eBay’s First Quarter 2023 Shows a Glimmer of Hope for the Marketplace

Last night, eBay released its First Quarter 2023 financials. And while this was another “eBay Inc. Reports Better Than Expected” headline for its earnings report (the company really needs to find a better headline writer, this is getting old…), there was reasonably optimistic news in this one.

The top-line numbers eBay reported for its first quarter were:

• Total Gross Merchandise Volume (GMV): $18.4 billion, down 5% YoY
• GMV United States: $9 billion, down from $9.3 billion YoY
• GMV International: $9.4 billion, down from $10 billion YoY
• Revenue: $2.5 billion, up 1% YoY
• Net Income (loss): $744 million, down $61 million YoY
• Active Buyers: 131 million*, down 5% YoY

* Excludes active buyers from GittiGidiyor and TCGplayer. eBay is closing down the Turkish marketplace GittiGidiyor and completed the acquisition of TCGplayer at the end of October. With these two marketplaces included, active buyers are 133 million. Active buyers are buyers who made at least one purchase over the past 12 months.

While active buyers continue to slide, the slide is tapering off. Here are the numbers from the past 5 quarters, again excluding GittiGidiyor and TCGplayer.

• Q1 2022: 138 million
• Q2 2022: 135 million
• Q3 2022: 133 million
• Q4 2022: 132 million
• Q1 2023: 131 million

On the GMV side, there have now been three quarters in a row with increased GMV for its biggest market, the United States.

• Q1 2022: 9.3 billion
• Q2 2022: 8.9 billion
• Q3 2022: 8.6 billion
• Q4 2022: 8.9 billion
• Q1 2023: 9 billion

The European operations of eBay’s international GMV are facing greater challenges, largely due to the cost of living crisis that has affected Europe more severely than the United States.

It would be nice if eBay broke out active buyers geographically, as it does with GMV. Given the continued decline of its international operations, while also considering the slowing of active buyer losses over the same timeframe, it’s reasonable to assume that the U.S. marketplace is recovering much quicker.

Actually, the U.S. marketplace may have even gained active buyers over the past few months!

So let’s take a look at some comments by Jamie Iannone, CEO, eBay and Stephen Priest, CFO, eBay during last night’s earnings call about eBay’s First Quarter 2023 results and what to expect in the near future.

Jamie Iannone, CEO

“Our progress is most evident in focused categories, which outgrew the rest of our marketplace by roughly 8 points during Q1 and grew low-single digits year-over-year overall.”

“Our largest focused category, motors, parts and accessories, or P&A, accelerated a few points sequentially and was the largest contributor to GMV growth in Q1.”

“[O]ur eBay Refurbished program also continues to be a standout. In the current economic climate, our range of refurbished goods has proven to be more valuable than ever and consumers are increasingly aware of the sustainability benefits of purchasing these products.”

“Building off its record holiday quarter, growth in eBay Refurbished GMV accelerated notably during Q1, posting double-digit year-over-year growth.”

“A series of search deployments we made during Q1 led to a measurable uplift in conversion that we estimate would amount to roughly $1 billion in incremental GMV on an annualized basis.”

“With 1.8 billion live listings and billions more images from historical sales, eBay is one of the few companies in the world training deep neural networks using tens of billions of images directly linked to commercially relevant data elements. Leveraging these assets, our product team recently re-engineered our visual similarity models, which has dramatically improved the speed and efficacy of image search on eBay.”

“[S]ellers will soon be able to pre-populate categories and item specifics from a single photo, enabling them to spend less of their time inputting inventory and more on growing and managing their businesses.”

“We are in the process of integrating the ChatGPT API into our core listing flow and will soon launch a beta release of a plug-in that enables sellers to automatically generate text for their item description based on known product attributes.”

“Generative AI has a number of exciting use cases outside of descriptions, and we’re exploring numerous potential applications across our marketplace that can enable truly magical customer experiences.”

“Strong demand for Promoted Listings drove first-party advertising revenue of $285 million, up 31% or more than 30 points faster than GMV growth for the third straight quarter. Total advertising revenue grew 23% to $317 million. During Q1, over 2 million sellers adopted single ad products, and we reached more than 750 million live Promoted Listings.”

“[O]n live commerce… we began experimenting with Q2 of last year, hosting a few pilots and experimenting with it throughout Q2. We did expand it into luxury in Q4 with some events for handbags and jewelry. We also created a central hub and discovery entry point for our live commerce events in Q4, which means now users can subscribe to a specific channel or receive updates and notifications of upcoming events. This year, we hosted about 15 eBay Live events with over $500,000 of in-event GMV across collectibles and luxuries. And at the end of March, we started hosting our first short auctions, think like 30 seconds for handbags and collectibles. In general, these are getting 5,000 and 15,000 buyers.”

Stephen Priest, CFO

“Enthusiast buyers make up roughly 70% of GMV on eBay and on average, to spend approximately $3,000 annually.”

“Notably, we expect the eBay International Shipping program to generate positive operating profit dollars in 2023 and approach our corporate operating margin percentage by Q4. The costs for this program have been in line with expectations to date. And since they are almost entirely variable, they can be passed through to customer-facing shipping fees with a predictable margin for eBay.”

“…our cross-border trade, which accounts for about 20% of the sales that take place on eBay. And as we came into the eBay International Shipping program, only about 50% of our 1.8 billion listings on the platform are available for global trade.”

“For the second quarter, we forecast GMV between $17.8 billion and $18.2 billion, representing organic FX neutral growth between negative 5% and negative 2% year-over-year.”

“We expect to generate revenue between $2.47 billion to $2.54 billion, representing organic FX neutral growth between 1% and 4% year-over-year.”

Conclusion About eBay’s Quarter

During 2020, eBay gained many new active buyers due to the pandemic. But those buyers didn’t stick around, and the company has been trying to put lipstick on a pig to hide this fact.

eBay has also been inconsistent about what defines an enthusiast buyer, seemingly making up new metrics since it started using that term. The company also stopped reporting active sellers at the end of 2021, again making it appear they are trying to hide negative data.

Unfortunately, the company has a track record of making lofty promises but failing to deliver on them, a trend that predates Iannone and Company. That being said, this particular quarter shows promise and possibly the first signs that the tech-led reimagination of the marketplace is moving in the right direction.

One of the interesting remarks in the earnings call was that eBay will also now join just about everyone else in the tech world to integrate the ChatGPT API into their platform. Initially, the company will help sellers build listings with AI, and apparently later, add some kind of consumer-facing shopping assistant.

Unfortunately, some AI integrations end up just being gimmicks, so let’s see how eBay will implement ChatGPT into the platform and if it truly will save sellers time to list more items on the marketplace.

But they could use ChatGPT to rewrite their tired headline. 🙂

Note: Please see eBay’s Investor Page for additional information about the company’s financial performance, including important GAAP vs. Non-GAAP comparisons.

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