Seeking Alpha
We cover over 5K calls/quarter
Profile| Send Message|
( followers)

eBay Inc. (NASDAQ:EBAY)

2013 Citi Global Technology Conference Call

September 4, 2013, 9:45 am ET

Executives

Mark Lavelle - Senior Vice President, Strategy

Analysts

Mark A. May - Citigroup Global Markets, Inc.

Mark A. May – Citigroup Global Markets, Inc.

Good morning, everyone. I am Mark May, the Internet Analyst at Citi and it’s my pleasure to welcome Mark Lavelle, who’s SVP of Strategy and Business Development at eBay.

Mark Lavelle

That’s correct.

Mark A. May – Citigroup Global Markets, Inc.

And who is also one of the co-founders of Bill Me Later.

Mark Lavelle

Correct.

Mark A. May – Citigroup Global Markets, Inc.

So I’d to make the session interactive, there are quite a few folks in the crowd so if it’s okay with you Mark, just let people kind of chime in, feel free to interrupt if I’m not looking to be yes someone making noise or something and feel free to ask questions during the session. Maybe if we could just jump right in and what did you want to make any prepared remarks or?

So a lot of focus on PayPal and the offline opportunity, obviously it’s significant in terms of the opportunity, there is some confusion out there, I’ll get questions from investors why hasn’t it worked? Why haven’t we seen the revenue impact and can you just kind of help us think about or understand where we are in the roll out of the PayPal offline business, and what we should be expecting as we look out over the next year or two or three.

Mark Lavelle

Sure. Glad to, we’re not done yet with the offline opportunities. As a matter of fact, when I came into the business something around 2010, PayPal would have said that it was just focused on online predominantly, and we’ve redone the strategy based on our view that the distinction between online and offline is irrelevant now to consumers, that was the opinion we had back a couple years ago, now I think it’s sort of assumed that we are making transactions, we are buying either on a device or on a laptop or standing in front of a monitor in a store, consumer is no longer saying I am an online customer and offline customer, so that is definitely an established trend.

We’ve seen that in our mobile – growth of our mobile business, and fascinating charts we look at where an e-commerce business used to have purchases before you went to work at lunch time, and then in the night time when devices came in, the number of purchase occasions we get, just moderates through the day and we get people buying on the bus, at a break, in the middle of a meeting, hopefully not in the middle of this one, but the opportunity therefore to go forward and have the entire purchase experience, be intermediated by a smart point of sales system, a mobile device and a cloud-based wallet is the vision we see in the future.

It’s different in the offline world because we walk around with physical pieces of plastic or a paper that we feel very comfortable with, and so where we are in the life cycle, we’re just figuring out how these devices and the fact that a consumer can access their PayPal wallet anywhere, how does that really improve someone’s life? How does it make something easier to do and more enjoyable, and so what we’ve been doing over the last year is testing a variety of use cases with a number of retailers, and we like what we are seeing. We like that in things like ordering ahead, queue busting, checking into your favorite barista, there are a number of areas that we think will become a tipping point for a lot of people beginning to buy using their PayPal wallet everywhere.

Mark A. May – Citigroup Global Markets, Inc.

And where are we in terms of, if you think about the steps that need to take place before you really step on the pedal in terms of customer acquisition, laying out incentives, I assume that giving some semblance of ubiquity is one step before that, where are we in that process?

Mark Lavelle

Ubiquity is definitely important aspect to it, and we’ve done a number of things with the announcement of our Discover Card partnership, we’ve made major partnerships with basically all of the major point-of-sale retailers like NCR, MICROS, and a lot of the disruptive start-ups that are using tablets and an application technology to sort of change the physical point-of-sale experience.

So, we’re laying the groundwork for that ubiquity, and the technology is there, the smart phone penetration is high enough for us to be really bullish about this. What has to happen next really is to have these use cases, have this all come together in our ecosystem, where either online relationship being able to store financial information in the cloud behind a safe and secure credential, which is something we’ve done for 15 years, and then being able to access it whether you’re in your car, whether you’re on iPad, whether you’re on a tablet, or whether you’re in a drug store or a gas station, those things all have to kind of come together at the same time to have a meaningful change in consumer behavior.

