eBay plans for the future

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Just like the sellers that use it, eBay is a business. It has its metrics, revenue, employees, tactics, strategy, hopes and fears.

Just like we depend on eBay for success, eBay depends on other companies and service providers for its success.

In order to be successful on eBay, you have to have a real deep, intimate understanding of the marketplace, of all its strengths and weaknesses.

One of the best resources you can use to get to know eBay intimately is the annual report to shareholders. It’s a 136 pages document, and in this blog, I’m going to summarize the most important highlights every seller must know.

An inside look under eBay’s hood

The insights below will help you better understand the tactical decision eBay makes, which are directly derived from the grand strategic goals.

What did eBay think of 2015?

  • 2015 was a remarkable year of change for eBay Inc. We completed the separation of PayPal and celebrated our 20th anniversary as an Internet pioneer. While doing this, we transitioned leadership and began executing a comprehensive long-term strategy to reposition our business. We believe the steps we are taking will make eBay more competitive by delivering a differentiated and compelling customer experience. We operate in a dynamic, fast-paced environment that requires companies to innovate and change in order to maintain their leadership positions. We embrace this dynamic and it guides our approach in everything that we do.

Focus on small and medium businesses #1

  • Our View of the World and What it Means for eBay Over the next five years, we believe a number of powerful trends will further re-order the commerce landscape, and we have created a business plan designed to successfully position eBay as a continued leader in our space. We will experience a world in which trillions of screens and sensors are connected to one another and form an ecosystem of data that lives in the cloud. This influences how we are evolving eBay’s platforms, including the experience for consumers and our value proposition for sellers. Additionally, we are entering an era where “global commerce” is losing meaning as much commerce is already becoming truly global. Nonetheless, structural barriers remain. eBay will continue to advocate to help champion an external business environment that is supportive of the small- and medium-sized entrepreneurs who rely on our platform for their livelihoods.

eBay’s Strategic Priorities

  • From our first seller in 1995, we have grown to tens of millions of sellers on eBay. Our community of buyers is now more than 160 million strong. The eBay of today has changed considerably since our early days, and the eBay of tomorrow will change even more. While eBay was once an auction site selling vintage items, today 80% of the items sold on eBay are new, and at any given time we have over 800 million live listings. Our marketplace has never been as big as it is now, and there are few companies currently in the commerce industry with the scale and reach of eBay.

Focus on small and medium businesses #2

  • We also stepped up our engagement with the core buyers and sellers who create eBay’s vibrant marketplace. We reorganized our business along strong regional category lines, and we announced a number of significant changes to our seller policies. These changes, which include more objective standards, are intended to help small- and medium-sized sellers be more successful on our platform and better reward sellers who provide great service to eBay buyers.

eBay’s Financial and Business Highlights

  • eBay Inc.’s total GMV (Gross Merchandise volume) was $81.7 billion, up 5% year-over-year

Revenue was $8.6 billion, growing 5% annually.

My note: eBay earns a fee whenever a transaction is made, so while the total GMV is more than $81 Billion, eBay’s revenue from fees is a bit north of 10%.

eBay Inc.’s active buyer base grew by eight million, to 162 million total active buyers, representing 5% growth on a year-over-year basis

  • With respect to the Marketplace platform, GMV was $78.1 billion in 2015, representing a 5% increase yearover-year

My note: eBay has more revenue streams beyond the famous marketplace.

  • Revenue was $7.2 billion, up 3% yearover-year

My note: eBay’s marketplace is the core revenue source, accounting for $7.2 out of the total $8.6 billion in annual revenue. The marketplace is critical for eBay, especially after seperating from PayPal.

