eBay Watch: A Better Q4 on Second Look

According to nearly all eBay (EBAY) analysts, listings growth quarter-to-date [QTD] appears flat when compared to the same time period in 2006. This inevitably leads to the now common headline "sluggish listings growth continues" and is the primary cause of the recent share price pressure.

But allow me to offer an alternate perspective on Q4 eBay listings. Be forewarned this is a "second derivative" approach and therefore less straightforward. Instead of comparing year-over-year [Y/Y] listings, I want to compare the Y/Y difference in quarter-over-quarter [Q/Q] listings growth. In other words, how does the growth in Q407 over Q307 compare to the growth in Q406 to Q306?

If we do this, we see a very different, and arguably more representative perspective on eBay's health. Last year, Q406 QTD listings were growing at nearly 4% relative to Q306 listings in the first 6 weeks of each quarter [some increase is expected given the high seasonality that is embedded into Q4]. This year however, Q407 QTD listings are over 16% higher than Q307 listings in the first 6 weeks of the each quarter.

In my opinion, this is a striking revelation. eBay listings are actually tracking much better in Q4 than last year's performance would suggest. Despite flat Y/Y listings, it is very likely that the improved buyer and seller experience initiatives put in place in the past few weeks are having a positive effect. If this turns out to be the case when year-end results are published, I suspect it will catch many eBay observers off-guard and provide a positive surprise for patient investors.