eBay Inc. (EBAY) Earnings Call Transcript & Summary

Understandable. Promoted Listings similarly has been sized as a $1 billion opportunity, I think, at least for you. One that other marketplaces have obviously built into multibillion-dollar businesses. How do you view asking sellers to pay more to promote their listings? And how big of an opportunity is that for eBay as you think more broadly about advertising on the platform?

Yes. So we think of it as sellers have the option to do it and they can use it to drive velocity. So we see it as another tool and capability to provide to them to really manage their business how they want to. And I think what's been great to see the launch with Promoted Listings and where it stands is that I think we do all of that with really enhancing and not degrading the buyer experience. And I think we found the right balance of how to do that. So we've committed to $800 million for the year in that business. It obviously moves and grows with volume. In Q2, it was over $200 million. So a significant opportunity for us, but we also believe that there is more potential. So that we believe we can drive more adoption, more conversion, and each quarter, we're launching new tools and capabilities that make it easier for our sellers to use things like Promoted Listings. In fact, we're trying to give them more data in general. So we launched some new capabilities this past quarter in Terapeak that gives them real-time pricing information. So they're able to use things like Promoted Listings, combined with these new tools that we're giving in Seller Hub to just manage their business more effectively, drive velocity where they want to drive to. And we think there's still a lot of opportunity left in the Promoted Listings business.

Yes. Understandable. You've talked a couple of times about some of the technology priorities that you've got. You mentioned AI is one of them. Obviously, technology investment has been a priority at varying levels for eBay for a long time. How do you size the right level of investment in technology for eBay? Is there a level that you should be pushing to where that technology investment can really drive growth for you and become profitable in the near term?

We're looking at it in 3 different ways. One is our -- just enabling our core technology to allow us to innovate faster. So that's getting off of legacy technology. That's been well underway since before I arrived. But we actually use some of the tailwinds that we've had from this year to actually accelerate that and move faster of getting off of some of the legacy technology to just allow us to innovate faster, and I'm really happy with the progress there. The second big level of investment or area is the opportunity to extend the things that are working. So payments is a great example. It's been a 2-year journey of investing in this technology, but it's right on track with what we expect it to be. And it's all next gen, really amazing technology, as is our Promoted Listings technology. So investing in these areas that create kind of new business opportunities for us is the second. And then the third one is really one of those next-gen capabilities that can really change the game. And sometimes, they're small things, like dark mode was a small investment, but the Gen Z community actually loves it. And the percentage of people that are using it has been pretty significant. Another one has been QR codes, a very small technology investment, but it makes the local pickup experience on eBay much easier because the buyer and seller can transact in the background pretty seamlessly. Using computer vision for things like image cleanup, but now in a flash, you can actually have a much better picture on the site. So you're going to see us investing more in next-gen capabilities, and those are just tiny examples. But more in next-gen capabilities to really delight the customer. Another big technology area of investment for us, Heath, is going to be on the marketing tech stack. So I think that we have the opportunity to really use these next-gen technologies to build a much more customized experience with our customers. The majority of our shopping actually happens on the app, and so our ability to do really unique experiences, really tailored experiences, I think, is another key opportunity for us. But look, we see this as a multiyear journey, but one where we're going to have wins along the way to really help drive the experience in a different way.

Yes. Jamie, you mentioned that marketing tech stack. I mean obviously, you come from a background where you spend a lot of time with membership organizations and driving incremental revenue streams for really big businesses already. When you look at the economics of selling on eBay, how do you feel about the take rate that eBay earns for its role? What do you think about the opportunities to sort of create incremental revenue streams on top of the platform?

Yes. So I think Promoted Listings is a good example of an opportunity to create a new revenue stream. Obviously, payments is a new opportunity for us. And off of that, I think we can build additional services. But I think, look, our goal is to have the best economics for a -- for our seller overall. And we think we do that by driving a lot of demand and driving a lot of growth. And then these other tools and third-party services allow us to modify the take rate as appropriate. Let me just give you an example of where we're really enhancing the experience in a different way. It was something that we announced this week, which is how we're changing the experience in our watches category. So if you look at watches, obviously, really important for a high selling price item to have more trust and more authentication built into the platform. So what we launched is that for every watch over $2,000, we're going to be authenticating that through a third-party intermediary before it goes to the buyer. And then for everything over $10,000, we're actually be doing that via an escrow service in partnership with Escrow.com. In addition, we're launching a new product in discovery and browse experience in watches to really help that enthusiast. And when I talk about turning buyers into enthusiasts, watches is an example category of where that happens in a big way on the platform. And so when you look at it there, it's a big win for buyers because they know that they're getting the product that was in the description. It's been authenticated, and that allows a higher selling price on the platform and more trust and more value that eBay is providing as part of that process. At the same time, it actually protects the seller because we actually intermediate the return as well to make sure that the product is not coming back as an empty box or something where there's going to be a dispute or claim. And then with the new product experience really driven for watches, it's just creating a much better experience of shopping. And so when I talked about that first priority for us of defending our core and going after real verticals where there's an opportunity, think of that as an example of what you're going to see from eBay over the coming years, which is really looking and being customer-obsessed with the end-to-end experience and saying, what do we build to make sure that we're creating the best experience. And these are -- don't think of these as like different experiences, like we're not going to build 30 different eBay Motors. These are horizontal capabilities that we're building across the platform that allow us to compete better in verticals, especially as we focus on that non-new in-season and that big TAM that we're going after. But I think it's a good example of the changes we're seeing and the customer obsession that we're focusing the team on.

