eBay Q4 and Full-Year 2022 Financials Are a Confusing Mess — Focus Category Strategy Continues

eBay released its fourth quarter and full-year earnings report for 2022 on Wednesday. Let’s take a look at some of the top numbers that are interesting for eBay sellers, and then I’ll dive into the earnings call, where the company discussed its financials and operations.

Fourth Quarter 2022 Financial Highlights:

• Total Gross Merchandise Volume (GMV): 18.2 billion, down 12% Year-over-Year (YoY)
• GMV United States: $8.9 billion, down 9% YoY
• GMV International: $9.3 billion, down 15% YoY
• Revenue: $2.5 billion, down 4% YoY
• Net Income (loss): $672 million, down 65% YoY
• Active Buyers: 132 million*, down 8% YoY

Full Year 2022 Financial Highlights:

• Total Gross Merchandise Volume (GMV): $73.9 billion, down 15% YoY
• GMV United States: $35.9 billion
• GMV International: $38 billion
• Revenue: $9.8 billion, down 6% YoY
• Net Income (loss): ($1.27 Billion), down 1,172% YoY
• Active Buyers: 132 million*, down 8% 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 134 million. Active buyers are buyers who made at least one purchase over the past 12 months.

First Impressions: All topline GMV numbers are trending downward, which is a continuing problem at eBay. They have not been able to turn around the deceleration of overall sales on the marketplace.

The YoY decline of GMV is larger than the decline in revenue. This clearly shows that eBay is squeezing out more revenue (fees) per sale to make its financials look halfway decent.

In 2021, eBay’s full-year net income was significantly boosted by the sale of divisions such as the Korean marketplace and its eBay Classifieds Group.

The net loss eBay reported for the full year 2022 of $1.27 billion may be more reflective of the current economic climate, as the company reported a net loss on equity investments and warrants of $3.7 billion.

Like with any large enterprise, the devil is in the details when it comes to net profit or loss. It does appear eBay is reversing quarterly losses, suggesting that despite a deceleration of GMV, its take rate, the overall fees it collects for selling on the platform, is rising. (More on that later)

eBay spent about the same in 2022 on sales and marketing, product development, and general administrative expenses as it did the year before.

Unfortunately, one metric the company has stopped reporting is the number of active sellers on its platforms. The last time eBay reported that number was at the end of 2021, stating 17 million active sellers globally sold on its platform back then, down 8% YoY.

Since then, it’s been crickets on that metric and frankly, it’s hard to imagine that number is up or stabilized because otherwise, eBay would be highlighting such a gain either in its earnings report or in the earnings call.

While there is a lot of negativity in these numbers, there is also a glimmer of hope that the strategic change to focus on specific higher priced categories as well as recommerce could be working.

The bleeding of active buyers has slowed a lot. At the end of 2021, eBay reported 143 million active buyers (again excluding the two marketplaces mentioned above), and at the end of 2022, the number was 132 million, a net loss for the year of 11 million active buyers.

However, when one looks at this metric on a quarterly basis, it’s far more encouraging: 143M (Dec 21), 138M (Mar 22), 135M (Jun 22), 133M (Sep 22), and 132M (Dec 22). The next couple of quarters will be telling if this trend continues because it could be the first measurable sign that its strategy is actually working.

eBay Earnings Call Highlights

During the last evening’s earnings call, eBay CEO Jamie Iannone and eBay CFO Steve Priest revealed additional metrics¹ describing eBay’s business. I picked the most important ones that sellers may be interested in.

• Enthusiast Buyers: 16 million
• Average Spend per Enthusiast Buyer: More Than $3,000 annually
• TCGplayer² Active Buyers: ~800,000
• Vehicle Parts & Accessories Category (P&A) listings: 500+ million
• P&A Annual GMV: More than $10 billion (originally disclosed last year, but reiterated in the call)
• Focus Categories³: Grew more than seven points faster in Q4 than the prior quarter, with P&A contributing the most to this growth.
• Luxury Goods Focus Categories: Double Digit Growth since Q4, 2019
• Take Rate⁴: 13.8% in Q4
• Refurbished Goods: Biggest sales week ever during Cyber Week
• Cross Border Trade: Roughly one-fifth of total GMV
• eBay’s New International Shipping Program: Buyer satisfaction reached 80%
• Promoted Listings: Generated $276 million in revenue in Q4 2022 from more than 2 million sellers and 700 million listings
• Promoted Listings Advanced: Grew more than 20% quarter-over-quarter (QoQ)
• Total Ad Revenue: Grew 19% in Q4
• Split Transactions⁵: Average order value over $3,000 in Q4
• eBay for Charity: Sellers raised 163 million, an all-time high
• eBay Foundation: Granted nearly 23 million, also an all-time high
• Headcount: Reduced about 500 jobs, roughly 4% of the global workforce