Well, that’s why I said -- as we’ve kind of given guidance at our last Analyst Day, the tremendous growth in PayPal’s business doubling to over $300 billion in volume in the next three years, really doesn't’ account for much of this, but there is tremendous upside in what we’re seeing already.

Mark A. May – Citigroup Global Markets, Inc.

Do you see the main incentive for consumer adoption being some of these convenience factors that you’ve talked about or might there be other incentives, financials, and those and another rewards related…?

Mark Lavelle

I think it will work in layers, so the great thing about having a business where we have a 135 million active customers already using us and having their financial instruments is that simply making it available, having such a large customer base, they express their preference for us, so at that level there is not much we need to do to our core customer. Our core customer just gets more valuable in the more places we make available to them and we’ve seen that network affecting our business online, and we’ve seen in mobile and we’re starting to see it happen in point of sale.

To get that next level of growth, I think we will and we know we will need to add things that combine either consumers respond being save me time or save me money, and make things easier for me, so that’s where the mobile device connected to the point of sale in either, search, help me find what I am looking for easier, help me check out faster, give me more choices on how I am going to buy or going to be the element that we focus on as this become little more pervasive.

Mark A. May – Citigroup Global Markets, Inc.

What about in addition to some of the initiatives offline any other interesting new kind of big market opportunities that you could highlight I think there is recently some report that was published around the cross boarder brick opportunity, maybe talk about some of the other kind of major initiatives that could drive growth for the business.

Mark Lavelle

Well in our core play book is still just a wonderful business model because basically we have every place we open a new kind of PayPal outlet, that’s our merchant services business, that’s our eBay business and every new consumer we buy both of those add to the network and add value to the network. So our playbook is selling Merchant Services, adding more and more merchants every month and adding more customers. We’re acquiring more customers than in the company’s history, 5 million customers in last quarter and then the global playbook is to just open up new corridors where PayPal customers can send and receive money or make purchases for goods and the BRIC countries represent huge opportunity for us. We just started in Brazil a couple of years ago. We opened up Russia this year. We’ve done a JV in Japan, which is the third largest e-commerce market. So we’re being very aggressive about covering all of the major growing commerce markets with our network.

Mark A. May – Citigroup Global Markets, Inc.

Within Merchant Services, maybe just taking the U.S. market, what’s the percent in terms of penetration of eBay, I guess maybe also of Amazon. If you just looked at that segment in market what’s the PayPal’s penetration today and what are the drivers that continue to kind of grow the outcome for you?

Mark Lavelle

People argue about the Dominator. I think we do in the high-teens of commerce, electronic e-commerce across the world and that varies based on geography. Obviously we have higher penetration in places like UK. In the UK we have tremendous growth potential, in Germany and like I said we’re just getting started in places like Brazil and Russia and we still have India, China in front of us. So we think about where – any place that there is a purchase occasion occurring, where there is a merchant relationship and a customer relationship attempting to transact. That’s the place where PayPal is to be integrated, so then we don’t see an end in the opportunity for us to continue that organic growth.

Mark A. May – Citigroup Global Markets, Inc.

PayPal’s roots in person-to-person payments, I mean the remittance market globally is huge. It’s a $500 billion market according to the World Bank. What portion of PayPal’s business today is in that segment of market and how much investment or focus is there in serving that segment or is it really just like the investments around the Merchant Services side of business?

Mark Lavelle

Well, P2P has been a part of our business since we started. I can send anybody money today and pick anyone of 27 currencies and you can have that instantly in your wallet. So, it’s a phenomenal P2P, person-to-person capability that our customers really enjoy. Remittances per se involve a lot of physical location capabilities, the exit funds or bank relationships to exit funds. We’ve done partnerships recently with MoneyGram to help integrate PayPal into their network to allow those things to happen and I think you’ll see us doing more of that type of thing that makes the wallet more useful to our consumers around the world.

Mark A. May – Citigroup Global Markets, Inc.

Okay. In PayPal’s penetration on eBay outside the U.S. is clearly smaller in the ‘60s versus over ‘80 in the U.S. What are some of the initiatives that you could highlight, try to get PayPal penetration on eBay outside the U.S. Maybe talk about why are those wallets [ph], discuss the timeframe.