Yes. No, that makes sense. You struck a very big deal in Classifieds right after joining, maybe not the one everybody was expecting, with eBay is still maintaining a very large equity stake in the business in the Classifieds business. Why was that the right move for eBay? And what are your future plans in Classifieds with that stake look like?

Yes. So look, first, with the creation of this new business, Adevinta, we're really excited because it creates the #1 online classifieds business in the world. When you look at the assets that eBay had in its Classifieds business plus Adevinta, they're really complementary when you think about geographies, when you think about the power of real estate and motors and key verticals in the Classifieds business, we see that bringing them together creates a lot of opportunity. Not only the synergies that Adevinta has talked about on the cost side, but also just on the revenue side and potential of the new combined entity. We think it's great for shareholders because it created some short-term cash for the business as well as gives us option value in the long-term for that business. When you look at the change in price of the Adevinta stock price, I think you'll see that it represents the industrial logic in the deal and why we think it makes sense. The other key piece for the organization at eBay is it allows us to focus our day-to-day in our core marketplace business. So now with StubHub sold off and the Adevinta deal, it really allows us to focus on this core vision and this core strategy. When you think about all of our technology resources and all of the management time being focused on marketplaces, where we see there's a lot of enormous untapped potential.

Yes. Now that's -- it's going to be fascinating to watch. I mean obviously, most of the last few years for eBay have been focused on divestitures is your path to creating a better eBay, what role will M&A have?

Yes. As we look forward to the business, we plan to be disciplined capital allocators just like we have been. So balancing growth and balancing margin with the commitments that we've made there. As we think about M&A, we'll look in -- we're open to opportunistically looking at M&A that makes sense with this strategy. Obviously, it would have to be asset-light and consistent with our model. But we'll continue to look at that. But we're committed to being disciplined capital allocators. We're committed to our dividend. We believe in the share buybacks. We still think the stock is undervalued. And we'll be opportunistic to look at opportunities in M&A.

Yes. One of the parts of e-commerce, obviously, that's been under kind of a microscope, especially over the last few weeks or few months now has been fulfillment, as we've seen, particularly the third-party networks stretched beyond their limit. What role do you see fulfillment playing in eBay's future, especially as platforms like FedEx and UPS talk about surcharges during the holiday season? What do you need to do to be able to support your buyers and sellers in that kind of environment?

Yes. So look, we spend a lot of time with our sellers. And some of my favorite time is getting out there and meeting with them. And in this COVID world, we've been doing it all virtually, but just as impactful. And what they're telling us is that they don't really need us to run their warehouses and for eBay to build up a huge warehouse network. What they're really focused on is how do we help them with their overall logistics and transportation. How do we integrate it better into the platform, give more confirmation to buyers about the arrival of the items, and just make it overall easier for them. So this past week or 2, we announced a deal with UPS where we're giving them sellers. We're passing on incredible savings to our sellers of being able to work with UPS on the platform where we've integrated the whole process, integrated shipping labels, integrated tracking. And so now our sellers in the U.S. have multiple choices between USPS and FedEx and UPS, all at very attractive rates. And that's the type of innovation that they want to see from us is how to help that overall process better, how to give them tools and capabilities to make logistics easier. Now there are certain cases where we do invest in a partnership or a relationship to help drive fulfillment for our sellers. A lot of that has to do with cross-border trade business, where forward deploying the inventory just makes the whole process much more seamless, provides a lot more certainty and confirmation and tracking. And so those are cases where we have invested in our partnerships with WinIt and SpeedPAK and other ones that we're doing to help drive that business where it is really critical. But on a purely domestic basis, that's been less of a need for our sellers.