  • Our StubHub platform, the largest ticket marketplace in the U.S., accelerated year-over-year with GMV of $3.6 billion growing 13% and revenue of $725 million up 15%.
  • The Classifieds platform continued its strong momentum in 2015 with revenue of $703 million growing 15% year-over-year

eBay businesses beyond the marketplace

  • eBay Inc. is a global commerce leader including our Marketplace, StubHub and Classifieds platforms. Collectively, we connect millions of buyers and sellers around the world. The technologies and services that power our platforms are designed to enable sellers worldwide to organize and offer their inventory for sale and buyers to find and buy it virtually anytime and anywhere. Our Marketplace platforms include our online marketplace located at www.ebay.com, its localized counterparts and the eBay mobile apps; which are among the world’s largest and most vibrant marketplaces for discovering great value and unique selection. Our StubHub platforms include our online ticket platform located at www.stubhub.com and the StubHub mobile apps. These platforms provide fans with a safe, convenient place to purchase tickets to the games, concerts and theater shows they want to attend and an easy way to sell tickets. Our Classifieds platforms include a collection of brands such as Mobile.de, Kijiji, Gumtree, Marktplaats, eBay Classifieds and others. Offering online classifieds in more than 1,500 cities around the world, these platforms help people find whatever they are looking for in their local communities.

My note: These are the less known eBay businesses. Just like we, the sellers, have major sales channels and less important ones.

How does eBay generate most of its revenue?

  • Our company is only successful when the buyers and sellers we enable are successful. We are primarily a transaction-based business that generates revenue from the transactions that we successfully enable.
  • We also generate revenue through marketing services, including classifieds and advertising

My note: eBay has recently made a dramatic change to it’s marketing approach, with a huge (positive) impact on sellers.

eBay only makes money if sellers make money

  • Our business model and pricing are designed so that our business is successful when our sellers are successful.

eBay Inc.’s platforms offer the following features

  • Our eBay Top Rated Seller program, or eTRS, rewards qualifying sellers with fee discounts and improved search standing for qualifying listings if they are able to maintain excellent customer service ratings and meet specified criteria for shipping and returns. We believe that sellers who fulfill these standards help promote our goal of maintaining an online marketplace that is safe and hassle-free.

My note: A stronger brand name for eBay means more traffic and sales to sellers.

  • The size and scale of our platforms are designed to enable our buyers and sellers to leverage our economies of scale and capital investment, for example in sales and marketing, mobile, customer acquisition and customer service.

Offer free shipping to increase chances to sell

  • We believe that we have some of the lowest prices available for a number of consumer products. In the U.S., the U.K. and Germany, the majority of successfully closed transactions included free shipping during 2015.

How does eBay help drive business to unknown, small sellers?

  • We have developed a number of features on our Marketplace platforms in the areas of trust and safety (including our Seller Performance Standards, eTRS, eBay Money Back Guarantee, Verified Rights Owner Program and Feedback Forum), customer support and value-added tools and services, as well as loyalty programs (for both buyers and sellers). These features are designed to make users more comfortable buying and selling with unknown partners and completing transactions online or through mobile devices, as well as rewarding our top buyers and sellers for their loyalty.

Focus on small and medium businesses #3

  • For sellers in particular, we recently introduced a number of upcoming changes to our seller policies to help small- and medium-sized sellers be more successful on our platforms and better reward sellers who provide exceptional service to eBay buyers.

How many Employees does eBay have?

  • As of December 31, 2015, we employed approximately 11,600 people globally. Approximately 6,200 of our employees were located in the U.S.

Risks – what keeps eBay awake at night?

  • Substantial and increasingly intense competition worldwide in ecommerce may harm our business
  • We expect competition to continue to intensify. Online and offline businesses increasingly are competing with each other and our competitors include a number of online and offline retailers with significant resources, large user communities and well-established brands. Moreover, the barriers to entry into these channels can be low, and businesses easily can launch online sites or mobile platforms and applications at nominal cost by using commercially available software or partnering with any of a number of successful ecommerce companies.
  • Also, certain platform businesses, such as Alibaba, Apple, Google and Facebook, many of whom are larger than us or have greater capitalization, have a dominant and secure position in other industries or certain significant markets, and offer other goods and services to consumers and merchants that we do not offer. 

eBay – Google dependency

  • Some of our competitors control other products and services that are important to our success, including credit card interchange, Internet search, and mobile operating systems.
  • For example, Google, which operates a shopping platform service, has from time to time made changes to its search algorithms that reduced the amount of search traffic directed to us from searches on Google.

