eBay Strategies

Part III - Live blogging from ChannelAdvisor UK - Mark Lewis reveas UK eBay details...

This is the third and last part of a two part series on eBay's presentation at catalyst UK:

Part 1, Part 2 are here.

Some highlights/newsworthy items:

• eBay UK to force free shipping and handling (P+P in UK lingo) for some categories.
• No changes planned for DSRs 

Now for the complete transcript:

Question: With the changes you are implementing, are you working with ChannelAdvisor?

Answer: We will be making the announcements 60-days ahead and giving ChannelAdvisor very early availability in the sand box.

Question: I have a question on multivariant otions.  I've found on our own ecommerce site that it's easy for consumers to mess up the drop-down boxes.  Will you avoide that by giving sellers the ability to change to radio buttons?

Answer: No, but we have tested and it's doing great with buyers.

Question: We are exclusive on eBay and you talked about lowering your highest service, best sellers.  We're finding the opposite.  We ship heavy items, we ship at cost or below. Our DSRs are terrible on shipping fees.  Now we pay more on eBay and our sales are down because of DSRs. 

Answer: Generally speaking, DSRs are working well.  They give us a mechanism for rewarding sellers at the upper end of the rankings.  There are some categories where it's extremely difficult to maintain high DSRs.  I've talked to furniture sellers with this challenge.  Thus far we haven't said we'll change our DSR rules to be category specific because we want to keep it the same and easy for sellers to understand.  My advice is to continue to do what you are doing -work with shipping partners, and be transparent.

Question (same seller): One thing we did is choose a terrible cheap shipper and that solved our DSRs, but customers get terrible experience. You are pushing me out of business.

Answer: That's nto the effect we wanted to have, this is an unusual case.  You should know your buyers enough - sounds like they want lower cost over quality.

Question: (sue from tamebay) - Why do you provide click-through data and not conversion on Adcommerce.

Answer: Tomorrow there is a session for detailed questions like this.  Adcommerce gives sellers yet another opportunity to meet buyers.  We appreciate the feedback.

Question: When we have lower quantity items, when we list on eBay, it is allocated so not available to other channels.  We want to put it on other channels and take the listing off eBay.  eBay has an issue with ending listings, what's the policy?

Answer: In auctions if there's a bid, you can't yank it. For fixed price we ask that there is clear locked down inventory.  This policy is for the best possible buyer experience.  No issues ending fixed-price listings.

Questions:  Why are your two releases so close?  What's major and what's minor?

Answer: We want the second change to not impact the holidays. Next year we will probably do three changes.  Major changes are those that disrupt sellers. For example, if we tweak the BestMatch algorithm, that's minor. Let me ask you a question - will this make trading on eBay easier?

Answer from the audience: I believe so - in the past your changes have made it very very difficult for my business.

Question:   Free postage - you've consulted with powersellers around this.  Amazon and Pix offer longer characters vs the 55 at eBay.

Answer: Clarification - sellers already have the option for free P+P (UK speak for S+H)

(back to seller) - I don't think we're on a level playing field.

Answer: Where possible we want to make it easier for sellers.  We have pricing incentives for DVD sellers and will turn up search incentives through the year. There are some categories where we may have to go faster than the marketplace is going.  For those categories we will mandate free P+P. Free P+P is 15%, but not high enough.  They want to see it very wide-spread.  In some categories it's not the norm, others we will make it the norm.

Item title - we are not actively working on this.  In the past we use to index only the title. We now index the title and attributes.  We are doing some other things that will contribute.  We will allow sellers to create their own attributes (ChannelAdvisor supports this today BTW).  The other is multi-variation.

Question: I agree we need longer titles. (comment really)

Question: For free P+P, with DSRs,  you should have 5.0, but that's not the case.

Answer: You'd think so wouldn't you?  We have heard this alot from sellers that they should have manditory 5s when offering free S+H.  We've heard from buyers that while the price may say free, they actually throw extra fees in there and buyers want to mark their DSRs down when that happens.

For most sellers with free P+P it's not an issue because they are above the FVF credit threshold.

Question: In regards to Trust and Safety - we have a new account on eBay. It was selling similar items and wanted to try some new strategies.  We got tripped up by TnS.  TnS wouldn't help us with this even though we are a top seller.

Answer: Most large sellers have account managers. We now have a policy that if one of your accounts is kicked off eBay, we will not risk your main account.  Brand restrictions are in place around 50 brands where there is high risk of VERO action.  Therefore we have to take exceptional steps to manage that risk.   We've done so with stringent requirements - biz account, impeccable record, etc.

SeekingAlpha Disclosure: I am long Amazon and Google

Part II - Live blogging from ChannelAdvisor UK - Mark Lewis reveas UK eBay details...