Mark Lavelle

Yeah. It’s sort of where the business has got started in a lot of cases and the network effects are, those numbers go up every year. And what we look at is from eBay’s perspective how can we serve eBay as a payment provider in which one of our products is PayPal, and how do we then make PayPay very, very useful to the eBay buyer or the eBay seller. And as we do that, those penetration numbers go up. So, eBay is an extremely dynamic business. It’s changing its user experience all the time and we work directly with them to make the check out experience on eBay the best possible experience that they can have and as we do that we see that PayPal numbers go up.

Mark A. May – Citigroup Global Markets, Inc.

Is there anything that’s unique about the markets outside the U.S. that would preclude penetration from being as high as it is in the U.S.?

Mark Lavelle

Yeah, I mean, if you take any place where you see differences and reliance on credit cards you’ll see a difference in penetration. So you have in Germany, for instance, CLV, the bank transfers as a different experience. So we need to go into those markets and integrate them both negatively as an option for customers to use and within the PayPal wallet as a way that customers can transact using PayPal.

Mark A. May – Citigroup Global Markets, Inc.

If we can shift to BML now given – especially given the background there. What’s sort of the company’s strategy for growing that business more broadly and what are the trade-offs and benefits from promoting BML within the wallet and maybe just talk a little bit about that?

Mark Lavelle

The strategy has always been to integrate that capability, the transaction-based credit capability into the wallet and the Merchant Services business in a way that makes the checkout experience easier and removes friction. That was sort of the invention that we did at Bill Me Later. That worked phenomenally well at working on the convenience aspect and to a larger extent the security aspect of checkout in e-commerce market and that goes hand in hand with what PayPal’s core value proposition of safety and security of purchases and financial information. So we’ve integrated that into the wallet. It’s grown phenomenally well. We’ve integrated it into eBay and that business continues to grow as a way to provide consumers choice and to few the convenience and security of our products.

Mark A. May – Citigroup Global Markets, Inc.

And can you talk a little bit about the ABS [ph] partnership that you recently announced, and what we should expect to see coming out of that? And also how it relates to…

Mark Lavelle

We’re very excited about that. It’s always been a business that I’ve – when we started Dominator, I thought it was fantastic business because they focus on helping retailers sell. They focus on information and value of information. So we found a kind of a great partnership there. As you think about the next phase of retail, retailers are going to need to use these tools like wallet, like credit more imaginatively and use the information they have about their customers more innovatively in order to compete. And so the basis of that partnership is just two like-minded companies and we felt that that would be a good place to grow, continue to grow our credit business.

Mark A. May – Citigroup Global Markets, Inc.

Maybe some practical implications. What we should expect to come out of that partnership?

Mark Lavelle

I think what we announced is we are looking at ways where their clients can take advantage of some of the capabilities that we have like their wallet, like credit, transaction credit and vice versa. How can we take advantage of some of their capabilities that they have in royalty and customer information.

Mark A. May – Citigroup Global Markets, Inc.

There is a perception just generally around PayPay that maybe it’s not the most innovative technology business. There have been other payment companies out there that have innovated a little faster, maybe, particularly in the mobile world. Can you talk about how that’s changed? It seems like there has been a noticeable change over the last year or two. In terms of the pace of innovation, maybe highlight a few things that PayPay has done, particularity on the mobile platform to compete more effectively.

Mark Lavelle

Well, I mean, since the update in the business we have obviously innovated quite aggressively with our credit offering in the wallet. We’ve fundamentally changed the user experience with PayPal in a number of different ways. In terms of what our PayPal application, our mobile application looks like going from iOS to Android and becoming, having mobile transactions, the 20% of our – $20 billion of our business from almost nothing three or four years ago. And the product pipeline that we have at PayPal right now is one of the most innovative than I have ever seen.

With the types of new engaging experiences we have coming up in the wallet with the things that customers can do like add credit, like add points and loyalty, like add third-party cards and the ability to innovate how the checkout experience works whether you are in a physical point of sale on a device or even the e-commerce checkout, we’re changing petty aggressively. We’ve opened up new areas of growth for us with our PayPal Here product that we’ve launched in five countries that allows for a mobile device to turn into essentially a cash register. We put out a mobile application that works on iPad devices that essentially a merchant can run their entire point of sale. And so, I wouldn’t hold a second to really anybody in the area of payment innovation.

