eBay Manages Expectations - Perhaps Too Well

eBay's (EBAY) results are out and the stock is down 5% or so in after hours trade. Q3 looked like a good solid 'meet/beat' Q, so let's dig in and see what's up.

Q3 - the turnaround in marketplaces seems to be working.

The metrics we watch most closely showed continued positive trends in Q3.

• Y/Y GMV (ex-autos) grew 10% compared to a trend that was as low as -16% in Q1
• Fixed price GMV is now 56% of GMV - up from 51% last Q 46% in the year ago period
• Sold items were up 30% y/y

The only concerning marketplace datapoint is the active user data, which remains anemic - still topped out around 89m users. This is up only 2% y/y.

Other interesting tidbits:

• eBay is previewing a diamond ring builder at http://diamonds.ebay.com
• Management seemed pretty upbeat during the call
• Donahoe mentioned they are going to launch a substantial Q4 campaign this year which sellers will like to hear.

Q4 - Hmm - storm ahead or conservatism?

So this sounds pretty good, what could be wrong? Analysts were forecasting eBay's Q4 revenue to be $2.26b and eBay's guidance released today suggests a $2.25b mid-point. This is clearly below expectations (albeit slightly) and some expectations were hoping to raise that mid-point, which clearly won't happen.

Additionally margins came down due to a change in mix between the core business, BML and other lower-margin lines of business (Skype).

The big question from today's results is: Is eBay being conservative and managing expectations or are they seeing a grinchy holiday ahead?

Disclosure: I am long Amazon and Google. eBay is an investor in ChannelAdvisor where I am CEO.

Comments

[old eBay se...:]

Scot,

If revenue goes up but profit goes down is, as anyone who has been in business knows, a very bad sign and it is telling every one to get out now.
They are wasting money and energy on the wrong things. Yes the revenue goes up because the listings have gone up and Skype and PayPal have gone up but they are not selling the same percentage of listings as before so the profit goes down. eBay is loosing their market share and they are wasting money and effort trying to get it back by going in the wrong direction.
It is a rusty old ship that keeps on springing leaks and how long are the pumps (investors on Wall Street) going to keep it afloat.
Many of the crew (workers and sellers) see it and they are jumping ship.
The Captain still goes on like nothing is wrong and the crew look at him like he is a complete idiot.
Our eBay sales are still down y/y but they are coming back.
Example of our sales:

Q1-09 was down 36.5% from Q1-08
Q2-09 was down 55.4% from Q2-08
Q3-09 was down 21.8% from Q3-08

Q3-09 was up 2.5% from Q1-09
Q3-09 was up 35.2% from Q2-09

We deal in Hobby items and not the run of the mill CD's, DVD's and Electronic items that you can find any where but that is what the Captain is pushing for eBay when it was originally built on collectible's and hobby related type things. People are not going to go to eBay to find the general run of the mill type items and they never will. They can find it all a lot easier and cheaper on Amazon.

Until the management at eBay realizes that they will still keep sailing a rusty old ship that will eventually sink or run aground.

Bill

Oct 22 01:14 AM

[Patricia013:]

Wow! This is rich. Looks like a big case of denial to me....

Oct 22 01:51 AM

[eBay +++:]

If eBay explained this better in their Call and the Press Releases there would not have been any sell off today, it would have been positive. (see below)

"In announcing Q3 earnings earlier this afternoon, the company projected Q4 EPS of 38-40 cents a share, which put the midpoint at 39 cents, or a penny below the Street consensus at 40 cents. But eBay CEO John Donahoe explained in an interview with Tech Trader Daily this afternoon that the guidance is based on the assumption that the company’s planned sale of Skype closes in the middle of the quarter. He says that factor reduced the forecast by about 5%, or around two cents a share; add that back in and you get a range of 40-42 cents, a mid-point of 41 cents, and a forecast ahead of the Street. (That, of course, assumes analysts hadn’t already reflected in their numbers a mid-quarter close for the Skype deal.) Revenue guidance for the quarter likewise would move up a bit if you back out the impact of the Skype transaction, and push the number up to around $2.35 billion, from $2.25 billion, ahead of the Street at $2.26 billion."

Oct 22 04:09 AM

[Bob C:]

The emperor has no clothes
and no clue

Oct 22 07:47 AM

[Leftfield:]

I have enough experience on Ebay to see the asinine idiocy of their policies and the reduction in traffic and business, first-hand. Let me assure you, they are continuing to find more ways to hurt the small seller even now and the results and trends are clear and worsening.
Interesting to see Wall St. spin on disaster. It has to be a pump and dump. Makes me consider the same interpretation of US "green shoots."

Oct 22 11:05 AM

[Patricia013:]

I'll let you guys speak to this article - its a bit too ridiculous to me. Shows me how little these people really know about Ebay ....or how much they are trying to cover up. Either way - its a waste of time!

Oct 22 11:08 AM

[a. palmer jr.:]

Every time eBay comes out with something "new and great" for the sellers, it doesn't apply to the small sellers but only for the mega-sellers than sell cheap Chinese junk that you can get down at your local flea market. They will probably lower fees a little on the large sellers and charge the small sellers more. We've been through this so many times lately that I usually don't even look at their changes.

Oct 22 09:19 PM

[sad user:]

No mater What spin they give. The bottom line is ." In a series of interviews, Mr. Donahoe acknowledged that eBay, based in San Jose, Calif., didn’t adapt fast enough to shifting e-commerce winds. He now embraces a “turnaround mind-set” and is refocusing its Web marketplace toward shoppers who don’t want to waste time in online auctions.


“There are times when I wish we can close this store and just open a new store, but we can’t,” he said. “We need to make bolder, more aggressive changes to the eBay ecosystem even if they are unpopular.”
" UNPOPULAR meaning hurting the business core. The users as in sellers. If anyone wants to know the true business go to the seller board. And feedback board. Even as I am needing income. I will rejoice when this BAD CEO leaves. / or the fall of this leadership.
Its all nothing but a candy coated cover. As the destruction continues

Oct 22 11:30 PM

[Patricia013:]

“There are times when I wish we can close this store and just open a new store, but we can’t,” he said. “We need to make bolder, more aggressive changes to the eBay ecosystem even if they are unpopular.”

He means he's not destroying what works FAST ENOUGH! He has strangled small sellers with high fees, restrictions such as offer free shipping or be lost in the listings - no insurance - seller eats that too! It goes on and on then he sits back and watches sellers add costs to starting price and he wonders WHY buyers are leaving? When oh WHEN is the board going to come to its senses and let this boob go? By the time he leaves Ebay will be in such tiny pieces that it can NEVER be put back together again.

Donahoe - if you want all small sellers to leave, eventually they will - and THEN you won't be able to hide your failures behind them any longer! What will you do then???? I have NEVER seen such unprofessionalism!

Oct 23 03:18 PM

[NYM Arts:]

Well, I told him so.
In "Other News Venues" Paypal is preparing for its SPIN-OFF from Ebay with a New Community Help Forum.
Unfortunately for Paypal, Every Single Topic is about the INEPTITUDE of Paypal and why you Just Shouldn't Use It.
You See, in order for Donahoe NOT to pay a Hefty Price for preventing us from accepting Money Orders and Checks on Ebay Auctions (He is acting ILLEGALLY HERE), he MUST get rid of Paypal and reinstate OUR business Protocol.
So, it will be.
Or we will make him Eat Dirt :o)
Hey Jack, want some Sugar to mix in with that, PAL ? I hear it's the latest Diet for Somali Women and Children, so it's DEFINATELY good enough for YOU.

Oct 30 09:02 PM