This is Part II of my eBay UK, Mark Lewis keynote live blog.  Part I was here.

• What kinds of products are doing well?
  
  • Just out of season - off-price, secondary market
     
  • Buyers are thinking about every pound and trading down 
  • There are warehouses of this stock throughout the country waiting for sellers like you to find them.  Go get them, put them on eBay and price them competitively.
  • Are you the lowest price in that category? 
  • Experiment with free shipping. 
  • Consider BestOffer
•   Summary:
  • It's tough out there 
  • Top sellers are doing well  
  • There is a success for doing well on eBay 
• Looking forward 
  • We heard you on predictability/reliability.  We're not changing our strategy. 
  • But we want to make ourselves easier to work with.
  • In 2009 we are going to bundle together our releases into two major releases
    •  Shows a calendar with June and Sept circled 
    •  60 days of notice at a minimum    
• Five things coming in June: 
  
  • Better Listings to drive more sales   
    • Multiple Variation Listings (size/color/etc.)   
    • Free Picture hosting 
  • Make it easier to sell on eBay
    • Smart FAQ -  allows you to build FAQs or eBay will do it for you.  You can also entirely suppress buyer questions (!?)   
    • Easy Returns - A new way for buyers to do automatic returns on eBay UK.  Buyers can print an RMA slip right off eBay with full information on what's going on.
  • More incentives to offer Free Shipping  
    
    •  This will be in addition to visibility incentives  
• Then they went through some mock-ups for how this will look in TurboLister as well as the site.
  
  •  Consumer will select their variations and click buy (like Amazon) 
• Conclusion:
  •  We realize it's tough out there 
  • That being said - top sellers on eBay are doing very well - 30% growth 
  • 2/3 are confident about ability to keep growing 
  • 2008 was a year of a lot of change  
  • We're excited about the year.  

They are opening to a Q+A - I'll post that separately in a second.

SeekingAlpha Disclosure - I am long Amazon and Google

  

Part I - Live blogging from ChannelAdvisor UK - Mark Lewis reveas UK eBay details...

I'm across the pond in London today for the first day of our annual get-together called Catalyst.   There are several insights I'm getting from UK sellers that I'll summarize on the flight later in the work.  Today we have the Managing Director of eBay UK, Mark Lewis, speaking.  He's going to be telling 200+ top sellers about some unique datapoints of the eBay UK marketplace so I wanted to do some live blogging.  Here goes part I of II

Mark Lewis, MD of eBay session notes from Catalyst UK

• eBay - Hitting High Growth on the World's Online Marketplace
• Wants to tell a story that's not being reported.
• Lots of tough environment stories, but on the other hand when we speak to our largest UK sellers, you are bucking the trend and having great success. 
• eBay UK Update. 
  • It's tough, times are hard, but... 
  • Buyer traffic on ebay.co.uk is UP 
  • Buyer trust is up compared to last year 20%
    •  Last year talked about how buyer service expections were up. Customer service, dsr and other investments paying off.
  •  On the sell side.  Sold items are up 15% y/y, which is an acceleration from this time last year.
• Data from our top 1000 sellers.  This data is available in a printed report (I'll try and scan this for our US readers later in the week - it's a great piece)
• Top sellers - Sales volume up 30%, which is an increase from year ago which was 25%
  •  That's all sales, fixed price in some cases double that rate 
• We asked top sellers how they feel about the environment+eBay - 65% feel 'very confident'.  Half of the other 33% are 'not confident', the other half 'worried'.
• If you get it right, there are lots of opportunity. 
• Top sellers exports are growing at 125% y/y 
  •  eBay UK has launched a big UK Exports Campaign   (other eBayers call this CBT-cross-border-trade)
•  Top seller concerns:
  •  The pound is down 30% vs. the euro which is a double edged sword 
•  eBay has implemented lots of positive changes for sellers: based on your feedback.
  • Reduce barriers to listing 
  • Accelerate  fixed price saes
  • Reward better service - in partnership (FVF discounts)
  • Mark then detailed all the ways they addressed these - lots of changes. 
  • We think they were foundational and now have put eBay in a much stronger position and created opportunities for sellers 
  • This is the key to unlocking high-growth opportunites on ebay UK 
•   eBay Transformation
  • They've gone from single item listings to multiple item listings 
  • Moved from short duration (7 day) to long duration (fp30/gtc) 
  • Moved from a model where you pay to list, vs. when you pay when you sell (insertions are one penny here now) and free gallery
  • Moved from TES in search to BM which is optimized for fixed-price, not auctions.  BM ties search to product, price, service levels.
  • We realize this was tough for you to adopt.
•  eBay scorecard on how they've done on how they measure themselves:
  • Sales velocity 
  • Profitability 
  • Reliability 
•  How are we doing?
  • Sales velocity - up 30% for top sellers 
  • Profitability -   On average fees are down 20-30% for powersellers.
  • Reliability - (frowny face graphic) - Lots of change to absorb, we've heard that feedback.  You did tell us we are getting better at it.  He will circle back on this.
  • Overall the scorecard is pretty positive 
•  Maximising the eBay UK opportunity
  • Products 
  • Pricing 
  • Service 
  • If you have these three elements you will benefit from search visibility and multi-item sales 
  • Virtuous cycle/flywheel.  Recent Sales score - if you can get to the top of search results, you can stick there and sell high volume. 

