eBay Q1 2024 - Can AI Promises & Ad Revenue Growth Outweigh Stalled GMV & Active Buyers?

Liz Morton

Published: May 1 2024 Updated: May 1 2024

eBay has released Q1 2024 results, reporting flat GMV and Active Buyers with Promoted Listings ads once again doing the heavy lifting on revenue growth and AI promises distracting from critical core infrastructure failures.

Important stats from the press release:

First Quarter Financial Highlights

Revenue of $2.6 billion, up 2% on an as-reported basis and up 2% on an FX-Neutral basis

Gross Merchandise Volume of $18.6 billion, up 1% on an as-reported basis and roughly flat on an FXNeutral basis

Returned $638 million to shareholders in Q1, including $499 million of share repurchases and $139 million paid in cash dividends

Total Active Buyers were reported at 132 Million, flat compared to last quarter and down 1% year over year.

This marks the 8th consecutive quarter with less Active Buyers than Q1 2018.

Note: eBay changed the definition of GMV and Active Buyers at the end of 2021 and restated both figures going back to 2018 (chart reflects restated figures per eBay's amended reports.)

Enthusiast buyers have also remained flat at 16 Million, which is where they've been since Q4 2022.

Q2 2022 - "Enthusiast buyers made up approximately 17 million of our active buyers in Q2...average spend among enthusiast buyers grew sequentially and remains over $3,000 annually."

Q3 2022 - "Enthusiast buyers accounted for approximately 17 million of our active buyers in Q3...average spend per user grew sequentially and continues to be healthy at over $3,000 per year."

Q4 2022 - "Enthusiast buyers accounted for over 16 million of our active buyers in Q4...average spend per enthusiast rose again sequentially and continues to be healthy at above $3,000 annually."

Q1 2023 - "Enthusiast buyers remained relatively stable sequentially at 16 million in Q1...and on average, spend approximately $3,000 annually."

Q2 2023 - "Enthusiast buyers was stable at 16 million in Q2...spend per enthusiast grew modestly year-over-year, averaging roughly $3,000 annually."

Q3 2023 - "Enthusiast buyers were also flat sequentially at 16 million. Spend per enthusiast was stable quarter-over-quarter at around $3,000 annually, but modestly year over year."

Q4 2023: "When you think about our enthusiast buyers..it was roughly flat quarter over quarter at $16 million...spending over $3,000."

Once again, eBay declined to provide Active Seller figures, which were last reported at 17 Million in Q4 2021.

Neither CEO Jamie Iannone nor CFO Steve Priest commented on the round of layoffs in Q1, in their prepared remarks and they did not acknowledge that Chief Business and Strategy Officer Stefanie Jay departed in Q1 as well.

There was also no mention of ongoing EPA litigation and cyberstalking scandal civil case, the $59 Million settlement with the DEA or the deferred prosecution agreement with a $3 Million fine and 3 years of enhanced compliance monitoring after the company was charged with 6 federal felonies in the cyberstalking criminal case.

Strategic Initiatives

eBay redesigned the self-service experience for the MyFitment toolkit, simplifying seller onboarding for Parts & Accessories listings while introducing new Motors DIY Guides on the buyer side to offer expert content for common maintenance jobs along with listings for specific parts, tools and materials needed to complete them.

While there may be some improvements on the front end fitment experience, buyers continue to run into confusing roadblocks when actually trying to take advantage of the Guaranteed Fit program if they need to make a return.

The big news on this earnings call of course was the recently announced acquisition of Goldin Auctions from Collectors and selling of the eBay Vault to PSA.

Through a newly branded service offering, our company has planned to launch an integrated program to buy, sell, grade, and store trading cards.

eBay will become PSA's exclusive marketplace partner for trading cards, enabling hobbyists to more easily list and sell their cards on eBay at the time of grading. Importantly, these deals enable each company to prioritize what it does best. At eBay, we can focus on enhancing our marketplace and streamlining the buying and selling experience for millions of hobbyists.