Mark A. May – Citigroup Global Markets, Inc.

It seems like on the mobile app side, there were some innovations that were launched. So probably across all your channels, but particularly in mobile reducing friction to the transaction is super important in a competitive edge and even some changes that you’ve made to the PayPal APIs over the last year or two to sort of improve the experience, but for the user but also for the developers they are having…

Mark Lavelle

It’s a bigger question. Last year in South West we rolled out an entirely revamped interface and toolkit instead of the API capabilities for developers. So we continue to put a lot of investment behind because we believe that that’s where the next level of disruption and innovation will come from is new applications that developers see as opportunities to change entire markets and that will happen, both wholly on mobile devices, but it will also happened on platforms that form sort of new retail opportunities. So having our product, our platform be the choice for developers and disruptors is a huge strategy for us going forward.

Mark A. May – Citigroup Global Markets, Inc.

Maybe I’ll just pause there and see if there are questions.

Question-and-Answer Session

Unidentified Analyst

[indiscernible]

Mark Lavelle

So, I think we have about 250,000 locations that are green, that are lit now, and we’re lighting them up all the time. We’re signing major acquirers to the program with Discover and we continue to work on it. When we have enough ubiquity of places for you to use it, we will release it more broadly. We are doing tests with it all the time in various markets, making sure that it works operationally, but it’s not just about the card, what the card is to us is a choice for consumers to access their financial credentials in the cloud.

We think that’s just one way that our consumers will interact with us, the card actually working with the mobile wallet is something we are far more interested in kind of getting consumers to habituate the same. You really don’t need, if you have your phone with you, in many circumstances you won’t need to pull anything out, the amount of information, the geo location capabilities, and awareness we have to authenticate you is going to provide some pretty exciting experiences in the point-of-sale world. So, more to come on that.

Unidentified Analyst

Just a quick question – two quick questions. One is, just in terms of looking at going after larger customers more offline, how does that effect take rate and margins, maybe just give us a three-year view, and then just talk as much you can about Apple, lot of buzz about what they may do, may not do, just give us a sense what you know are you looking at Apple?

Mark Lavelle

Sure, I think what we’ve said is that we see this business continuing to double on the top side from where we are today at our last Analyst Day, and we feel very, very comfortable doing that, delivering the same margins that we’ve been able to do for the last several years, so again as we said, point-of-sale isn't huge in that mix, but I think what we feel like is that with the types of choices that our customers have to use financial instruments in our wallet, some being credit cards, some being debit cards, some being our own credit, significantly being balances that they keep on PayPal.

We feel that no matter what happens in the point-of-sale world, we’ll be able to deliver both very high growth because we’re talking about markets in the trillions of dollars there that we will be penetrating and deliver the types of returns that we have talked to our investors about.

Unidentified Analyst

Apple?

Mark Lavelle

Apple, I think is a very innovative company. We have partnerships with them, PayPal is the method of payment on Apple, and they continue to lead on these customer experiences that we all love to adopt, so we watch them very closely and really take their lead on trying to simplify how payment occurs, and the types of technologies that they are putting out, and we think they will announce are going to be good for a company that’s already using digital cloud based technology to penetrate new markets.

Unidentified Analyst

So you are saying that I wouldn’t be carrying a Citi, Chase, and Bank of America credit card, I’d be carrying a PayPal card, that’s --?.

Mark Lavelle

We think that if you have and most of you do have a number of different ways that you pay despite other than the credit card business for a long time, we wanted you to just use our card all the time, but consumers want to have a diversity of ways to pay. They typically have two or three active cards. They have a debit card, they’ll have store cards.

Unidentified Analyst

But what you are saying is you envision where instead of me having six credits in my wallet, which I do, I would have just maybe one or two – and that’s -- one of them will be PayPal cards…?

Mark Lavelle

We think you will have six cards in the cloud stored with our wallet and that you will be able to access that credential either with a card that we issue you, the PayPal payment card or with a digital credential.