SeekingAlpha Disclosure  - I am long Google and Amazon.

eBay DSRs - the downside of transparency... or a Dashboard to declining GMV

eBay recently released a nice enhancement to the eBay seller dashboard that gives sellers the ability to see more detail in their DSRs (I still argue a seller should be able to see it all vs. an eBay approved 'slice', but I digress).  

One of the views is international vs. domestic both as a bar chart and you are able to see more details about the 1/2/3/4/5's DSR scores from domestic and international sellers.

Here at eBay Strategies, since DSRs came out we've been talking about the fact that sellers with higher international sales rates suffer severely from those sales in DSRs.  In fact some of our strategies for DSRs are to carve off international or stop selling international all together.  

The new transparency that eBay has provided in the dashboard is opening up this issue to a much broader set of sellers and the reaction has been interesting.

First, all of the eBay message boards that I track are lit up with shock that international DSRs are so low.

Second, and we see this in support requests at ChannelAdvisor, sellers are asking how they can stop selling internationally as quick as possible.

As we've been saying for over a year, the DSR system is full of unintentended consequences that actually incent sellers to things that I don't think are aligned with what eBay wants.  For example, I don't think the eBay management sat in a room wondering how to decrease their cross-border-trade (CBT in eBay-speak) as that's a big part of the business and growing.  However they are achieving that and now with this new transparency, it is going to accelerate materially.

John Lawson is a top eBay seller and does some social media around ecommerce+eBay topics called ColderICE.  John had a great video on the topic that I've embedded here.  He does a better job of explaining this problem with real data from his dashboard than I've been able to do in the past:

DSRs - time to go!

eBay needs to either dump the DSR system altogether (a core part of my eBay 2.0 plan), or majorly revamp the system to try and fix all of the problems inherent in the way it was hastily implemented.  In conclusion, this new transparency proves that eBay's DSR system get's a 1 star -  whichis "very unreasonable" in DSR-land.  Or maybe "very innacurate" or "very unsatisfied" work better?

For all you Wall St. readers, I would add the severe decline of CBT as another headwind facing eBay's recovery right now.  The company doesn't report that piece of GMV as best I can tell, but looking across our customer base it was as high as 20% a while ago and is well on it's way to 10% in the short term and I bet if eBay doesn't fix this DSR system, it will go to sub 5%.  Layering that on top of the current GMV declines in auction+fixed price doesn't paint a pretty picture.

eBay Seller Readers are you seeing a huge difference between your domestic and non-domestic buyer DSRs?  Do you plan to stop selling internationally as well?

SeekingAlpha Disclosure - I am long Amazon and Google.

Couple of upcoming events of interest...

There are a couple of upcoming events that I wanted to point out to readers that you may find of interest:

1. Amazon ProductAds Webinar - ChannelAdvisor is co-hosting a webinar with Amazon around their new ProductAds initiative.  This webinar is for customers and non-customers so if you are interested in this topic, feel free to join us.  Signup is here.
2. ChannelAdvisor Catalyst UK - Our annual ecommerce event is coming up soon - March 30/31 - signup is here and we are closing in on capacity.  This is in London.
3. ChannelAdvisor Catalyst US - April 30/31 in Raleigh - We are definitely hitting capacity here so I recommend signing up asap here.  

  

Wall St. Analysts' thoughts on eBay Analyst Day....

Yesterday eBay had their first Analyst day in three years.  We had lots of coverage here at eBay Strategies and are continuing with the Wall St. reaction followed by one last summary piece later today. Here's a guide to the coverage:

• Part I - Donahoe opening remarks
• Part II - Paypal
• Part III -  eBay Marketplace.
• Questions sellers wanted to ask (collected from twitter) 
• Part IV - Q+A 
• News round up 
• Wall St. Analyst' thoughts (this post you are reading) 
• What does Analyst day mean for sellers (coming soon)     

Usually after an event like this the stock analysts issue reports.  These reports include interesting nuances that in many cases were picked up in side discussions and what-not.  It's also interesting for eBay sellers to understand what's going on as frequently marketplace-moving changes are introduced at a high-level at these events.  Strategically, understanding where eBay is going can help sellers plan their strategies for the coming year(s) and plan for where eBay should be in that mix.

