eBay Inc. (NASDAQ:EBAY) Goldman Sachs Communacopia + Technology Conference 2022 September 12, 2022 1:00 PM ET
Company Participants
Jamie Iannone – Chief Executive Officer
Steve Priest – Chief Financial Officer
Conference Call Participants
Eric Sheridan – Goldman Sachs
Eric Sheridan
Can you hear me now? There we go. Okay. Welcome back everyone. I know everyone is still finding their seats, but in the interest of keeping things on time let’s go on to our next fireside chat. So it’s my pleasure to have the team from eBay Jamie Iannone, CEO; Steve Priest, CFO. Jamie, Steve always great to catch up and thanks so much for being part of our combined Technology Communacopia Conference this year.
Jamie Iannone
Great to be here. Thanks.
Steve Priest
Good to see you.
Question-and-Answer Session
Q – Eric Sheridan
So Jamie, I think if we start maybe with an introduction. I think the company has been through one of the more interesting transformations to a mix of the pandemic. And since you’ve joined and Steve, obviously, joined during the pandemic as well. Maybe just level set for us. What is the company faced through the pandemic? What are your key strategic initiatives? And how are you feeling about executing against them at this point?
Jamie Iannone
Yeah. Well, thanks for having me. Great to be here. So when you look at the transformation that we made 2.5 years ago, really leaning into non-new in season and focused category I think it lines up very well with some of the challenging times that we’re seeing now. I’m particularly happy about what we’re seeing on focused categories. The thesis was really to change customer satisfaction and NPS and that would change the experience for buyers and sellers on the platform. And that’s exactly what’s happened.
So if you look at the data that we showed at our Investor Day with what happened in our sneakers category, for example, when we invested in it as focused categories to what we talked about last quarter with focused categories growing nine points ahead of the rest of the business just feel really good. We just announced some recent acquisitions, which we can talk about in the vertical space.
But also if you look, the majority of our investment is still going to horizontal efforts across the platform. So the work we did in payments and the innovation that we’ve driven even after converting $80 billion to go through our platform with lots of new capabilities now, for example, with buyer effects et cetera, the work that we’re doing in advertising and really across the board with things like stores, users listing experience and sellers. So really happy about the pace of innovation on the platform. And I guess I’d end with I’m excited about the team that we’ve been able to put together. Not just Steve, but more than half of the leadership team is new and real experts in the field. They’ve been able to hire world-class talent into the organization and so that’s performed really well.
Eric Sheridan
Okay. We’re going to come back to all of that in mind a lot of that for a much wider ranging conversation. I think just jumping right into the broader consumer, what are you seeing in terms of the eBay consumer right now? Obviously, it’s a volatile macro environment in general, but you talked a lot about the eBay consumer especially the ones that are power buyers, power users on the platform generating an outsized amount of GMV, how are some of your initiatives lining up on the users you want for what your strategic goals are versus the broader macro environment?
Jamie Iannone
Yeah, I’d say a couple of things. One is well, we’re certainly not immune to the macro environment and what’s happening globally around the world, but our focus on non-new in-season has made our business more resilient from that standpoint, because frankly eBay offers a lot of value. For example, we lean into our refurbished categories and those have been and really interesting opportunity to get like new products for 30% off. So from that alignment is really great.
When you look at the enthusiast buyer on eBay, they spend over $3,000 on average. They shop in eight categories outside of their original category and they shop with us 30 times a year. So we’re really focused on how do we not only acquire people in as enthusiast buyers on the platform, but how do we develop new buyers into enthusiasts. And then as we get them onto the platform, how do we really drive the multiplier effect of getting them to go across category of them to become sellers on the platform and then to buy in other categories across the experience, and that’s been working out really well for us over the time period.
So Steve has talked on a couple of the earnings calls about the differences we see with international and our US businesses just because of the war, because of what’s happening in inflation and macro impacts, and supply chain. But overall, when you look at the business and our strategy in terms of what we’re doing, we’re really excited about the growth that we’re seeing, especially, in our focus categories and the performance of those buyers.
Eric Sheridan
Okay. Great. I want to come back to those focused categories because maybe you can lay out for those who don’t know eBay as well or weren’t as familiar with what you laid out at the Analyst Day. What are your key focus categories that you’re investing behind? How should we be thinking about them widening out the utility on the buyer-side when you think about those focused categories becoming a bigger percentage of the mix over time?
Jamie Iannone
Yes. Well let me take a step back. So when you look at eBay, eBay has the benefit of horizontal scale. We have the benefit of breadth. We have the benefit of having an attractive CAC because when we acquire a customer in we can monetize them across eight different categories on the site which is especially beneficial.
