morning and climbing fast.

Time for eBay to get in there and start buying back shares.

MsFish213On July 17, 2008 at 10:45 am Said:

When the changes were first announced back in January, quite a few “seasoned” sellers started creating multiple ID’s for back up in case they got hit with a neg or had their DSR’s dinged. Then they found out that they had better placement in Best Match.

MechelleOn July 17, 2008 at 11:19 am Said:

wow!! I bet they are buying like mad

patricia1On July 17, 2008 at 11:25 am Said:

The extra ID’s is probably correct. Everyone on the boards seem to have a zero posting ID, myself included and who knows how many more selling ID’s. I have a spare selling ID I didn’t have before. So this one single registered user actually has 3 ID’s and counts as three people!

dimesOn July 17, 2008 at 12:09 pm Said:

Hi, Richard – I wasn’t referring to eBay employees trading shares, I was talking about the structured stock buyback the company is doing.

eBay bought back 19 million shares @ $566 million in Q2 @ an average price of $29 and change.

With the shares so low today, it would be a good idea for eBay to purchase a nice chunk (before a competitor does!).

However, I didn’t realize there is a trading blackout for employees – is that an SEC regulation with regard to buying/selling within a certain time period after financials are released?

MechelleOn July 17, 2008 at 1:04 pm Said:

I was also referring to their buy back activity. Is that also subject to the blackout?

It seems a good idea for the blackout- is that an sec requirement? Never the less I certainly have considered an intentional downplay of eBay’s outlook was motivated by their intention to drive down the price to acquire the stock at lower prices. It’ll be interesting to see who walks away with the bulk of sold shares over the next few days.

On the other hand it is clear as someone who actually participates in the marketplace things are not looking well even beyond the auto sector. The clear intent of Donahoe’s intentions with ppc ads will shatter the marketplace, and then the only result will be the loss of any advantages to ads. They really ought to rethink that plan.

Robert H. Swan

John, if I could; David, I’d like to just emphasize a point that John made as well — when he talks about increasing velocity on the site and the significance of increasing velocity, that’s because we will monetize that traffic in new ways, in different ways on a go-forward basis. So when you look at just transaction revenue growth of 9% in the quarter, that’s a function of velocity on the site. But the other things, PayPal’s on-eBay revenue growth was up 19% year over year. That’s because of increased velocity and increased penetration on transactions on the site. Advertising was up 183% year over year; that is a function of increased velocity and people coming back to the site.

So as we focus on improving velocity, we know we’re going to monetize that in different ways over time, not just through insertion fees and final value fees, but also through progress we make on penetration and our ability to monetize in new and different ways on an advertising basis.

Question: Christa Quarles – Thomas Weisel Partners

One question on the marketing side; it seems as if, given the fact that if I go to the page, for example, the only monetization that’s happening above the fold is an ad from Yahoo!, and I was just curious if that’s indicative of its ability to better monetize relative to what you think your listings can monetize, and/or if you think that ultimately improves the buyer experience? Thanks.

Answer: Christa, yes, the bottom line is we think our listings, especially as we improve search, are the best way to monetize that above-the-fold real estate. So we do have the graphical display ad from Yahoo! at the top of the page but listings are still monetized most effectively and are consistent with the real core focus on the transaction marketplace.

We’re finding where the text ads really monetize best are on null search results, where in those rare cases we don’t have inventory, or on complementary items that are made to fold down at the bottom, and so overall both text ads and graphical advertising, as Bob said, is growing. We continually test that to make sure what placements optimize our advertising but by and large, above-the-fold listings monetize better.

Question: Christa Quarles – Thomas Weisel Partners

So you think that you can continue to see high double-digit growth, even in this environment, given what’s going on in the display marketplace?

Answer: John Donahoe

I think we look at advertising overall and we continue to be optimistic that advertising is a nice complementary way to monetize our traffic.

“monetize our traffic.”
Again a failure to realize who are generating the traffic!

I found this statement particularly amusing. I have never equated “incent” with punishment and inducement of fear.

“I might point out that the movement to incent and reward great prices and great service to buyers is not limited to larger sellers. In fact, we have many small sellers who are achieving very high DSRs and are providing great prices and great service to our buyers, and so I really want to emphasize that we have many small sellers succeeding under these conditions, as well as larger sellers. And so we intend to continue to incent and reward that across sellers large and small.”

