eBay Q4 2023 Earnings: Leaning In On C2C Pivot, Ads Continue To Drive Revenue Growth
eBay has released Q4 and full year 2023 results, beating previously weak guidance for the quarter and expanding stock buyback plan.
Important stats from the press release:
Fourth Quarter Financial Highlights
- Revenue was $2.6 billion, up 2% on an as-reported basis and up 3% on a foreign exchange (FX) neutral basis.
- Gross Merchandise Volume (GMV) was $18.6 billion, up 2% on an as-reported basis and nearly flat on an FX-Neutral basis.
- Returned $379 million to shareholders, including $250 million of share repurchases and $129 million paid in cash dividends.
Full Year Financial Highlights
- Revenue was $10.1 billion, up 3% on an as-reported basis and up 4% on an FX-Neutral basis.
- GMV was $73.2 billion, down 1% on an as-reported and FX-Neutral basis.
- Returned $1.9 billion to shareholders, including $1.4 billion of share repurchases and $528 million paid in cash dividends.
Full Q4 2023 earnings call transcript here.
Total Active Buyers were reported at 132 Million, flat compared to last quarter and down 2% year over year.
When asked about active buyers and whether there are any metrics on churn or new activations that give eBay encouragement, CEO Jamie Iannone once again tried to paint the drop-off as post-pandemic stabilization saying "our buyers are exactly where we expected them to be."
However, looking at a longer time frame shows this is now the 7th consecutive quarter with less Active Buyers than Q1 2018 - and if that's what Jamie calls meeting expectations, we'd hate to see what he would consider a failure.
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, spending "over" $3,000 annually.
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.
Iannone gave the obligatory brief acknowledgement to the layoffs announced last month, but neither he nor CFO Steve Priest addressed recent reports that Chief Business and Strategy Officer Stefanie Jay may have stepped down as well.
Liz Morton
Priest also revealed a GAAP accrual of $15 million related to pending legal matters, with further details to follow in their upcoming 10-K filing.
That's likely going toward the ongoing EPA litigation and cyberstalking scandal civil case, since eBay inked a $59 Million settlement with the DEA last month and accepted a deferred prosecution agreement with a $3 Million fine and 3 years of enhanced compliance monitoring after being found liable on the criminal side of the cyberstalking case.
Liz Morton
Update: eBay's 10-K shows:
"In connection with the government matters and criminal and civil actions described above, the Company has accrued for probable losses of $132 million in the aggregate as of December 31, 2023, of which $68 million was recorded as a component of general and administrative expense during the year ended December 31, 2023, and for probable losses of $64 million in the aggregate as of the date of this report."
Strategic Initiatives
eBay has opened an authentication center in Japan for handbags, with authentication reportedly being handled by a 3rd party, according to the announcement that was sent to buyers in December.
Liz Morton
However, Jamie did not disclose on the call whether this authentication center is completely in-house, 3rd party or some combination of the two.
Is the lack of transparency perhaps an effort to muddy the waters and avoid additional scrutiny of the costs and risks associated with increasing labor-centric physical warehouse operations?
Liz Morton
In Motors Parts & Accessories , eBay introduced AI-driven predictive maintenance recommendations based on a specific vehicle's mileage and a multi-warehouse shipping API for large US parts sellers to provide more accurate estimated delivery dates for buyers.
What Jamie forgot to mention is the mult-location API was originally announced way back in Q4 2020 and was supposed to be available to sellers across many categories, but the feature never materialized at that time and efforts to get an updated roadmap over the last 3 years have gone unanswered.
Liz Morton
This functionality could be very useful for large sellers with multiple locations, so we'll put it in the "better late than never" column and hope it expands to more categories "soon."
Iannone is also still touting the AI enhanced version of their image background remover as an example of eBay's tech innovation but many users still miss the ability to fine tune the results from the previous version of the tool, saying the AI doesn't always get it right.
