Deep dive into eBay's strong Q2 2012 Results
Last evening, July 18, 2012, eBay released their Q2 2012 results. As mentioned in the preview, we had a feeling this would be a great quarter for the company, and boy were we right. As of this writing the stock is up ~10% and flirting with new highs. In this blog post, we'll dissect the quarterly results focusing exclusively on the marketplace side of things (no payments or gsi, etc.) and of course highlight what we think are the most material datapoints for sellers.
Second Quarter Results Tracker and Highlights
Here's a key metrics tracker that we've updated to show eBay's Q2 results vs. their own guidance and Wall St. expectations: (click to enlarge)
I think the highlight of the conference call was John Donahoe's statement:
"This is the strongest performance we've seen out of marketplaces since 2006."
That's definitely true and exciting, but what's really impressive is that the marketplace is obviously a great deal larger now than what it was back in 2006, so they are accelerating a much larger 'mass'.
Here are some other tidbits of interest to sellers:
- As you can see in the tracker, US GMV grew at 14% and non-US grew at 16%, for an overall growth rate of 15% - right in line with e-commerce.
- Sold items grew at 19.7% - when SI grows faster than GMV that means the ASP went down - probably a reflection of category shift (see category details below for more info)
- Active users - I was a little disappointed to see this grow 8% after Wenig stated at EOL it is growing double digits - perhaps he meant for the month or for the US and not 'global for the Q' which is what is reported here. eBay now has 104.8m active users (compared to Amazon's Q1 170m).
- Fixed price is now 65% of GMV and growing at 20% y/y
- Auctions is now 35% of GMV and growing at a paltry 4% y/y - eBay is getting a natural tailwind as this melts away and the FP growth rate takes over.
- 48% of transactions had free shipping -up 11% y/y
- Top Rated Sellers (eTRS) made up more than half of US GMV - eTRS are growing at 18% y/y
eBay BFF's Mobile
Perhaps most interesting was the continued bullishness on mobile - across both eBay and Paypal:
- For historical reference, eBay did $5b in mobile sales in 2011.
- Early in 2012, they were forecasting $8b
- On the call yesterday, they bumped this up to $10b for both eBay and Paypal - there's a lot of overlap in there so I tend to ignore the Paypal number - think of it as effectively doubling on eBay.
- On the call there were a lot of Wall St. questions asking if this is incremental or cannibalistic - I don't think it matters to be honest - at least eBay is connecting with consumers and riding this wave vs. losing it. Under the old regime we would have all been really frustrated by lack of innovation here, so kudos to the new team for jumping out in front of this.
- This was interesting: they also said 600k of those new active users came from mobile. I guess those are android/apple folks that are grabbing the eBay family of apps and either re-engaging or first time users.
eBay's growth vs. e-commerce
We always like to compare eBay vs. e-commerce growth to see how the MP is doing against the baseline growth rate of the industry. In this chart we show that visually and include some of these 'interior' data points that eBay is now sharing:
You can see that eBay is essentially growing in-line with e-commerce in the US. What's more interesting and to my earlier point is that you have TRS and FP growing faster than e-commerce and gaining share vs. the other components (non-eTRS and auctions) - as that happens, the eBay growth rate should drift up toward those high teens and low twenties - something I don't think eBay is really putting into their guidance and that Wall St. is counting on happening.
One of the most popular datapoints we publish is category detail. First, let's look at the categories by size:
What really stands out to me from this data is that Home and Garden is now at a > $10b growth rate. I'll have to check the history of vehicles, but I'm definitely sure this is the first non-vehicle (and maybe the first category period) to get to this massive scale. H+G is interesting to me because it keeps on chugging without much focus from eBay.
Here's a view of the categories by Q2 growth rate:
I've color coded these into three buckets: Leaders, Neutral and Laggards.
- Tickets and travel - eBay redid the ticket category to be more stubhub friendly and it seems to be really paying off! The category is growing at 28% y/y and 23% sequentially - epic.
- Jewelry - This category has been a bit of a sleeper and it's interesting to see it take off - I'll have to ask some of our larger jewelry folks what's going on here.
- H+G - The largest category is growing at 19%, that's a huge contributor to this Q's overall growth rate.
- Collectibles and health both grew at the 15% mark y/y, but a bit of a concern is they did decline sequentially - we'll keep an eye on that.
- CSA - I was hoping with all of their focus on Fashion, that we'd see this category grow faster than the average, but it's only growing at 12% and is down 4% since Q1. Amazon is really increasing their efforts in this category, perhaps it's starting to show up here?
- P+A - This is interesting because our P+A numbers are substantially larger than this. Perhaps we see a changing of the guards from small/c2c type selling to B2C and ChannelAdvisor is growing faster because of our B2C concentration.
- Toys, CE and computers were all not only neutral, but negative sequentially, so we'll put them on the watch-list to see what they do next quarter.
- Sports and Photo were slow, but at least up Q/Q.
- While BMV held on to positive y/y growth, Q/Q it was down a whopping 20% - this category has to be hurting from the double wammy of e-books and Amazon.
- The only positive news down in laggard-ville is that Vehicles were up Q/Q, showing perhaps a bit of a turnaround happening in that category? That's a weird category because GMV 'doesn't matter', but it could be a second-order indicator of a turnaround.
- Musical instruments, antiques, video games and 'everything else' were all down y/y as well as Q/Q indicating serious weakness either from competition or structural challenges in the category. For example, video games are on life support with no new consoles or big Halo-like launches happening in a loooong time.
- Finally, coins and stamps seems to have stopped it's impressive run-up on Gold and silver prices -it's down 23% y/y and 13% Q/Q. Ouch.
What we're watching for in Q3
One interesting thing to watch for in Q3 is the annualization of last year's price change where they included S+H in FVF. It's our analysis this added to some of the growth rates and if they hold pricing the same, it will be interesting to see if this causes any slowdowns or not. Those changes went live on July 6, 2011.
Also, we'll be looking for any kind of read on the Holiday 2012 which hopefully will put a nice cherry on top of what is shaping up to be a great 'post turnaround' year for the eBay Marketplace.
What did you think of the Q? Let us know in comments.
SeekingAlpha Disclosure - I am long Google and Amazon. eBay is an investor in ChannelAdvisor where I am CEO.