Unidentified Analyst

When do you think this will happen, 6 or 12 months or how sooner we…?

Mark Lavelle

Well, like we said, we’ve been setting up the merchant network starting in 2012 for these types of capabilities that continues. We have said that this year what we are doing is a lot of testing with the user experience, and I think in the years to come you will see us more broadly market what we see working with the card and with the mobile device.

Unidentified Analyst

[indiscernible]

Mark Lavelle

Well, I don’t know about the interchange featurings, but I think issuers -- I used to be an issuer work in those businesses, and what we used to have to do was compete for your attention first in your mail box, and we had to get you to open up our solicitation versus our competitors’ solicitation. And then we have to make sure that when you filled out our application and put us in your wallet that you stay top of wallet and we kept a reason for you to use us.

I don’t think the issuing world is markedly different when digital wallets sort of become a broader part of it. I think issuers will have to compete in a new channel distribution, so that digital wallet is actually a very interesting place to acquire customers, the auto provisioning of new cards based on relationships, and it’s also a way to work on how do I stay on top of the digital wallet using things like mobile and Geoware kind of location-based methods to say, why would I use my card versus the other card, when I select my preference for what I’m going to use when I use PayPal. I think it’s a similar game and that some would be better at it than others.

Unidentified Analyst

In one sense you’re offering consumers an ability to bypass that ecosystem and pay with their -- through the ACH Networks, which is different. It’s an online capability that is much harder to access offline. And that’s something that issuer is – that’s a different competitive dynamic that exists.

Mark Lavelle

Yes, I don’t think that’s something we are doing. I think that’s something that is available, right. And so, our customers actually love to use credit cards, most of them do. We think that is going to continue. We think that they are going to continue to use multiple financial instruments in their wallets, and that they’ll get a different, they get a different value proposition by using us than they do versus using individual cards. We provide safety and security, convenience, choice of flexibility for what we call omnichannel commerce, and they are using it in the – using it online, using in mobile, using in physical point-of-sale.

So from an issuer standpoint, they need to be competitive with their products. You asked about why they charge what they charge. They charge what they charge because they deliver value to a merchant and value to a consumer, and I don’t think that changes. They compete on credit line, APR, points and royalty and rewards and protection. I think that’s the same going forward whether it’s in a wallet or that’s wrapped in leather where it’s in a wallet wrapped in digital bits and bytes.

Unidentified Analyst

More of a technical question, but you’re signing these deals with NCR and the POS providers. If you sign deals with (inaudible) , does that allow you to bypass a merchant acquirer, for example, First Data, you haven’t been able to sign an agreement with them. So, does signing an agreement with NCR allow you to bypass First Data? And then second question is just on PayPal Here and some of the POS initiatives that you’re developing, I guess is there an inherent conflict when you’re also signing agreements with acquirers and other POS providers like ShopKeep?

Mark Lavelle

So to your first question, I think we view it as really a merchant preference, and there will be a number of ways. There are a number of ways that merchants can connect transactions to PayPal. They can come through existing acquirers and come through third-party gateways and come directly to us.

So, it really depends. We have a conversation with the retailers that we talk to, and we have third-party relationships that overlap with the equipment in the software providers they have. What we try to do is work out the easiest way that the retailer prefers to do it. So, is there a conflict perhaps, but I think it goes back to what’s the most efficient safe way to move information from one place to the other.

And your second question on conflict. I think the acquiring industry has had several ways that it gets distribution for a long time, the ISO market and gateways, and it all has accrued to creating more electronic transactions, not less. And so, the quick way to say, yes, there is conflict like what we see is we aggregate digital transactions and send them back to the payment network that sits behind us in a lot of cases.

That’s been our legacy; we’ve done hundreds of billions of dollars of volume of electronic transactions that arguably would not have happened had we not been around. And we are going to continue to press that and I think collectably as a payment industry there is lot more upside in digitizing cash and paper and increasing the velocity of transactions then there is sort of worrying about who is in front of who, from a layer standpoint.

