eBay Cites Advertising As A Way To Improve Revenue

eBay this week reported $763 million in net income for its fourth-quarter 2018, compared with its year-ago losses of $2.6 billion.

During the earnings call, the company said it would pay its first ever $0.14 dividend in March and return about $7 billion to shareholders through dividends and buybacks that would take place during the next two years.

Analysts are not impressed. “Nothing in this report makes us change our fundamental thoughts on eBay,” wrote Ben Schachter, analyst at Macquarie, in a research note. “It is still struggling to find its position in a competitive ecommerce landscape. We believe EBAY must find an answer to losing share to Amazon and address the structural problems of the business, including brand association and challenges with not controlling its inventory and fulfilment experience.”

During the earnings call, Devin Wenig, eBay president and CEO, said this is exactly what the company is doing. It plans to make changes to its advertising and marketing strategies based on slower growth from “non-structured data SEO pages” that delivered less traffic and lower conversions compared with a year ago.

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“While we increased our marketing spend in Q4, we experienced lower returns than expected,” Wenig said. “As we entered 2019 we've aligned our tactics to directly address these issues and to capitalize on the opportunities ahead of us as we transition to a different eBay in 2020 with a comprehensive catalog, intermediated payments and a robust and high contribution advertising business.”

Wenig said eBay had 600,000 active sellers promote 200 million listings during the fourth quarter of 2018, which led the company to roll out placements more broadly in search results.

The changes helped to drive nearly $80 million of revenue during the fourth quarter of 2018 -- up nearly 150% year-on-year.

For the full year, promoted listings delivered nearly $200 million of revenue -- well above the expectation that eBay set in October.

“We’ll continue to ramp our advertising effort in 2019, while ensuring we achieve the right balance between user experience and monetization as we build towards $1 billion advertising revenue opportunity,” Wenig said.

Marketing services and other revenue fell 4%, but most of the decline has been attributed to shifting advertising efforts away from non-strategic third party ad placements and toward first-party promoted listings products.

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