Analysts tend to use these opportunities to also change their view on a company.  Analysts have some combination of a rating (buy, sell, hold, underperform) and some have a price target.  Movements in these can move markets of course, but I also look at them as signals.  In this case, everyone in the eBay world is looking for some sign of the bottom of the marketplace's problems and when analysts get bullish that would be a strong signal.

Here's a quick recap of the analyst notes I've seen so far this am.  PT is an abbreviation for Price Target and as a point of reference the stock is in the $11-12 range right now.  These are in the order that I received them and the bolding and comments marked (editorial) are my own.  I've put the analysts into three buckets based on their ratings - Bullish, Neutral, Bearish.

Bullish

• Marianne Wolk - Susquehanna (say that three times fast) - $18PT  (Editorial: Marianne had lots of paypal that I didn't put here as we focus on the marketplace biz)
  •  We believe there is value to the core eBay franchise, which has more than 86.3 mln active worldwide users as of 4Q08 and ~17-18% domestic eCommerce share in 4Q08. Many of these users are loyal buyers/sellers, and with stronger company actions and a more benign economic backdrop, we believe usage and monetization levels could improve in time (albeit our estimates assume this is not until 2010).   
  • The major change we heard at the analyst day is that the company expects to incorporate more classified listings and advertising with the search results for users. (Editorial - more advertising - GREAT!)
•   Heath Terry - FBR - OUTPERFORM - $16PT
  •  While there is significant execution risk as the company attempts to create a "New eBay", at less than 6x forward EBITDA we believe investors are being paid to take that risk. We believe the stock represents an attractive long-term risk/reward, as our $16 price target equates to a 6x EV/EBITDA multiple.  

Neutral-ish (is that a word?)

• Spencer Wang - Credit Suisse- PT - $15 - Neutral
  • Overall, we are encouraged by management’s initiatives to maintain its role as a key connection between buyers and sellers of goods, to extend PayPal’s scale, to “transform” Marketplaces, and to accelerate growth at Skype.   
• Gene Munster - Piper - Neutral - no PT
  • We are incrementally more positive on eBay, given potential changes to the marketplace platform, which could come late in 2009, according to the company. We remain Neutral on EBAY shares, as ultimately, we need to see changes to the platform that improve the user experience and arrest market share losses. 
• Collin Sebastian - Lazard - HOLD -  
  •  2011 targets provide an optimistic scenario assuming a rebounding economy. Highlighting the Analyst Day, management provided a range of 2011 revenue and margin targets, under the assumption that the economy rebounds next year and that growth in PayPal, Skype, and marketing services continues to offset the declining auction marketplace. In the near term we expect 2009 to be another challenging year for eBay in the midst of transition in a weak economy 
•   Imran Kahn - Neutral - 
  •  ...we continue to be cautious on the story, as many of the announced changes may not fully materialize until 2011. Additionally, we believe competition from Amazon and other online commerce sites could create further risks to the company’s financial targets. 
•   Jim Friedland - Cowen - Neutral - 
  •  (1) the company is actively addressing the challenges in its core marketplaces business, but we think its three-year revenue and margin projections are too high; (2) PayPal is well positioned to demonstrate continued growth; (3) Skype is for sale in our view; and (4) a dividend is unlikely and management seems to be unwilling to repatriate its cash position for a buyback due to tax implications. 
  •  We think competition from alternative channels, such as Amazon and Google Search, is a serious threat to the marketplaces business. Amazon and Google offer attractive seller pricing (it is free to upload inventory to Google's product search database). Further, we believe the superior buying experience on Amazon and search experience on Google reduces the value of the eBay platform for buyers and sellers. Even though eBay is dedicating significant resources to enhancing search, improving the user interface, and other buyer/seller features, we believe it will be difficult for the company to catch up to Amazon.
•   Mary Meeker - Morgan Stanley - equal-weight
  
  • eBay noted 2009 marketplace GMV should grow slower than market (we assume -12% Y/Y); 2010 should grow with market (we assume +8% Y/Y) while 2011 should grow faster than market (we assume only +4% Y/Y).  
•   Derek Brown - Cantor - HOLD - $13 PT
  
  • On the one hand, we were very impressed by mgmt, most (if not all) of whom were presenting at his/her first Investor Day; its willingness to admit past errors/oversights in strategy, product development, technology and customer relations; and, its unyielding commitment to drive "foundational" change within the core of eBay (both its culture and Marketplace franchise); on the other, it seems clear to us that eBay's revitalization efforts remain very much a work in progress and we think hopes for a healthy recovery by 2011 may be premature.
• Ben Schachter UBS - $14 PT, Neutral  
  