What do you small sellers (those who are not powersellers) think- do you feel “incented”?

Patricia1On July 17, 2008 at 1:38 pm Said:

“What do you small sellers (those who are not powersellers) think- do you feel “incented”?”

To be honest, this 100 percent feedback 5.0 across the board DSR seller of 10 years has been insulted by Ebay and still waiting for that apology. I have no heart at this time to “want” to list on that site…certainly not in the capacity that I did before all this mess! No I don’t feel incented – insulted is much closer to the point!

MechelleOn July 17, 2008 at 2:10 pm Said:

Agreed, but I am curious if you are also being rewarded $ as is implied in that statement?

GailOn July 17, 2008 at 4:01 pm Said:

“I might point out that the movement to incent and reward great prices and great service to buyers is not limited to larger sellers. In fact, we have many small sellers who are achieving very high DSRs and are providing great prices and great service to our buyers, and so I really want to emphasize that we have many small sellers succeeding under these conditions, as well as larger sellers. And so we intend to continue to incent and reward that across sellers large and small.”

Mechelle ~ That Donahoe response was obviously very carefully worded, implying something that’s blatently untrue but not actually saying it so it wouldn’t come back to haunt him.

Donahoe certainly implies in the first and last sentence of that paragraph that all sellers, large and small, meeting the criteria are receiving discounts. But, that second sentence doubles back on itself and actually states nothing at all. It only serves to lead a listener around in a maze.

Webster’s Dictionary
se·man·tics – noun
b: the language used (as in advertising or political propaganda) to achieve a desired effect on an audience especially through the use of words with novel or dual meanings..

I hope to God Christa Quarles and the other analysts posing questions read the transcript carefully, analyze the heck out of those eBay-speak responses, then do some of their own research to figure out what Donahoe wasn’t saying.

Semantics are an integral part of the early curriculum for business degrees, and rehashed ad nauseum in the marketing and management majors. We used to call them the “I didn’t say that” courses.

GailOn July 17, 2008 at 4:22 pm Said:

I have a post missing! Ya gotta love it!

The word Donohoe was looking for was incentivize. He must have skipped that class. Someone should proof-read his scripts…..or put him on a short leash.

MechelleOn July 19, 2008 at 10:28 am Said:

Sorry Gail I should have specified that Swanson is who said small sellers are “incented” as well

MechelleOn July 20, 2008 at 2:43 am Said:

Richard

So reading over the FAQs Update

# 59
Is eBay going to list identical matching PPC ads on item pages?

We have no plans for this.

I want -no never- or -yes of course why even ask dummy-

If the answer is no please follow with

Is eBay going to put any ads (other than those stupid credit score crap ads) any where on the store and/or item listing pages?

Can you find someone who is honest enough to provide the truth here- the truth not words with a loop hole.

I had to use that – I was driving with my 7 year old yesterday and suddenly he started talking about contracts and how they always have a loop hole so if things don’t go the way they should you can always use the loop hole- freaking scary. I better work on the compassion and integrity attributes big time with otherwise I just might end up with …….I would be so disappointed.

GailOn July 20, 2008 at 12:57 pm Said:

Thanks, Mechelle ~

I know ‘incent’ has accepted use in some circles, but it’s still jargon. I would have thought when the president of a multi-billion dollar corporation is delivering a quarterly report, he would use the proper word.

These new policies will ‘attrit’ the sellers until there is no more eBay.

I wonder if these ‘back-formation’ words will be in the next revision of Webster’s….

lagOn July 20, 2008 at 4:02 pm Said:

As a seller and a buyer, I don’t feel incented – I feel incensed. One small letter but it makes a world of difference.

I am throughly sick of change for change sake with no thought of the consequences. They have ruined the search – raised status means you will appear lower in the search not higher. They plan on ruining the ‘my ebay’ page.

This is a hobby for me and I had planned to increase my selling when I retire in a few months to make a little extra money but I am rethinking that. It’s not fun anymore.

MechelleOn July 21, 2008 at 5:52 pm Said:

so last night I was reading the stores board and learned 2 things

1) the question was asked “Is eBay going to list identical matching PPC ads on item pages?

The answer was NO, but my next question is will there be any ads on our listings or in the areas (that are considered eBay’s zone? Also, if there are not sponsored ads do they intend to advertise other sellers’ listings of the same or “complementary” items?