Great. No, really, really appreciate that. Obviously, one area that I think is worth just touching on is how you view the competitive landscape for eBay. I mean in an e-commerce environment that's increasingly getting as crowded as we see globally, where does eBay fit?

Yes. So there's a couple of things I'd say is, one is, I think over the past few years, we've seen the growth of niche competitors in specific verticals. And I think what that's showing us is just how much TAM and opportunity is out there for us to go grab and be part of eBay. And so a big part of why I talked about our vertical strategy and really building these great end-to-end experiences is really making sure that eBay is the #1 destination for all of those categories across the web. The second thing I'd say is that part of our focus for our non-new in-season is because we really feel like there's a unique right to win in that category. And it's just such a big TAM where there's enormous potential, and we're still such small market share that we see a lot of growth left in that opportunity. And it's unique to eBay because of the unique C2C selling components that we have on the platform because of the enthusiast nature of the platform, frankly, because of the flexibility of the formats, as an example. When I was -- when I left the company, obviously, fixed price have grown a lot. But now we have -- best offer is a very heavily used feature across the site. We've introduced seller-initiated offers, so sellers are actually going out to buyers and making offers, and we continue to build new capabilities into that type of format. That's doing $1 billion already of GMV just in this format. So we see this really unique opportunity in the core categories and these verticals that are really at the core of eBay with this big TAM, and that's where we're focused. I think the competition makes us stronger. We've been really obsessed with the customer and all the key pieces of the journey along the way, taking friction out of the business. And that's why we're launching the things like managed payments and the investment in the tech-led reimagination is really to make sure that they have the absolute best experience on eBay.

Yes. One market, in particular, where eBay has invested heavily over the years is Korea, where competition continues to intensify with just so much venture capital going into the companies there. How would you describe the state of things in Korea? And what's your strategy for eBay there?

Yes. Korea is, obviously, a competitive market, and it's slightly different where they have a strong 1P business there in Korea. And what I would say is that it has been competitive. You see competitors investing a lot to drive growth with what we believe is probably not a profitable thing for them to do. And we run 2 profitable businesses in Korea with Gmarket and IAC. So we're really focused on the things that we do really well there, driving the platform, both the 1P and the 3P business in Korea. Also, we have some different techniques for loyalty there. We have a Smile Club, which drives loyalty. We get free shipping. They get dedicated customer service. And so we're really leaning into our playbook in that market and doing the right things to drive growth there.

Yes. So we have gotten a few questions from investors in over the webcast. I think you've answered many of them. But one that I thought was worth asking, what lessons and successes from running SamsClub.com can you apply to eBay? And in particular, is there anything from the physical world innovations like self-checkout or in-store pickup that might be applicable to your vision for eBay?

Yes. When I look at the experiences there, the first thing I'll touch on is, I feel like I've led a tech-led reimagination a couple of times in my career, and it's been really successful. So the first thing I'd say is that if we look at the things that we did there, where the membership process took 20 minutes to sign up, and we said, how do we think about this in a completely different way and get it to under 2 minutes to do. We're going to make a significant transformation and obviously, the metrics kind of followed from a membership standpoint. When I look at eBay, I feel like we have the same type of opportunity here. So if I look at the existing selling process today, Heath, I think it's just too cumbersome. And we have the opportunity to not try to make it incrementally better, but how do we use computer vision and next-gen technologies and AI to really simplify that down to a 30-second selling experience on the site. And you see the steps we're making, like managed payments is a key part of trying to get that to be a 30-second or 2-minute listing flow because we can really shrink down the information that we need and use technology to get there. And with managed payments, I don't have to go set up a separate account to do that. I think as you look at apps like Scan & Go, and we say, how do we put more capabilities in the hands of our -- in that case, in the hands of customers. That's how I think about being the seller platform of choice. How do we take our tools and capabilities give more data to our sellers. You and I talked at the beginning of this conversation about marketing and the opportunity that we have there. I think we have the opportunity to involve our sellers in creating next-gen marketing capabilities for us on the platform. And that's why I'm excited by investing our dollars in technology there is that those can be really game changing. And that's what I've seen in the physical and the retail world, and I think the same thing we can bring over to us at eBay. The last thing I'd say is just I'm trying to bring a real customer obsession to the organization. Every interaction that we have with sellers, every interaction that we have with buyers, how do we make sure that we're really fulfilling their ultimate needs in the platform, how do we give them the best and simplest and most seamless experience, that's our focus.

Great. Jamie, thanks so much for taking the time to join us. Really can't wait to see how all of this works out for you and the team at eBay. Joe, as well, thanks for joining us, and we certainly look forward to staying in touch with you on all this.

Thanks, Heath. Thanks for having us.