eBay Q2 2024 Earnings - Lowered Forecasts Call Enthusiast Strategy Into Question
UPDATE 8-1-24
eBay's Q2 2024 10-Q filed with the SEC reveals an interesting omission - despite the amount accrued for possible legal losses going from $64M in Q1 to $67M in Q2, eBay only mentions the ongoing EPA case, but not the cyberstalking lawsuit that was included in 4 previous prev 10-Qs.
Could a settlement within previously accrued amounts be imminent?
Liz Morton
eBay has released Q2 2024 results, reporting stalled Active Buyer stats, barely noticeable GMV growth and a lowered Q3 forecast that raises questions about whether CEO Jamie Iannone's enthusiast buyer strategy is really paying off.
Important stats from the press release:
eBay Inc. Reports Second Quarter 2024 Results
- Revenue of $2.6 billion, up 1% on an as-reported basis and up 2% on an FX-Neutral basis
- Gross Merchandise Volume of $18.4 billion, up 1% on an as-reported and FX-Neutral basis
- Returned $1.1 billion to stockholders in Q2, including $1.0 billion of share repurchases and $135 million paid in cash dividends.
Total Active Buyers were reported at 132 Million, flat compared to both last quarter and year over year.
This marks the 9th 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, though CFO Steve Priest says average spend per enthusiast buyer has increased slightly from "over $3,000" in previous quarters to "just over $3,100."
Once again, eBay declined to provide Active Seller figures, which were last reported at 17 Million in Q4 2021.
Priest and Iannone apparently believe the modest 1% increase in GMV was enough to satisfy their previous forecasts of "returning to GMV growth by Q3 or Q4", but guidance for Q3 came in lower than expected and Q4 expectations are also unimpressive at 0-2% - hardly anything to write home about.
While there was no direct mention of competition from Temu and Shein on the call, it's clearly still one everyone's minds with Iannone quick to point out that eBay is seeing cross border growth from Japan and China.
Liz Morton
There was also no mention of the recently announced investor recommended independent Values Assessment eBay is undertaking to determine if they are living up the principles and commitments outlined in the company's Human Rights Policies, but investors who made the recommendation may understandably be holding questions and commentary until the results are released.
Liz Morton
Business Highlights
eBay is leaning heavily on their recent acquisition of Goldin Auctions, eBay Live events and recent engagement at The National Trading Card Convention as signs the multi-billion dollar collectibles business is still going strong on the platform.
But Alex Hughes from Barclays challenged Iannone in the Q&A, calling out that mega-seller Burbank Sportscards took the occasion of The National to announce they would be removing millions of cards from eBay after inking an exclusive deal with competing marketplace, Fanatics Collect.
Looking at collectibles, news came out earlier this week that one of your trading card power sellers was moving to Fanatics in the next few months. Can you just give a little more color as to that situation and if the Goldin deal played a factor?
Jamie dodged the first part of the question and gave a vague answer to the second part, saying:
Yeah, I can't talk about any one seller. We have millions of sellers on the platform.
What I say about collectibles is that we feel really great about the innovation that we're driving in that business. Goldin coming on brings the world's most desirable inventory and collectibles onto the marketplace and new capabilities.
The reception that Goldin had last week at The National was really amazing...we had over 50 eBay live events that we held there and the consumer and the hobbyist is really resonating with the steps that we're taking,including bringing in Ken Goldin and his team into the business.
eBay is hoping the new integration with Venmo will attract more Gen Z and Millennial shoppers and while Jamie did not provide a demographic breakout, he said initial results have been positive with a "significant portion" of Venmo payments coming from new or reactivated buyers.
Liz Morton
Iannone also said eBay's new Business Cash Advance offering in partnership with Liberis is off to a strong start, already funding over 1000 sellers and dispersing millions of dollars of working capital.
Liz Morton
Once again Consumer To Consumer (C2C) sales were a major point of interest in the German and UK markets, especially fee free selling and other pre-loved fashion initiatives, but Iannone gave no hints or clues as to whether that C2C focus will be expanding to the US any time soon.
eBay has hit a milestone with their authentication offerings, with a pair of Air Jordan 1 Low Lucky Green sneakers being the 10 millionth item authenticated since the program was introduced in 2020.
However, the company has struggled with growing the program, only introducing small incremental changes like expanding consignment to more luxury fashion items and adding the ability for buyers to opt into authentication for handbags below $500, for a fee.
Liz Morton
Touting the Elton John Aids Foundation Rocketman Resale eBay Live technical debacle as an "impact" event was a bold move - it certainly had an impact on those who tuned in, but probably not the one eBay hopes investors will remember.
Liz Morton
Oddly, there was no mention in either the main remarks or Q&A segment about eBay winding down KnownOrigin NFT marketplace 2 years after acquisition.
Since Chief Business Strategy Officer Stefanie Jay quietly exited the company earlier this year, will anyone be held accountable for this failed investment?
Liz Morton
Promoted Listings Ads
I was surprised to see that eBay did not include any details about ad revenue growth in the initial Q2 results press release, as that statistic has been featured prominently in past releases.
Digging deeper into the full presentation shows why eBay may have not been keen to draw much attention to ad performance - Q2 shows much slower year over year growth compared to Q1 as they lap last year's Halo Attribution change.
Iannone says he believes the recent redesign of the Ads Experience will help more sellers grow their businesses on eBay by "broadening the appeal of the full suite of advertising solutions" and "delivering actionable insights in a more intuitive interface."
Liz Morton
But actual users find the new interface far less intuitive and transparent and apparently even eBay's own ads team is struggling to understand the new tools as they are now almost a week late in delivering answers to the dedicated "Ask Me About eBay Ads" community discussion series.
Liz Morton
AI Initiatives
Surprisingly, discussion about AI was somewhat muted compared to previous calls, possibly indicating the hype cycle is winding down and investors are starting to temper their expectations for the revenue-building potential of LLMs and Generative AI technology.
Iannone said eBay entered the high performance computing realm by deploying their first supercomputer in Q2, giving the company the capacity to build and fine tune larger LLMs on trillions of tokens.
But the actual practical applications of that computing power are less clear as eBay is still lagging behind in important AI initiatives like rolling out phase two of the "Magical Listing Experience" to more sellers and is only just now starting to leverage machine learning and image recognition capabilities from last year's COMC partnership to streamline the trading card listing process.
Liz Morton
And in a telling omission, while Jamie was proud to share that eBay was recently recognized by Fortune as one of America's most innovative companies, eBay's "Best Generative AI Solution" award apparently didn't even merit an honorable mention.
Liz Morton
Final Thoughts
Wall Street will likely once again be placated with $1 Billion in stock buybacks, but it's difficult to see how anyone can consider 2+ years of falling or flat active buyer metrics and barely eking out ~1% in GMV growth to be overwhelmingly positive for the platform.
With forecasts of only 0-2%, it's clear eBay has given up on (or never had any real intentions of) actually driving significant growth in Q4, leaving the company with few options for increasing revenue except continuing to ratchet up take rate through ads and other fees.
Once again I must conclude with nothing truly magical on the horizon and no clear vision for a strong strategy to reinvigorate sales across the site, eBay will likely continue its spiral into ecommerce irrelevance.
While Iannone and Priest are quick to blame external macroeconomic conditions, it's past time to take a look in the mirror and reflect on the role management misexecution, failed strategies, and ongoing technical blunders have played in the decline and decay of eBay from within.