  • Management expects the Marketplaces division to grow slower than the market in 2009, with the market in 2010 and outpace the market in 2011. EBAY expects to bring large scale changes to its Marketplaces division that will take time to implement. The company is attempting to improve its user experience by expanding efforts to include more liquidation/out-of-season products and by overhauling its search function to bring more relevant searches to the forefront (highlighting inventory from across the EBAY ecosystem). Even if we assume they can execute on this strategy and stabilize the marketplace, it will take time and guidance does not imply real growth until 2011. We continue to remain cautious on management’s ability to execute and expect the stock to reflect more near-term execution than promises the company makes about 2011.   
• James Mitchell - Goldman (Golden Slacks as Cramer says) - $14 PT  - Neutral  
  • We view management’s marketplace objective of focusing on the “secondary” (used/discontinued/discounted/ end-of-season items) rather than “primary” (new/in-season items) category as a rational strategy for minimizing head-to-head conflict with Amazon. However, “secondary” may account for a declining portion of overall e-commerce over time, potentially condemning eBay’s marketplace to perpetually under-grow the e-commerce market.   
• Christa Quarles - TWP - Market Weight 
  
  • We believe eBay's strategy makes sense and the actions the company has taken thus far (changing management, putting technology at the centerpiece, strategically cutting costs and reinvesting in growth) are in the right direction. However, it's still unclear if core marketplace will look as management defines it in 2011 (e.g. the margins may be 25% not 35-45%) and it may take much more time to fix, particularly if the macroeconomic environment stays weak. We remain on the sidelines, but could start to see some value investors with long time horizons starting to get more interested in the story.  

Bearish

• Justin Post - Merrill Lynch - PT - $13 - UNDERPERFORM
  •  Upbeat presentation, but one message from the day was that eBay was still early in their turnaround and that things would get worse before they would get better. 
•   Jeetil Patel - SELL - $11 PT
  
  • While filled with long- term optimism, we thought the analyst event lacked near-term reality with respect to the current deteriorating fundamentals. In light of no near-term (2009) guidance, anticipate acceleration in growth, competitive pressures and economic backdrop, we think it's difficult to put much credibility into the 3-year plan. We think investors should gauge eBay against near-term performance. 
  •  Near–term, the marketplace business is expected to underperform industry growth trends before flattening out next year and reaccelerating in 2011 – representing an optimistic view from eBay, we think . Clearly, this business represents the cash cow, and risk remains on declining demand, high seller commissions and lack of interface changes. We think the Skype unit is actually performing well, and management should hold on to this business model.   
    
  •  The problem in the core lies with lack of demand, seller fees running too high and an e-commerce interface that is inconsistent with the industry norm (think product orientation, not listings metaphor). It is quite difficult for sellers to generate cash flows if they have to discount pricing (relative to other sites and direct) and maintain in-line to above-market commissions on selling on the platform, especially with weakening demand.  

That's all folks - later today, seller view of all the news.

I may update this post as more items come in.  If I do, I'll highlight them with three stars like this ***. I think the funniest thing I read was from Christa@TWP who led with: "Should eBay Change ticker to PYPL?"

Later today I'll put together a 'what does this mean for sellers' post as we're getting lots of inbound questions around this from customers.

Seeking Alpha Disclosure - I am long google and Amazon

 

eBay analyst day news roundup.

Some news reports are hitting from analyst day that I thought readers would be interested in so I've captured some of them here for your reading+viewing pleasure.  Tomorrow and later tonight the stock analysts will chime in as well and I'll try and summarize some of their findings.  Also, I have the Citi call with Mahaney (contact him if you want to participate) at 11am ET tomorrow (3/12/09) and after that will be publishing our thoughts on the analyst day and the implications for sellers here.

Before jumping into that, eBay has two downloads up from the day:

• The presentations are all in this jumbo file
• There's a little backgrounder here (financial background and bios). 

Most of the press took eBay's lead and talks primarily about the PayPal opportunities.