Like I said there is partners who then integrate don’t see conflict with it. They know that we’ve got products out there that are useful for some segment of merchant, but not really useful for others, and that’s where ShopKeep and Vend and ERPLY and NCR and Micros we find common league because they have specific areas of the market that they are targeting, and they are serving, but we don’t do what they do, so we feel pretty comfortable with the ecosystem of partners we have created.

Unidentified Analyst

A couple of questions Mark have been around towards people trying to get their head around how customer experience may change and companies use the Jamba Juice example a few times, I think you just mentioned some work you may be doing with the Apple in that area, are there any other kind of partners that you are working with that are innovating on changing the customer experience by using the digital wallet then maybe you could also talk about things helpful for people.

Mark Lavelle

Sure I guess the example – it wasn’t this trip, but a recent trip for not too uncommon occurrence, I’ll be coming to the East Coast on Monday, I’ll take my wife to a movie and a lunch before I get on the plane on Sunday, and I will arrive at airline and I will get into a car and I’ll come to a hotel, and from an end-to-end standpoint I can do those things today without ever using a physical wallet, I can use a Fandango app to buy tickets in advance, I go to a Five Guys across the street, and on a cheap date, take my wife to Five Guys but a good burger.

We ordered ahead because Five Guys always there is like line out the door in Redwood City where we live. I picked that up at the end of the counter and save time, my car picks me up takes me to the airport, I have my United app, I check in, and I do the same when I check in into a hotel. That’s what life is going to be like. Life will be like you will be sensed, right. The point of sale will sense where you are versus you having to go and physically make contact with the point of sale.

It will happen when you go up your gas tank. It will happen when you pick up your pharmacy. It will increasingly happen in places that are just obvious like why did we do this in other way, our kids will be amazed like the things that we used to carry in our purses and wallets, they will and that’s what happening much, much faster than I think. When you’re in a paradigm shift like that, it’s kind of hard to – you can question why it’s not going to happen, but you take a long view and you realize the iPhones only, six or seven years old and look how it’s changed our life. So I think that’s what you’ll say about payments in the next couple of years.

Mark A. May – Citigroup Global Markets, Inc.

Anyone? There is one.

Unidentified Analyst

Just a quick question about the overall e-commerce world, I mean, it seem like e-commerce typically remained strong even though retail was weak in prior quarters and in Q2 there was a little bit more correlation. Is that just an anomaly and can you talk about the correlation going forward?

Mark Lavelle

Yes, that’s interesting. I think it will continue to outpace retail obviously. I think that the change we’re seeing in – there is a concerning part of and a hopefully part of it, I guess. We’ve seen since the 2008 that smaller merchants are having a harder time keeping up with the type of innovation changes happening in mobile, the type of competition that they’re seeing from folks like Amazon and I think that’s a concern showing one that at eBay from a value standpoint, we care very much that people have inclusion and the capability for them to take advantage of technology that helps their lives improve, that’s been eBay is kind of founding charter. And so we think about the world and ways of using our massive scale and leverage to help small, medium and now increasingly large merchants, get the type of digital scale that they otherwise couldn’t invest in themselves.

That’s a bit of a paradox of technology because technology is supposed to be making things cheaper and lower cost. Right now I think what you’re seeing is getting little expensive to change your e-commerce experience into mobile experience. I think we’ll work through that.

On the top end, you are seeing a total rationalization or realization that if you’re in the business of retailing, you’re in the business of online and mobile selling and that the customer demand that you know them whether or not they were on your mobile app or in your website or standing in your store. So there’s been massive investment in emerging these systems both from a CRM standpoint, an order management standpoint and a fulfillment standpoint, so that they all work as one experience for the customer. And I think there will be winners and losers in that game because the ones that will do it well will own the customer better and be able to compete and the ones that don’t probably will be round in the next five years.

Mark A. May – Citigroup Global Markets, Inc.

Mark, before we take another question, can you comment on the macroeconomic environment, particularly outside the U.S., any kind of thoughts in terms of how business conditions are in parts of Europe or Korea, some of the markets where the business has seen some choppiness of late?