¹These metrics are supportive business data revealed during the earnings call. They are not typically included in the published earnings reports by eBay. Unless noted as “in Q4,” data is for the full or end of year 2022.
² Focus Categories include sneakers, luxury handbags, luxury watches, fine jewelry, trading cards, and vehicle parts & accessories.
³eBay acquired TCGplayer at the end of October 2022.
⁴Take Rate is the percentage of all fees collected such as final value, listings, subscriptions, advertising, etc. collected by eBay from sellers.
⁵Split Payments is a new option eBay released in Q4, enabling buyers to split transactions over $1,000 across two credit cards.

Now let’s take a look at a few quotes from the earnings call.

Quotes from Jamie Iannone, President and CEO, eBay

On Focus Categories: “Establishing a game-changing level of trust between sellers and buyers has been an important driver of the momentum in our focus categories.

“When you look at our coverage, we’re at about 25% across the whole business. If you look at our big three markets where we’ve been focusing, it’s about 28% coverage, so making nice progress there.

“We’ll continue to innovate for customers in our focus categories and extend to new countries and categories this year.”

On GMV: “We have observed notable turnarounds in GMV growth since we launched authentication, improved the product experience and grew awareness to the great inventory in these categories.”

On Live Shopping: “We also introduced the eBay Live Hub, where users can subscribe to channels and receive notifications about future events. This hub will serve as a central discovery point as we broaden the availability of live commerce to more sellers and categories this year.”

On Cross Border Trade: “…less than half of the inventory in our top three markets is currently available for export due to the friction associated with these transactions.

“Sellers across our marketplace will benefit from the expansion of our international shipping program to more markets, which will drive incremental GMV as sellers tap into our global demand.”

On Shipping Time Estimates: “Investments in AI are also improving customer perception of our shipping capabilities. In Q4, we deployed a new machine learning model for estimated delivery date in the US and select international markets, enabling us to make more accurate delivery predictions to buyers.

“Applying this model in the US reduced the average delivery estimate by one and a half days for all domestic listings, resulting in a noticeable uplift in conversion. A separate model deployed for eligible Authenticity Guarantee products resulted in an average reduction of approximately two days for US listings.”

On Ad Revenue: “Our total ad revenue is nearing 1.8% penetration of GMV. Promoted Listing Standard was again the largest contributor to growth, both on a sequential and an annual basis, as optimization gains from prior quarters continue to benefit ad rates.”

“…we have line of sight to 3% [penetration of GMV], which we still feel great about. If you look at the performance, Promoted Listing Standard continues to be the workhorse of the product, and we’re continuing to drive additional penetration there.

On Enthusiast Buyers: A sneaker buyer “will come in and buy $450 in sneakers, but then they’ll buy $1,900 in other products in other categories. A handbag buyer will buy $2,500, but then spend $5,000 elsewhere.”

On Recommerce: “In 2022, our marketplace generated $4.6 billion in positive economic impact through the sale of pre-loved and refurbished goods. This activity avoided 1.6 million metric tons of carbon emissions and kept 73,000 metric tons of waste from going into landfills.”

On The Vault and Collectibles: “We’ll ramp assets in the vault and extend eligibility for more collectible items. While integrations with TCG player and known Origin will strengthen our value proposition for collectors.

“We will also continue to iterate next-gen shopping features like live commerce to better engage with enthusiasts. And we will further develop the category landing pages we debuted for sneakers, watches and handbags in Q4, which offer trending inventory and personalized recommendations, powered by machine learning.”