• ($ub required) The WSJ has an interesting piece out called 'eBay retreats in Web Retailing'.  In it Geoff covers the fact that eBay basically said today they won't compete head to head with Amazon on in-season product. Yours truly has a quote in here.
• NYT has a blog post by Brad Stone here.  Brad interviewed JD and this quote was concerning.  I can guarantee you that Amazon sees eBay as a competitor: "“Everyone is saying, it’s eBay versus Amazon. We aren’t trying to be a retailer. We’re not trying to fill our shelves with every new iPod. If our sellers can find new ones and resell it, that’s fabulous.”"
  •  There are two possibilities here: 
    •  JD is aloof and doesn't want the press to think Amazon is a competitor.
    •  eBay really doesn't believe Amazon competes, just like McKinsey told them that google isn't a competitive threat.  Either way, it's a weird way to approach this.
      • Maybe eBay hasn't seen the marketplace that Amazon is operating over there?  Last I checked, I think they may have ipods that are both new and used over there -oh, but they are a retailer so that's different.  Crazy right?  Well read that quote again.
• AP story is here - 
  •  JD quote - "..But we were faced with the innovator's dilemma. We were the largest, biggest, successful, profitable, and we knew we needed to make changes but the changes we'd made were always incremental because we didn't want to upset the apple cart," he said." 
  • Analyst quote - Derek Brown (aka Dr. Brown), an analyst with Cantor Fitzgerald, said he got the sense from the presentations that the changes eBay implemented last year didn't quite yield the results it had hoped, and that eBay is now speeding things up in an effort to bring the market back to them."Are they making the right changes in the right order and will those changes bear the fruit they hope? It remains to be seen," he said.  
• Reuters story is here - JD quote: ""Its (paypal) potential is enormous," Donahoe told Reuters. "It's not just a stepsister ..., it's a second core."  
  •  Analyst quote (shout out to eBay Strategies friend - SteveW!) "The question is: will those changes make the experience competitive with other online retailers like Amazon or Zappos who aren't standing still. That's hard to say," Pacific Crest analyst Steve Weinstein said. 
• FT is here  

There were two CNBC stories today from Jim Goldman.  The one early in the day was about eBay vs. Amazon (smackdown!).  Then at 8pm ET he interviewed JD - both are embedded here for your viewing pleasure.

SeekingAlpha disclosure - I am long google and amazon.

  

eBay Analyst Day - Part IV - Q+A

This is part 4 (final), part 1 is here, and part 2 is here, part 3 is here and a 'top questions sellers wanted to ask' is here.  I recommend reading these in order.

Reminder - if any of the acronyms here are confusing, check the backgrounder here.

The Q+A session was fast paced so I tried to snag the stuff that was most interesting to marketplace participants with a little bit of extra thrown in.

Q: Is eBay working on merchandising?

A: ST - yes, we have more data than anyone and it's something we're working on.  LT adds that it will be driven by search

Q: Can you say more about this secondary market opportunity?

A: LT - yes, the old eBay was about cleaning junk out of your house, this is about cleaning junk out of your warehouse. The stuff retailers don't want

Q: Skype - will you split out all three businesses, or sell one?

A: JD got a little tough on this one and reiterated that Skype is something that doesn't fit, but they love it.  He wants to win in each business and that's the goal.  eBay helps PP win - brings new users, powers BML balance sheet, PP growth enabled Skype to grow without monetization.  JD - tell them why they are undervaluing it. BS joked that he wouldn't presume to do that, JD said - well give them some hints (funny).

Long blurb - highlight, BS thinks that marketplace business is valued at zero and thus people get free option on marketplace business is one way to look at it.  We work on two things - PP and eBay and stay out of Skype's way.

Q: How concentrated is your seller base? 25m sellers with $60b - Amazon has $10b with 1.5m sellers

A: LN answers - we favor those sellers regardless of size with superior experience and value.  We have a very diffuse base.  High trust sellers are winning.  We believe that over time we will have fragment base for two reasons.  1. Used segment - continue to see diversity/fragmentation. eforcity - fairly small business.  2. you will see large massive inventories in liquidation come into the market.  Search will look at all this and bring the best stuff up.

JD - we still embrace the large seller. Lots of small sellers bring great value and provide service.  We are only marketplace that can embrace both.

Q: What's the mix of new/used on the site.

A: JD - we won't go out and try and be a retailer.  90% out of season, 10% in-season (LN chimed in).  Everyone else has the in-season stuff, we're the only place with the secondary stuff.  Consumer can decide

Q: What are you going to do with all this cash that's sitting internationally?

A: First priority is M+A, second is stock repurchase, third is see one/two.  Went on long discusion about past M+A's.

Q: What exactly is happening to the auction busines -where is it going? If you're getting it on the fixed-price side, what are the competitive dynamics?

A: LN - FP has always grown faster than auction - all about showing the best results and seller quality.

Q: How do you win when you don't have supply leverage of a big box retailer? On the demand side you are facing pressure on search spend, etc. 

A: LN - On the demand side, we will delight buyers and they will use word of mouth. We want the 150m/m buyers to go tell their friends how great eBay is.