Mark Lavelle

I mean we’ve got such high growth rates in most of these countries that the macro for the most part, PayPal doesn’t – I guess it’s there, that I guess we’re in a place where it’s still very advantageous for us to be in those markets. We see tremendous upside and Europe even now it’s growing in the 40%, some of these markets even though we talk a lot about. Those headwinds are there for us, but the – we’re one of the only companies that can be on both sides of the border with availability and the ability to transact a number of currencies and that’s a good, good business. So there is volatility in that, but what we’re fining is more sophisticated sellers reaching those markets. We just announced in our APAC business, the broadening of our seller protection so that we get the merchants that are selling globally to sell to more markets and we see more opportunity in that than we do sort of macro issues that make them up from time to time and individual markets.

Mark A. May – Citigroup Global Markets, Inc.

Okay. Maybe we have time for one more.

Unidentified Analyst

Yes. You mentioned China. Were you referring to PayPal? There’s a big – there’s TenPay, there’s Alipay, there’s a lot of players there. Were you referring to PayPal making a bigger push into China and can you elaborate more on what you are referring to in China?

Mark Lavelle

Well we have a very good business in China in that we are massive exporters, the sellers out of China into our corridors are tremendous success story for this small Chinese seller and manufacturers and that continues. From a domestic standpoint would be license and we continue to pursue ways that we might be able to do that, but that path isn’t always clear, but we see on eBay side tremendous opportunity to continue to facilitate flows of global goods both out of China to our global buying base and from our global selling base into middle class China buyers. So that’s where we are.

Mark A. May – Citigroup Global Markets, Inc.

Any other questions from the audience? One down here.

Unidentified Analyst

I think you gave a great deal of great example of buying the more dividend [ph] checking into a hotel all the way. But there is still friction and I know a lot of people here, can you do that, but not many. So I was wondering what do you see changing that we will make that whole experience much easier because right now you can use credit card and go through the same process and do all the transactions probably faster than a mobile payment. So I was wondering in next two years what changes do you see that will make it fix on that?

Mark Lavelle

Well from the technology standpoint the change has already been made, I mean nine, we stop looking at the penetration of smartphones by countries because it’s already there. We’re no longer talking about development for future phones and things like that. It’s a smartphone world. Maybe the other change is still occurring that is happening faster is getting out of the grey box brick wall and getting to a smart point of sale on the other side. It’s Internet connected.

So anytime you’ve got a smart device and a smart device and Internet between them, anything can change. And so, the friction is less about, sometimes I think we make the mistake of thinking that it’s how do you compete against card. We don’t think about competing against card, because that would be competing against what our customers like to do and we’ll continue to do for quite some time. We look for ways that we can add value and I’ve talked about some of the ways that I think are exciting to add value, but more importantly, what you have to realize when you’re in this type of transformational shift is you don’t have all the answers about what’s going to happen.

We are literally in a once in generation change in the payment realm, it’s probably like when we were getting P&E accounts back in the ‘70s and ‘80s and all of a sudden that created a massive upswing in consumers in then the United States, that it still spread to other parts of the world and that was based on a credit card. Your ability to either defer payment or not have cash, that is happening now, and the way it’s predicting how and will it happen are difficult, but when they happen they’re quite obvious. It’s quite obvious. And so, we think we already have a number of them and we think all the elements are there for fairly massive change and it won’t be like you think it would be right, I mean I dont' think everybody is going to leave their physical wallets behind any time soon.

But I think you' d be surprised to the extent to which your merchant knows you a little better, says hi to you, knows your name, knows what you bought last time and suggest something, and how you kind of can save time and maybe frequent places more than you otherwise have, in a growth company you always compete with the transaction that wasn't happen – that didn't happen, all right, that's really the competition, it's not the one that was happening, it was fine, eBay started out competing against transactions that weren’t happening connecting buyers and sellers, using technology. We're doing the same thing now, when we think about these point of sales.

Mark A. May – Citigroup Global Markets, Inc.

Well, I think we've actually run out of time, so I'd like to thank Mark.

Mark Lavelle

Thank you.

Mark A. May – Citigroup Global Markets, Inc.

Thanks, I appreciate it.

Mark Lavelle

I appreciate it. Thank you.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!

Source: eBay's Management Presents at Citi 2013 Global Technology Conference (Transcript)
This Transcript
All Transcripts