Q1 2025 Growth Trouble: eBay CEO Continues Old Discount Tricks To Boost Enthusiast Buyers
eBay continues leaning on legacy discounting tactics to boost enthusiast buyer stats for Q1 2025 - has CEO Jamie Iannone run out of ideas to grow GMV and active buyers organically?
The steep discounts aimed at converting casual sellers into buyers started in Q4 2024 in reaction to Wall Street's concerns about weak Q4 guidance provided in eBay's Q3 earnings report.
Liz Morton
While the report showed "modest growth" in both GMV and Active Buyers, it also showed increasing pressure on revenue, largely driven by "phased monetization of UK C2C initiative" - ie. fee-free private selling across most categories, with buyer fees to be introduced February 4 2025.
It was nice to see eBay eke out a tiny Active Buyer "win", going from being stuck at 132 Million for 5 quarters to 133 Million in Q3, but it's worth noting there's still a lot of lost ground to make up as eBay has now had 10 consecutive quarters with less Active Buyers than Q1 2018.
But within that larger Active Buyer stat, CEO Jamie Iannone has focused a lot of attention, and marketing dollars, around what he calls "high value enthusiast buyers" - generally defined as buyers who shop on eBay at least 6 times per year, spend at least $800 per year or those who also sell on the site.
Despite these enthusiast buyers being the target of Iannone's "focus vertical strategy" in categories like sneakers; trading cards; luxury handbags, jewelry and watches; auto parts and refurbished electronics, the number of "enthusiast buyers" has also been stalled for many quarters, stuck at ~16 Million since Q4 2022.
That means while there was a small amount of buyer growth reported in Q3, eBay doesn't appear to be bringing in a lot of new "enthusiasts" to the platform.
eBay was already pulling out the stops to try to "buy" GMV and Active Buyer growth in Q4 by introducing fee-free selling in the UK across most categories in October and offering 0% fee promotions through the end of the year in some categories to business sellers as well, in order to try to quell backlash from the C2C initiatives and keep sellers from defecting to Vinted Pro.
The willingness to give up fee revenue in order to boost GMV and Active Buyers is an interesting strategy - particularly since Iannone had been highly critical of previous CEO Devin Wenig's frequent discounts (paid by eBay) to try to attract more buyers in 2018-2019.
Those 15-20% off flash sales proved to be a double edged sword - once buyers get used to receiving discounts, they'll often wait for a sale before making a purchase, creating "one and done" or only occasional buying patterns.
Wenig's strategy was considered such a failure that Iannone felt the need to explicitly distance himself from it when he took the helm, telling investors in 2021:
We've discontinued legacy tactics that led to low value, infrequent or one and done buyers. Our buyer base is starting to evolve based on this strategy. These high-volume buyers are growing compared to a year-ago and their spend on eBay is growing even faster. This higher-quality mix of buyers increases value for sellers and will lead to improved health of our ecosystem over the long-term...
..This is something that I laid out last July when we talked about the tech-led reimagination as being focused on turning buyers into lifelong enthusiasts on the platform and moving away from the tactics that we had in 2019 what was really just about the number of active buyers even low value buyers or one and done buyers.
However, despite his criticism of those past tactics, it's hard not to see that eBay is increasingly putting themselves in a similar position with sellers and fees.
Business sellers could become habituated to frequent discounts, just like buyers did, and hold back some inventory until a fee discount or promotion is offered.
eBay has taken it a step further, first in Q4 and now again in Q1, hoping to secure an increase in those critical "enthusiast buyers" by specifically incentivizing new sellers to become buyers too, offering a $15 coupon to spend on a purchase of $50 or more, if they sell an item for $10+.
Sell for the first time and earn more
What is the Promotion?
Invited sellers (“Seller” or “Sellers”) who create a listing during the Promotion Period (as defined below) pursuant to the terms and conditions set forth herein (“Qualifying Listing”), and then sell one (1) or more items for $10 or more each from a Qualifying Listing during the Promotion Period are eligible to earn a single eBay Coupon (“Coupon”) worth $15 off a minimum purchase of $50.
For the sake of keeping the math easy, if someone were to use that $15 coupon on a $50 order, that would work out to a 30% discount - significantly higher than Wenig's 15-20% flash sales.
While gaining more "enthusiast buyers" who also sell on the site is a worthy goal for the company (and may even be worth allocating additional marketing or discount dollars), as always the devil is in the details and execution.
If Iannone is confident his fee-free strategy for private sellers in the UK, fee waivers or discounts for some business sellers, and ~30% coupons to incentivize new sellers to also buy will create long-term, sustainable GMV and Active Buyer growth without the significant downside risks he criticized his predecessor for taking, then he should have no problem candidly discussing how much any (presumed) growth in those areas can be attributed to these initiatives as well as costs and return on investment on the next earnings call.
If instead he and/or CFO Steve Priest try to present any (presumed) growth as proof their "magical" strategy is working while not disclosing any of that crucial context - investors would be wise to dig deeper, demand honesty and transparency, and take a hard look at the near to long-term prospects for the company if eBay remains under current leadership.