My note: You can have a 100% feedback and the lowest prices on the planet. When eBay rankings go down on Google – you will see a decrease in your sales.


Sellers go multichannel, beyond eBay

  • In addition, sellers are increasingly utilizing multiple sales channels, including the acquisition of new customers by paying for search-related advertisements on horizontal search engine sites, such as Google, Yahoo!, Naver and Baidu.
  • Consumers and merchants who might use our sites to sell goods also have many alternatives, including general ecommerce sites, such as Amazon and Alibaba, and more specialized sites, such as Etsy. Our international sites also compete for sellers with general and specialized ecommerce sites. Sellers may also choose to sell their goods through other channels, such as classifieds platforms. Consumers and merchants also can create and sell through their own sites, and may choose to purchase online advertising instead of using our services.

My note: A recent survey we conducted among the CrazyLister app users and blog readers shows that a majority of the sellers want to have their own webstores. We are already working on a “one click” webstore solution.

Relying on international business

  • Our international businesses, especially in the United Kingdom, Germany, Australia and Korea, and crossborder business from greater China, have generated a majority of our net revenues in recent years.

The mobile commerce evolution

Retail-Mobile-Commerce-Sales

  • Mobile devices are increasingly used for ecommerce transactions. A significant and growing portion of our users access our platforms through mobile devices. We may lose users if we are not able to continue to meet our users’ mobile and multi-screen experience expectations. The variety of technical and other configurations across different mobile devices and platforms increases the challenges associated with this environment.

My note: More than 605 of eBay transactions are touched by mobile – make sure your listings are mobile optimized!

Infringing the owners’ intellectual property rights of rights owners

  • The listing or sale by our users of unlawful, counterfeit or stolen goods or unlawful services, or sale of goods or services in an unlawful manner, has resulted and may continue to result in allegations of civil or criminal liability for unlawful activities against us (including the employees and directors of our various entities) involving activities carried out by users through our services.
  • In Turkey, local prosecutors and courts are investigating our liability for allegedly illegal actions by users of our Turkish Marketplace business (GittiGidiyor). In accordance with local law and custom, they have indicted one or more members of the board of directors of our local Turkish subsidiary. We intend to defend vigorously against any such actions and a growing number of these cases have been dismissed by the relevant courts.
  • In August 2012, we were informed that U.S. listings of footwear with religious imagery were visible on our local Indian site and we immediately removed these listings. In September 2012, a criminal case was registered against us in India in regard to these listings, and we are challenging the prosecution of this case.

2014 security breach

  • In May 2014, we publicly announced that criminals were able to penetrate and steal certain data, including user names, encrypted user passwords and other non-financial user data. Upon making this announcement, we required all buyers and sellers on our platform to reset their passwords in order to log into their account. The breach and subsequent password reset have negatively impacted the business. In July 2014, a putative class action lawsuit was filed against us for alleged violations and harm resulting from the breach. The lawsuit was recently dismissed with leave to amend.

Losing talented key people

  • Competition for key personnel is intense, especially in the Silicon Valley where our corporate headquarters are located, and we may be unable to successfully attract, integrate, or retain sufficiently qualified key personnel.

Breaking up with paypalPayPal

  • We may not realize some or all of the anticipated benefits from the Distribution and the Distribution may in fact adversely affect our business. As an independent, publicly traded company, we will be a smaller, less diversified company with a narrower business focus and may be more vulnerable to changing market conditions, which could materially and adversely affect our business, financial condition and results of operations. Separating the businesses may also eliminate or reduce synergies or economies of scale that existed prior to the Distribution, which could harm our business.

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