2) with the intent to rob me of my left navigation bar from my listings the replacement is going to be 4 links at the top of the listing that can house 10 additional links in drop down format. So 2 questions A- I had read a post from another member who stated that the 10 additional links are not links to our products but are actually links to competing sellers’ products- is this accurate? B- it seems to me that the drill depth will be significantly decreased with this new category structure (damn near void of any categories) so how deep will we be able to specify category details?

I also read from an eBay rep that search 2.0 is essential to make custom item specifics relevant. So my question is – considering many of my listing item specific defaults provided by eBay are void of an item condition option, so I have had to use a custom item specific designation- does this mean that currently in eBay classic my custom item specifics are of no value? how does this affect best match search returns?

When reading the 08 updates I noted that eBay will begin specifying shipping time based on our shipping wait time. My questions- A) will this notice of when my customers should expect their package to arrive going to break down into carry service estimated time relative to service level? B) If they do use service option carrier estimates will they indicate expected arrival based on the quickest carrier estimate or the latest possible? C) eBay stated they intend to provide a day count rather than an actual date in their messages to my customers- will they subtract weekend and holiday days from the count provided to my customers?

example of all of the above shipping questions
I have a 3 day handling period and I use priority mail service which has estimated delivery of 2 to 3 days. So will ebay suggest they should expect their package in 5 days max or 6. If the buyer purchased on Wednesday evening is that considered one of the handling days? If the purchase was on Wednesday and there is a 3 day weekend will eBay suggest they should expect their package on Monday the holiday? If it is a standard weekend will eBay set the expected arrival time to be the following Wednesday of the following Tuesday or the following Monday?

I would truly appreciate your acknowledging my questions and attempting to find the answers

AmberOn July 22, 2008 at 8:05 am Said:

Mechelle, the handling time/calculated delivery date issue is a big one for me.

Currently, eBay still includes the PO provided estimated delivery time frames at the bottom of our listings near the S&H. MY problem is that I’m a media seller. Book buyers WILL NOT PAY for Priority. They just won’t. And the estimated delivery time listed is 2-9 days.

My issues are these:
1. In 5 years, I’ve NEVER had a media mail package delivered in 2 days. EVER.

2. Buyers don’t understand business days, and it seems that neither does eBay.

3. Media Mail can receive “deferred” service, but that is not communicated in the listing/carrier provided info.

4. Buyers always focus on the first time period in a range–in this case 2.

5. I have 2 different handling times. 1 for domestic, 1 for APO/International. There is currently no way to specify different handling times for domestic and international.

6. International delivery times vary widely. Will eBay calculate delivery times for overseas shipments? Even the PO website fails to provide delivery info on First Class International, because there really is no consistency.

So, if I’m understanding the plan correctly, they’ll take the seller’s handling time and simply add it to the carrier’s delivery time, taking the carriers at their word.

2 day seller handling time + carrier AVERAGE delivery time = range or dates shown to the buyer. So for media, it will be 4-11 days for a seller with a 2 day handling time. NOT enough, as it takes up to 3 weeks (14 business days) just for delivery during peak times. It’s sometimes even longer for extremely rural areas.

This will be disappointed buyer central if that happens.

Will they add some time on there to account for holiday mail delays?

In their Amazonification, will they actually HELP their sellers? For example, even expeditited packages on Amazon are allowed a 2 week delivery time window. They add SEVERAL days onto the average delivery time so that buyers have realistic expectations and are happy if the deliveries arrive sooner.

FYI: I chose a 2 day handling time because that’s what Amazon expects/allows of their sellers ;)

I somehow doubt eBay will do anything that actually HELPS their sellers. Haven’t so far.

MechelleOn July 22, 2008 at 2:35 pm Said:

Amber

I am sure given that Amazon allows 2 weeks eBay will expect us to overnight it- if not purchase a freaking jet and hand deliver daily. eBay needs to be the most competitive – we are apparently their products and employees so are what they will be competing with.

I feel this aspect of the policy is nothing other than an attempt to make our customers score our stars poorly.

I feel as though everything they do is an effort to ruin me.

MechelleOn July 28, 2008 at 6:10 pm Said:

Richard I have a lot of questions through out this thread could you please let me know you are aware of my questions and if you can get answers?

Thank you so very much

MechelleOn July 28, 2008 at 11:57 pm Said:

Thank you

MariansOn August 3, 2008 at 10:45 am Said:

Yay! Interesting…