While Collectors can concentrate on its operational expertise in grading, authenticating, and securely storing collectibles. There'll be more we can share about our company's joint plans after the deals closed, which we expect to occur during Q2, subject to closing conditions.

Jamie also announced eBay Live livestream shopping is now accessible via desktop with a revamped live auction process for more seamless bidding - but Value Added Resource readers already knew that.

He also highlighted consumer to consumer (C2C) initiatives in Germany and UK, particularly fee-free clothing selling for private UK sellers and new tools to streamline the clothing listing process as well as eBay Explore and Shop The Look AI-powered fashion shopping discovery features for buyers.

As I noted on the Q4 earnings call, Iannone is carefully positioning his newly rediscovered interest and focus on C2C and small business as simply the next step in the focus vertical innovation strategy he had planned all along, rather than a notable pivot from the narrowly focused vertical strategy he has pursued in the last few years.

After many quarters of consistent innovation in focus categories like luxury, P& A, and retail, Refurbished sneakers and street wear. We are bringing our innovation playbook to pre owned fashion in the UK to simplify selling, drive inspirational shopping, and promote the circular economy.

But job postings and internal promotions across the US and international markets as well as planned marketing changes show the significance of this strategy pivot, including a new UK Seller Success team to implement what eBay is calling the "fix the fundamental aspect of UK Win back plan."

Priest gave some insight into why eBay is specifically concerned with trying to boost C2C selling in the UK, saying they saw softness there due to new digital sales reporting requirements in the region.

In the UK, we did see some softness in C2C volumes during the quarter when the new UK digital sales reporting requirements came into effect. We are currently working to educate sellers that many of them actually do not incur taxes for selling pre owned items.

While Jamie did not have much new to share about the Magic Listings feature that still has not been seen in the wild or progress on other unfulfilled AI promises, he did once again extol the virtues of increasingly turning support and trust and safety functionality previously handled by humans over to AI.

We're increasingly leveraging generative AI to change how we work, driving meaningful productivity and efficiency improvements across our organization. A prime example of this is within our global customer experience organization.

We are in the midst of a multi year journey to transform our GCX capabilities using technology. Our North Star for customer service is not just to reduce costs, but meaningfully improve the quality of interaction.

Recently, we implemented generative AI technology that supports our GCX teammates by analyzing incoming communications to create a simple summary of customers needs and intents.

This technology automatically extracts relevant solutions and next steps. From an LLM fine tuned using our comprehensive knowledge base and policy documents, we are now able to present solutions and a clear and concise structure to our GCX team, allowing them to quickly provide customers with the help and support they need, improving the accuracy, consistency, and quality of support.

Many sellers would take issue with that last sentence, arguing in their experience AI is most definitely not improving the accuracy, consistency, or quality of support they receive.

And on the subject of seller sentiment and relations, during the Q&A, Richard Kramer from Arete Research asked Jamie an interesting question about the risk of sellers defecting as eBay continues to ratchet up take rate via Promoted Listings, especially as other marketplaces are discounting or eliminating some fees in an effort to bring in more sellers.

When you talk about the guidance of take rate expansion, can you talk through how you might mitigate risk of seeing seller defections to other platforms that are doing cheap promotions?

Jamie stumbled for an answer, somehow inexplicably unaware of all the missed opportunities that exist with eBay's woefully under-developed store functionality and believing that what sellers really want is more ways to spend more money on advertising just to bring back some of the traffic they used to have before the big push to increase Promoted Listings ad revenue.

The reason that we have such good seller metrics and sellers are so loyal, is because we let them build a brand on eBay.

They build an eBay store, they have a presence and we bring them a lot of really unique value propositions. You know, we bring them the scale and breadth of global buyers on the marketplace. We bring them all of the capabilities to market and advertise their products really easily.