Quotes from Steve Priest, Chief Financial Officer, eBay

On GMV: “Compared to Q4 of 2019, our total marketplace grew 2%, a deceleration from 6% last quarter versus 2019, US GMV rose 12% in Q4 while international GMV was down 5%.”

On Macroeconomics: “…inflation is impacting a number of our businesses across the US and in Europe. Europe has been more pronounced over recent quarters because of — particularly because of the energy challenges as we go forward. And in addition, you’ve got some labor pressure being impacted in Europe as well that’s impacting the business.

“Specifically, around eBay, we do have a resilient business, but however, general inflation does have a, I suppose, a mixed impact on our business because we lead into non-new-in-season items, that really just helped impact where consumers are looking for value, and we have a lot of pre-loved and refurbished items on our platform and that performance in Q4 was a great reflection of that.

“However, because of the macro challenges, we’re not immune to the inflationary pressures on the discretionary consumer spending.”

On Financial Health of eBay: “Our fortress balance sheet is a tremendous competitive advantage in this environment that enables us to invest organically in our business, accelerate our strategic objectives with disciplined inorganic investments, while still delivering healthy capital return to shareholders.”

Final Thoughts

When Jamie Iannone took over the CEO position in 2020, he clearly saw that eBay needed to change direction. It was too focused on new in box (NIB) products, trying to compete with Amazon and other online retailers.

The company also ceded market share to upstart online marketplaces in collectibles, sneakers, and luxury goods.

Of course, the pandemic and the resulting macroeconomic challenges make such a change in business strategy more difficult.

As I said earlier, a lot of the top-line numbers continue to trend downward. But, Iannone and Priest keep bringing up positive metrics during their earnings calls to show that the strategy is working.

Yet, two years later, there is little evidence in the quarterly earnings reports to substantiate these claims.

I am not saying they are being untruthful, but maybe a bit selective in the numbers they pick to make public. It makes it difficult to compare any progress from quarter to quarter.

One item that irks me is that eBay stopped reporting the number of active sellers on the platform. Why? I don’t see any reason to hide this metric, as it provides further insight into the overall vibrancy of the marketplace.

By quietly removing this metric, it makes it appear eBay has something to hide that it feels could make its “turnaround progress” look not as favorable as they want to portray.

Another area that I find difficult to get my head around is what actually defines an enthusiast buyer?

There have been vague references to annual purchases (or GMV spend), but they have not been consistent. At one time, eBay’s Steve Priest defined high-value buyers as those that represent “approximately 20% of our buyer base, and they purchase around 75% of our GMV.”

Since then, the term high-value buyer morphed into enthusiast buyer. When targeting such a strategy, one would assume the company would define this buyer, but apparently it doesn’t.

Assuming the definition (annual GMV) of such a buyer remained the same, it would mean at the end of 2022, enthusiast buyers only represented 12.1% of all buyers. This would roughly equate to around $50 billion in GMV, based on an annual $3,000+ per enthusiast buyer spend disclosed in this earnings call.

Either the enthusiast buyer strategy is a bust or the definition keeps changing. I am going to assume it’s the latter because one metric that appears to be stabilizing is the sequential (quarter-to-quarter) decline of active buyers.

It would be nice for eBay to better explain the impact of enthusiast buyers, but I suppose that is also information they would rather not share as more competitors today are picking at some of their focus categories.

And what does all of this mean for sellers?

If your sales are not doing well on eBay, you might be in the wrong categories.

eBay is clearly investing in these focus categories (and recommerce) with platform improvements and marketing campaigns.

While we are left to guess how well this turnaround is actually working, there is no sign that the company plans to abandon the strategy. They seem all in, and if they broke away now, it would likely result in a major top management exodus.

Therefore, if we accept the optimistic nuggets of GMV improvement at face value; value positively the slowdown in active buyer erosion over the past year; these focus categories seem to offer the best opportunity for sellers today. It’s where eBay is trying to drive the business.

With that said, it’s always good to be in categories where eBay is actively engaged to bring more buyers to the platform, regardless if that buyer ever becomes an “enthusiast buyer.”

For a complete look at eBay’s fourth-quarter and full-year financials, please visit the eBay Investor’s page. It provides additional financial context not included here that is important for investors.

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