On seller side, in general, our sellers want velocity. We are dealing with different inventory of one item.  Let's take a jacket that is $150. Liquidators are moving it at $100-120.  They won't have as much, maybe 10 jackets.  They will move it on eBay because no risk and flexible.  That will bring inventory.

JD - the whole point of secondary market is that our sellers don't compete with big guys in an inefficient supply chain.

Q: Of the 6-7b in cashflow you will generate, a lot is in marketplace.  Everyone fearful that mp is in decline.  Couponing didn't work.  The value buyer isn't on the site driving GMV. Is there a risk that even with changes you don't gain share of wallet.  Also recommends doing a dividend.

A: LN - In the seller/risk equation that you point out.  You made our case!  We have to make foundational changes.  There are great deals on eBay today.  As we get into secondary market with inefficient supply chains, we can bring those deals on.

ST - If we fix the fundamentals, we will get organic growth.  We are driving th product and experience.  It is working as it's working on inactive buyers.

LN - word of mouth is our best marketing possible.

JD takeaways

JD concluded by saying there are three takeaways:

1. Our company is about connecting buyer and sellers - we need to evolve as ecommerce evolves.
2. Aiming our company to the future.  We now have clarity on where ecommerce is going and we will sail the ship to that point on the horizon.
3. We have a portfolio that is positioned to win in that environment and there's a benefit to having a portfolio (except for skype - editorial):

• Paypal - THE online payments network
• eBay - objectivity and commitment to take the business and make it the leader
• Skype - A great business

Finally, we have a leadership team that is absolutely commited to delivering and driving hard.  We look forward to this showing up in our results.

SeekingAlpha disclosure - I am long Google and Amazon

Questions that top sellers wanted to ask eBay today.

While on Twitter, for eBay's Analyst day, I started to receive tweets from sellers reading/following and tweeting.  They wanted to ask questions via analysts.  I was able to gather those and pass them on to some of the buy+sell side folks that I knew attended.  It's an interesting wish and worth publishing:

1. How much will advertising be growing from the eBay site – what amount of real estate does that represent and GMV cannibalization
2. Who does eBay think of as their customer – if they had to pick one of seller/buyer/shareholder
3. Does ebay plan to have any new protections against fraudulent buyers – will sellers have to pay for this?
4. Are you focused on secondary or primary (diamond) – we are confused.
5. If trust is so important – why does eBay continue to not implement verification of buyers and sellers?
6. Does eBay give preferential treatment to large diamond sellers with better economics and the removal of negatives/low dsrs?
7. eBay keeps saying that selection has never been better, but as sellers we are seeing the lowest selection in categories like shoes, golf, etc.  How does eBay reconcile that?
8. Why is Griff the only one that will talk to small sellers now? (does eBay hate small sellers now?)
9. If sellers with 4.8+ DSRs are ‘trusted sellers’, what are those with lower than 4.8?  Why not kick them off the site? (that one is mine)
10. If 2011 is when we will grow again, how will you get all of the buyers that leave over the next two years?
11. If UPC and catalogs are where eBay is going, how can vintage sellers stay on the site (and why).

SeekingAlpha disclosure - I am long google and Amazon

eBay Analyst day - Part III - eBay marketplaces

This is part 3, part 1 is here, and part 2 is here.  I recommend reading these in order.

Reminder - if any of the acronyms here are confusing, check the backgrounder here.

Lorrie Norrington - What's going on at eBay?

• eBay has 25m sellers 3m items a day globally
• Keeps talking about 'secondary market' and how they will own (more later)

• Not retailer, won't compete with sellers. seller competition drives best value for buyers.  - the "Not a retailer" is a swipe at Amazon.
• Creating new eBay where they have largest selection of deals (value) in any format.  Note - not easiest to use.  Good to see some kind of mission statement->

Why aren't we growing faster?


In the slide above, LN admits that the customer experience and 'approach to change' - READ 'eBay culture is calcitrant' - good to see they realize now they are fighting a tech battle.

LN then put forward this roadmap which was referenced throughout the rest, I'll call it the 2010+ roadmap slide if needed:

Of note is that they are now saying this change is going to extend beyond 2010 with 2009 another 'down' year, 2010, flat and then we'll see things grow again in 2011.  If I'm Amazon, I'm licking my chops on this one.

LN covered the 08 changes for a while which are dead horse material on this blog so I won't go into that.  This slide was used to show the progress on foundational changes.  There are so many things wrong with this one, I have to circle back:

One thing I found a little disturbing is that LT kept referring to 4.8+ DSR sellers as "Trusted sellers".  That seems fine at first, but then what is a seller with a 4.7?  Hmmm.

