The company recently announced earnings results in which it indicated that its cut of merchandise sold, also known as the transaction take rate, was 7.8% in 2009,below the 7.9% we were anticipating.
eBay's marketplaces business is the most valuable part of the company, constituting 54% of eBay's stock value. The transaction take rate is a crucial factor that determines how much money eBay makes.
Take Rate Sacrificed for Higher Overall Revenues
eBay's take rate for the first three quarters of 2009 was 7.9-8%; however the rate dipped to 7.5%. This dip was driven in part by new seller incentives that reward sellers for providing the best service to buyers. In return for improved customer service, sellers pay a lower transaction rate to eBay, which means that eBay's effective take rate of sales drops.
Although eBay is sacrificing a few fractions of a percent on its take rate, the goal is to drive up overall revenues by encouraging more buyers to transact through eBay. This could lead to an improvement in eBay's listings-to-sales conversion rate, or in other words, the percentage of all listed merchandise that is sold.
You can modify the eBay Transaction Take Rate forecast and the Listing-to-Sales Conversion Rate to see how eBay's business could be impacted if the seller incentives lead to even lower take rates and better conversions.
Disclosure: No positions