E-Commerce Outlook – Second Quarter 2008 Earnings – Part 2 – eBay

It’s that time again, earnings season, where the huge net players not only post their financial results for the current quarter but forecast their outlook for the rest of the year. As the second quarter comes to a close and it grows more apparent that runaway energy costs and decreased confidence in financial institutions has taken a toll on economic growth, many pundits have wondered if the growth of e-commerce would be slowed or reversed by the greater economic landscape. Over the next two weeks I’ll take a look at the four companies, Google, eBay, Overstock, and Amazon to help us gauge where e-commerce is going in the next six to twelve months.

Today’s Spotlight:

eBay announced earnings on Wednesday, July 16th, reporting profits of 460 million (+25 percent YoY) on 2.2 billion dollars in revenue (+20 percent YoY). eBay stock dropped rather dramatically after the earnings announcement (-14 percent the next trading day) despite beating the street’s expectations for both revenue and earnings per share due poor marketplace health metrics. eBay Core (eBay.com) revenue only grew at 13 percent during the current quarter while GMV (Gross Merchandise Value- The total dollar amount of transactions on eBay’s platform) grew at an anemic 8 percent.

CPC’s Thoughts- During eBay’s Q1 earning call, new CEO John Donahoe announced that eBay would be making significant changes to its marketplace to retain and attract buyers and sellers to the site. A number of changes were introduced to the site aimed at increasing inventory and streamlining seller feedback to help to kick start slowing GMV. Despite this, GMV grew in the single digits with overall revenue only buoyed by eBay’s growing Advertising business (Through partnerships with Yahoo and Google). It remains to be seen if the changes made in the first half of the year will have a positive impact on GMV growth during the second half of the year. While the earnings numbers and analyst downgrades are concerning, due to the marketplace changes eBay performance during Q2 should not be used as a yardstick to gauge the health of overall health e-commerce. It should be interesting however to see if merchants impacted by eBay slowing growth and rapid changes will migrate over to the other marketplaces (Amazon, Buy.com, Overstock) or invest in their own brands to compete on the shopping engines.