Lorrie then went on to talk about the 09 initiatives in broad strokes.  They are listed here on this slide:

Probably the most interesting one to me is that they are going to guarantee transactions it seem  starting in US and then UK - no details were offered on how this will work. Embedded sku (parent child as we call it in the Amazon world) will be good and finally enable sellers to offer a 'choice listing'.

Next, LN shed some light on the secondary market.  This was interesting as it seemed like something new they are focused on, but going back to my old analyst day decks, they talked about this as the tail of ecommerce so to me this is just a new chart that says the same thing they've been saying.  Maybe I'm missing the point though.

The middle bubble seems to be where they think they have a huge opportunity - out of season, outlet, overstock and liquidation, which I guess is true, but to me that's where the bulk of eBay is today, so are they saying they aren't growing where they already are?

Here's another slide on the topic, but again, doesn't offer up anything that isn't already what eBay is doing other than maybe a new focus on 'deep' inventories.  They did say that deal of day is driving some volume now which is good/true.

LN handed it over to ST.


Stephanie -Global Product (meaning how does the eBay site operate?)

Lorrie went through no short of about 50 slides showing the user experience changes over the last year.  A couple of tidbits from this:

• I noticed that the banner ad was stripped from all of the screen shots.  I guess ST doesn't find them useful either ;-)
• She showed the product-based experience in media that is live now.
• Showed the innovative new "buy box" that eBay has - picks out the best deal for the consumer in the upper right hand side.
• Snapshot view and a 'choice listing' - terrible experience for buyer and seller as it isn't part of the eBay tech platform 
• Showed some Kijiji integration I've never seen before - I was hoping they would kill this brand today, looks like it's here to stay (ugh!)
• Put forth a datapoint that eBay has best value - showed a Tivo HD and said it is 12% cheaper on eBay than anywhere else online (I'm going to check this)
• eBay deal of day
  • sold 8k xbox cards in 6hrs
  • sold 7k logitech remotes (ChannelAdvisor customer!)

Then ST showed a notional view (mockup) of how eBay could drive a great experience - it shows a product-based experience with the top chunk of items coming from "Trusted Sellers", the next from Marketplace deals and the last from 'whats nearby'.  This is actually very close to what I was thinking of in eBay 2.0, minus the ads at the bottom which I believe add little to no to negative value.

ST then talked about sellers and said that eBay is the best channel for sellers because:

• Velocity - best channel for cash flow
• Efficiency - increased operational efficiency (they want to drive this for sellers)
• Reliability - release management that's controlled (2/yr) for sellers

Mark Carges - SVP+CTO eBay

MC took the stage and didn't go through many slides, but it was actually the best part of the day because it looks like eBay finally has someone there that can help them on the technology/r+d side.

MC talked about 4 areas:

1. Search
   1. Talked about the challenges that are unique to eBay (more real time vs. web-search)
   2. 09 plan:
      1. Improve relevance
      2. Better sorting/bestmatch
      3. search as a platform - deliver custom experiences based on category
2. Catalog - wants to bring structured and unstructured data together on eBay to form a uniquely eBay catalog.  (editorial: Neat idea, hard to execute and starting at zero.
3. User Experience
   1. Showed some mockups of better buying experiences - heavily disclaimed that they are beyond experimental.
   2. One was a color picker like www.like.com
   3. Another was a knock off of bluenile's diamond builder
   4. Nothing innovative IMO
4. Platform
   1. Showed a project echo item - which is an application that can show up in Seller Manager Pro
   2. Likened this to their 'appstore' equivalent to the iphone - that's a real stretch as:
      
      1. eBay is the king of closed platforms and I haven't seen that change at all culturally, in fact it is going backwards
      2. This is in SMPro - only a small fraction of users see it.
      3. There's like one company (terapeak) that is even thinking of building against this thing.

All in all, I thought this was the best part of the presentation as it seems like they have someone finally thinking about the hard problems and how to solve them.  Going to be key to keep this guy and make him effective given non-tech culture at eBay.

LN wraps

LN concluded by recaping much of what was already said.  She also spent some time on classifieds pointing out that it has grown from $86m in 05 to $270m in 08 - a 46% CAGR.  She postulated that it is a $22B opportunity for eBay by 2010.

The most interesting part is she forecast what the marketplace business will look like in 2011 here:

This is a little bit scary to me given that the low-end is $5B revenue which is LESS than they did in 2008.  Even the high end - $7B is only 25% above where they were in 2008. I don't know what the CAGR is there, but it's very very low.  The mid-point of $6B is 20% growth over a three years period.  I don't think this is what Wall St. is thinking with 10 estimates.

Skype is next which I'll skip and then BS which I'll circle back to later.  Up next from a blog perspective will be Q+A

SeekingAlpha disclosure - I am long amazon and google