Liz Morton
Also on the AI front, eBay says their generative AI-powered social caption generator "makes social sharing easier for sellers" - what they didn't say is the scheduling part of the Social Sharing tool suffers from major lag time and delays, negating the purpose of this critical functionality.
Liz Morton
Priest also touched on the increasing use of AI to drive "cost efficiencies" in customer service and help handle over a million self-service queries a week, which we've previously explored in the changing face of eBay Customer Experience.
Liz Morton
The AI description generator has been rolled out to 100% of users and when asked for details about how it has been received, Iannone said "it's still early days. I can give you some of the early perspectives, but when I'm having a hard day, I go read the message boards about how consumers feel about these features that we're launching because they just love it."
Longtime community members will get a good laugh out of the idea that Jamie actually spends much time reading the boards, but it's probably fair to say he skipped over some threads on the topic - "Not buying from listings with AI descriptions", "The height of AI-generated absurdity", "AI descriptions are truly awful", and "Those useless AI generated descriptions" to name a few.
Iannone says the "just take a picture and let AI do the rest" phase of the Magical Listing experience is currently being tested with up to 5% of consumer to consumer (C2C) sellers on an opt in basis, though we have yet to see any confirmed public examples of it in the wild.
Speaking of C2C sellers, we predicted ahead of earnings that eBay may be pivoting back to a consumer-seller focus and Jamie did not disappoint, heavily "leaning in" on C2C growth that eBay is seeing in Germany.
...when you think about our focus category strategy of really kind of leaning in on this specific area, driving the CSAT to a whole double-digit level, we essentially apply that to a certain segment of our business in Germany to our C2C segment.
And that's exactly what we're seeing...greater than 20-point improvement in NPS in that business, which is really great for us. It's an important business.
And what we really focused on was designing around the needs of the buyer. So that's search and SEO improvements specifically around, you know, language needs in that market...
...and doing pricing adjustments for our C2C business there, really leaning in to being able to drive buyers who sell and bring more C2C inventory on the marketplace.
And that's been working well for us. We've seen double-digit increases in buyers who sell on the platform.
That's the most we've heard Iannone mention C2C selling since mid-2020 when he initially acknowledged "consumer to consumer selling as the foundation of the company's success" before curiously dropping it from much of the "high value, enthusiast buyer" strategy the company has subsequently pursued under his leadership.
Liz Morton
eBay is currently testing fee free selling for private consumer-sellers in the UK market as well and we expect to see a continued shift back to these foundational roots in the UK and possibly US throughout 2024 - a very encouraging sign for the many sellers who have felt abandoned and excluded by the route eBay has taken over the last few years.
Promoted Listings Ads
Unsurprisingly, much of eBay's revenue growth is still coming from 1st party Promoted Listings ads products, which delivered $368 million of revenue in the fourth quarter, up 33% on an as-reported basis, with total advertising offerings generating $393 million of revenue, representing 2.1% of GMV.
eBay also revealed $1.4B in total ad revenue for 2023, touting having 2.9 million sellers adopt a single ad product during Q4 and currently having over 900 million live promoted listings on the platform.
Promoted Listings Standard cost per sale ads remained the largest contributor
to year-over-year ads growth in Q4, but Iannone was quick to point out that cost-per-click ads were the largest contributor to sequential advertising growth.
While Jamie says the introduction of rules-based campaigns drove much of the CPC growth, one has to wonder how much credit should also be given to the fact that eBay ran multiple promotions in Q4 offering either discounted ad fees or credits for both Promoted Listings Advanced CPC and Offsite Ads CPC products to entice sellers to try them out during the all important holiday shopping season.
Liz Morton
Final Thoughts
Jamie and Steve are very carefully threading the needle to try to paint the picture that they are simply continuing with their strategy that has been working all along, but the importance of reintroducing C2C to the conversation cannot be overstated.
With both enthusiast and total buyers remaining flat, it appears eBay may have found a level bottom, but they have some serious work ahead to meet their estimates of returning to GMV growth in Q3 or Q4 2024.
A long overdue return to eBay's broader consumer-seller roots could be the key to accomplishing that goal.
