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February 06, 2009

Episode IA - Some quick answers to your episode I questions.

Earlier in the week, I started a series around the battle between ebay and Amazon - here.  

Before I get into Episode II, I wanted to answer some of the more common questions that have come in from Episode I to make sure everyone understands the foundation we're building here. Many of these were in comments, but I also received several calls and emails with interesting questions/clarifications from the data in Episode I that I thought everyone would find of interest.  Here they are in Q+A format.

Q: What 'counts' in eBay's active user base? How about Amazon's

A: This question was spurred by the datapoints that eBay's active user base grew 4% vs. Amazon's grew 10%.  Here's my understanding of these metrics.  eBay's active user base counts anyone who bid, bought or sold in the last 365 days. 

Amazon's active BUYER metric just includes anyone that purchased.  

Q: Several people asked for the actual data behind eBay and Amazon's active user counts.

A: As of Q408, eBay had 86.3m active users.  Amazon reported 88m customers (buyers) and 1.5m seller accounts (for a apples to apples of 89.5m vs. eBay's 86.3m).  What's impressive about this is that Amazon is in only a fraction of the geographies of eBay and has a tighter definition (doesn't include sellers or bidders) and even given those disadvantages has already surpassed eBay AND is growing faster.  This is another datapoint that supports the theory that eBay has hit a tipping point.

Q: How does eBay count someones second, third or fourth ID on the site?  For example, many sellers have 2+ buyer accounts and 3+ seller accounts.

A: If ANY ID has activity in the last year, it will count.  If it does not, it will not. eBay doesn't do any 'de-duplication' of IDs to match them to individual people or anything.  To be fair, Amazon doesn't either, but I don't know many people with multiple amazon IDs, and most eBayers have at least 2.

Q: If active buyers increased, but the GMV of fixed-price and auction were down, what did those buyers do?

Similar Q: If active buyers are up, why are pageviews down?
A: There is much less activity per buyer (you see it for example in the GMV/user stat in my post). If active buyers goes up 3% and activity (gmv/buyer, ASP/purchase and pageviews/user) goes down 10%, you're going to get a massive decrease in page views as that 10% decrease goes across 86m buyers. Said another way - A 10% drop is the equivalent of 8m users 'lost' activity.  A 3% increase in active users is 2m - so there's a net 6m user activity loss.

Q: Does the eBay data include international sites?
A: Unless I specifically called it International or Domestic, yes, the eBay data includes all international sites (GMV-based - not stuff like kijijijijijijiji).

Q: How many visitors are leaving eBay due to marketing?
A: That's a really good question and one that only eBay knows the answer to.  eBay stopped reporting the advertisitng revenue specifically from the marketplace business.  They do report a 'bigger' advertising number that includes classified revenue, shopping.com and some other areas like rent.com which is $228m/Q or $901m/yr.  I think we could say that on a Q basis, there's $100m of advertising from marketplaces. Now some of that's going to be based on pageviews and some clicks, but if we assume a $.50 effective revenue per click that blends industry average $30 CPM and .40 CPC, we can back into 200m off-site clicks/Q  If eBay has about 80m unique visitors/m, then I believe they are essentially putting 20-30m of them off-site with ads (2 clicks/visitor/m - normalize the 200m/q to 66/m).  More on advertising later.


Q: What's up at Shopping.com?
A: In the conference call, eBay's CFO, Bob Swan, made a short remark that shopping.com's revenue was down 50%.  We've seen this with our comparison shopping retailers we work with.  Google changed the quality score algorithm and the result has been the destruction of the paid-search arbitrage that kept shopping.com chugging all these years.  Score one for google in the behind-the-scenes battle that has continued on since the more public Boston Tea Party a couple of years ago.  If eBay's business is in a decline, shopping.com has had the wings come off the plane and the pilot is standing at the door with a parachute.

Q: You say that autos GMV is down 30% - does that include auto-parts?
A: No, I should have been clearer.  Passenger vehicle GMV was down 30% - that does not include auto parts.  eBay actually produces this data, but for some reason, I can never find it.  I was able to get a friend to send it and have provided it for anyone that wants to look via this PDF: Download Ebay_categories_q4 .  

Here's some quick Q4 highlights:
  • auto-parts was down 12%
  • consumer electronics down 14% 
  • apparel down 10% 
  • Wow, now that I look at it y/y, no single category is up.  Yikes.
Q: You say eBay is down 12%, but I'm up on eBay 5% - how is that possible.
A: Congratulations my friend, you are taking share (on eBay)! BUT, depending on ecommerce, you are neutral or losing share and you are clearly losing share to Amazon.

Q: Are auctions really down 26% y/y?
A: Yes, auction-GMV is down that much y/y.  You can really see this if you look at this graph that was in the original article.  You can see that in Q407, auctions was at 9.4B and in Q408 it is down to 7B for a 2.4B difference.  That equates to a 25.6% decrease.  I don't make this stuff up folks ;-) 

Auction_fp_ebay_jpm

Q: Bonanzle! I love bonanzle why didn't you cover them?  They are replacing eBay soon and have 1m listings!
A: While Bonanzle seems to have picked up a huge following with expatriated eBay selllers, it is just starting to get some buyer traffic.  You can see this in the comscore data or if you look at sites like compete or quantcast, they show 300k/visitors/month - compare that with Amazon/eBay's scale of 80m+ visitors/month and you'll see they have a loooong way to go.  I think it's more interesting to think of someone like a Yahoo!, Google or Microsoft jumping into the competitive mix, because they each have buyer scale that could be married to supply.  Without a good mix of both in the recipe, you don't have a sufficiently liquid marketplace.

Q: Why did eBay change their discussion boards - I hate them! Why did JOhn Donahoe do that to me?

A: I have no idea.  I doubt that Donahoe even notices they were changed or was consulted in that decision.

Q: Aren't sellers worried that Amazon competes with them essentially?
A: Yes and there are stories where sellers have had a hot product that Amazon has come in and started competing with them on. The safest strategy for a seller is to build your own website, brand and buyers - potentially leveraging eBay/Amazon to help move this along.  

Q: You used this term "tipping point" - isn't that the point where something goes from behing a niche to a phenomenon?
A: Yes, but I use the term here because I think it works both ways.  Some folks have suggested "Negative network effects" or  "exponential death". Yes, I think these all describe what I'm trying to get at - the potential accelerating descent of eBay's business.  A snowball going down hill - pick your metaphor, I think it's happening.

SeekingAlpha disclosure - I am long google and amazon.


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