We've been working the last couple of quarters on this product I talked about with offsite ads, which helps them bring traffic back. And so it's really, you know, those are really, I think, important to sellers, and what we see is really good feedback from doing those.

While it's difficult to say how many sellers may have quit the platform all together, since eBay has not published active seller stats since 2021, many sellers I've spoken to who had sold exclusively on eBay for 10-15 years+ have started diversifying and cross listing to other platforms for the first time in the last year - and some of those other platforms are all too happy to help make it easier than ever for sellers to go multi-channel.

Promoted Listings Ads

Unsurprisingly, much of eBay's revenue growth is still coming from 1st party Promoted Listings ads products, which delivered $370 million of revenue in the first quarter, up 30% on an as-reported basis, with total advertising offerings generating $384 million of revenue in the quarter, representing 2.1% of GMV.

Iannone says that Promoted Listings Standard continues to be the largest contributor to ad revenue growth, followed by Promoted Listings Advanced Cost Per Click - but also says that Offsite ads emerged as a material contributor to ad revenue in Q1 due to expanding their go to market efforts for those ads toward the end of last year.

What he doesn't say is those go to market efforts have mostly been in the form of ad credits offered to entice sellers to try out Offsite ads and it remains to be seen how many sellers will continue using the product once those credits dry up.

He also didn't say anything about how dark pattern design practices could be leading sellers to accidentally create Promoted Listings Cost Per Click campaigns they did not intend to, which could artificially inflate those numbers to some degree.

Beyond that, he failed to mention that eBay has now completely discontinued Promoted Listings Express for auctions, forcing sellers to use Promoted Listings Standard instead if they want to continue to promote their auction listings - something to remember for Q2 when this will inevitably artificially inflate the number of sellers trying PL Standard for the first time.

Final Thoughts

Steve and Jamie say "our model is winning" while GMV, sales and Active and Enthusiast Buyers remain relatively flat with little to no growth - if that's their definition of winning, I'd hate to see what losing would look like.

eBay still has some serious work ahead to meet their estimates of returning to GMV growth in Q3 or Q4 2024 and they'll need to pivot hard into their C2C initiatives to have any hope of making it.

Once again I see no real tech-led reimagination or innovation and, as noted in my pre-earnings commentary, while eBay forges ahead with plans to stuff AI into every experience on the platform, the rest of the site infrastructure is groaning under the weight of almost 3 decades of tech debt with many major technical issues impacting both buying and selling in the last few months.

The increasing occurrence of serious, business impacting issues brings to mind another period in eBay's history that saw sellers, media, and even activist investors take executive leadership to task for their technical misexecution.

Ex-CEO Devin Wenig infamously said at eBay Open 2018 that technical glitches are "unacceptable" and really pissed him off.

Those glitches and other executive failures caught the attention of activist investor Elliott Management, resulting in a very public letter calling for substantial changes at the company in their Enhancing eBay plan.

Current eBay Chief Technology Officer Mazen Rawashdeh, who was Chief Infrastructure and Architecture Officer at the time, somehow managed to escape the wrath of a "pissed off" Wenig.

He was then promoted to Chief Technology Officer in 2019, after a brief period where he co-led Core Product & Tech along with Mohan Patt.

Five years later and very little has changed - eBay is still plagued by technical problems and operational challenges and management is certainly not doing "all that it takes" to achieve consistent reliability of the platform.

"While innovative endeavors in new pursuits like machine learning and augmented reality are promising future technologies, eBay’s publicly touted initiatives in these areas will add little value if the core platform continues to have critical functionality failures."

That statement is just as true today about AI as it was back in 2019 and Iannone must address the longstanding critical technical failures, including making changes in leadership if needed, if he wants to have any hope of AI truly adding value to the buying and selling experience.

eBay Earnings AI

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Liz Morton is a seasoned ecommerce pro with 17 years of online marketplace sales experience, providing commentary, analysis & news about eBay, Etsy, Amazon, Shopify & more at Value Added Resource!