Earnings

eBay Reports Revenue Bump While Managed Payments See A Slow Build

eBay-investors-acquisition-walmart-google

More than a month ago, eBay started managing payments on its U.S. marketplace platform, and on Tuesday (Oct. 30), the first results of that effort were in. The eCommerce operator, which released its third quarter 2018 results, said it has intermediated $38 million of gross merchandise value (GMV) so far.

The amount of those intermediated payments barely represent a trickle of eBay’s $22.7 billion of GMV during Q3, roughly 0.17 percent of GMV. Twelve percent of customers using iPhones or other Apple devices have used Apple Pay on eBay’s platform. It’s not clear how many of eBay’s customers are iPhone/Apple users or how much of an impact those buyers have on sales.

That said, “we’re really happy where we are with payments,” said eBay CEO Devin Wenig during the earnings conference call, adding that eBay is where it wanted to be at this point.

Those results come amid marketplace GMV for the third quarter of about $21.5 billion — up 5 percent year over year, but down from $22.6 billion for the second quarter of 2018. Active buyers increased 4 percent year over year to 177 million.

For the third quarter, eBay reported a 6 percent year-over-year revenue increase to $2.6 billion, which generally met analyst estimates. Earnings per share stood at $.56, above analyst expectations of $.54. Gross merchandise volume reached $22.7 billion, just below analyst expectations, but up roughly 5 percent from the same quarter last year.

Company executives said the following months will require more work to better balance the desires of existing customers with the need to acquire new ones — an effort that will lead to slower growth in the coming quarters, according to eBay executives during the Q3 earnings conference call.

Managed Payments

Earlier this year, the eCommerce operator announced its managed payments push, which was implemented on Sept. 25. Wenig said on the earnings call that managed payments gave buyers payment choice, and the ability to check out and pay directly on eBay without leaving the site. Managed payments also reduced overall costs for sellers.

The annual run rate of those managed payments stands at “over half a billion dollars,” Wenig said during the call. He told analysts and investors that 3,000 of eBay’s 25 million sellers have enabled some 900,000 transactions via its managed-payments service since the program’s start.

Part of that slow seller-adoption curve has to do with buyers who continue to use PayPal. Customers who’ve been with eBay for relatively long periods have tended to stick with PayPal, eBay CFO Scott Schenkel said during the call, with newer customers preferring credit cards. (Schenkel told investors that with eBay-owned StubHub, 90 percent of transactions are done with credit cards.)

For its part, earlier in October, PayPal reported a 14 percent year-over-year revenue jump to $3.7 billion, beating analyst expectations by about $20 million, with earnings per share at $.58, another beat. PayPal set off investor alarm bells, though, when it reported that only 11 percent of its volume last quarter came from eBay, down from roughly 20 percent when PayPal and eBay split. Management also reported a softening in volume from eBay in the quarter ahead.

“PayPal’s report put a lot of pressure on eBay shares,” said Tom Forte, analyst with D.A. Davidson & Co., according to Bloomberg. “While this wasn’t a quarter to write home about, it’s not as bad as people were expecting.”

Promoted Listings Growth

Beyond payments, eBay executives said promoted listings now has more than 400,000 sellers and 160 million listings. “Advertising and payments [are] two significant opportunities in front of us,” Wenig said.

However, one of eBay’s ongoing challenges as it seeks to fend off Amazon and other rivals — a challenge that will serve to dampen growth in the coming quarters — is how to improve the online operations (update user experience, the new payment regime) to attract new consumers without alienating too many of the existing ones. “New eBay users are responding well to the evolution of the platform,” Wenig said during the call, “but the existing buyer base has not been as enthusiastic, and that’s making it harder to scale.”

New Buyers

So what will eBay do, then?

“We are targeting our ambitions to focus more on acquiring new buyers,” Wenig said. “That will result in slower growth for a period of time as we grow the user base and acquire a new mix of customers.”

For the fourth quarter of 2018, eBay said it expects net revenue of between $2.85 billion and $2.89 billion, which represents year-over-year growth of 4 percent to 5 percent. “We are positioning for stronger growth in 2020,” he explained.

To that end, Wenig discussed providing quicker, more reliable shipping to win over shoppers, along with enabling consumers who’ve not registered on eBay to save searches and product watch lists. In addition, the company aims to better promote itself as a “mainstream commerce destination for holiday shopping,” he said.

——————————–

Latest Insights:

Our data and analytics team has developed a number of creative methodologies and frameworks that measure and benchmark the innovation that’s reshaping the payments and commerce ecosystem. In the November 2019 Mobile Order-Ahead Report, PYMNTS talks with Dan Wheeler, Wahlburgers’ SVP, on how the QSR balances security and seamlessness to secure its recently launched WahlClub loyalty program.

TRENDING RIGHT NOW