Now in many cases, the real benefit of eBay is that we have 80% organic traffic on the platform and so lots of buyers. So we started with the sneakers category and watches doing significant changes in those categories, laying out things like authentication. So we now authenticate products and sneakers and watches and handbags, and we start that in a single category and geography and then expand that around the globe. So we did handbags in the US, then we expanded handbags to UK and Australia. Last quarter we’re now authenticating handbags in Germany.
Why does that make a huge difference in that category? A, is it raises the level of trust that we have on the category that a buyer has in that category; and B, we also protect the seller because the seller gets intermediate on the way back. So it’s a real game changer in terms of NPS and CSAT on the category. So this most recent quarter we announced jewelry. We’re doing that with a partnership with GIA. We’re really changing the game-changing level of trust in what we’re doing in jewelry on the platform.
And the strategy has been through the back end of 2021 we’ve gotten to 20% of GMV on the site with focused categories. At the Investor Day we laid out getting to 50% of GMV by the end of 2024. And so that’s really kind of the ramp that we’re on. A lot of innovations, for example, most recently in our parts and accessories category, massive category over $10 billion of GMV on the business and a real opportunity there to change the trust change the experience and change the vertical specific marketing that we’re doing.
Eric Sheridan
Okay. In terms of the investments you have to make as you build and scale one of these focus categories is there a way to give us an example of some of the key investments you have to make when you try to widen out one of these focus categories? And are there some that are further along in the investment cycle and some where the investment cycle is still sort of just starting?
Jamie Iannone
Yes. So a couple of things. One is we’re doing a lot more vertical-specific marketing — full funnel vertical specific marketing really directed at acquiring enthusiast buyers into the platform. In one of our early meetings this morning I was with an investor that said Jamie this is great. I’ve been looking at this category and I got a targeted advertising inside of my Uber app about the work that you’re doing in that category, which was interesting given Dara was the last person up on stage small world here.
But that work is really about how do we make sure that people are aware and we’re driving consideration in those key focus categories on the site. So let me take an example of sneakers. In sneakers, eBay used to do just horizontal advertising right, like eBay fill your cart with color et cetera. Now you see us like on TikTok doing specific influencer marketing.
We had a campaign a few quarters ago which got four billion views. People generated thousands of consumer chain invented videos. This is a very different eBay. In that category we invested into marketing. We invested into reduced final value fees and we saw such great growth that we showed at Investor Day that we also recently reintroduced monetization back for sneakers over $100.
So it all depends on the category. You take that versus something like parts and accessories. eBay is the leader in UK and Germany and a very strong player in parts and accessories. So we have over 40 million buyers in parts and accessories on the platform. So there, while we’re investing in vertical-specific marketing, a big part of our focus is how do we change the experience on the platform.
Eric Sheridan
Got it. Okay. That’s key. And then, I want to — obviously, the categories to some degree are supply side of the equation. And when we think about the demand side of the equation or buyer growth, obviously, you’re seeing the trajectory of buyer growth come down, but you’ve explained it as a result of the focus of how you’re sort of aligning investments in buyer growth against yield or return from a GMV basis.
So can you just lay out that view for investors, so they better understand when they see buyer growth at a certain level? What some of the underlying decisions as a company you guys are making, as to how to invest and think about the trajectory of buyer growth?
Jamie Iannone
Yes, I would say, if you go back to 2019, the company was really focused just on acquiring active buyers, doing things like couponing and offering percentages off, et cetera, to bring more active buyers on the platform.
When I came in, we changed that strategy, really focused on how do we turn buyers into long-term enthusiast buyers on the platform and build a trusted relationship. And why is that important? Because our enthusiast buyers represent 70% of GMV on the platform. So we’re really focused.
They — like I said, they spend over $3,000, which is like a membership model level of spend without a loyalty program. They shop in over eight different categories. They shop 30 times a year. So really leaning in from that perspective.
When I look at the bottom — really the bottom 50% of all active buyers, they only contribute 5% of GMV. So what I said at Investor Day is that, we expect some near-term pressure on both active buyers and enthusiast buyers, because of the lapping. It’s a 12-month metric.
For example, the lapping of COVID effects that we have, also what’s going on in the macro impact, but the strategy of going after and acquiring enthusiast buyers is absolutely the right one. And so, I think, a better indicator for investors than looking at active buyers, which we’re less focused on is to look at our focused category growth, because it’s a better leading indicator of what’s happening in the business and the success of the strategy that we’ve laid out.
And what we talked about last quarter is, we had a 9-point differential in focus categories. We talked about some of the successes that we’ve seen category by category. And we talk about how the playbook that we rolled out in the US is working for us internationally as well. And so, we’re continuing to expand category by category what we’ve done in the US and our other major markets.
Eric Sheridan
Maybe one question I get a fair bit from investors is, how should folks be thinking about turning an enthusiastic buyer into sort of a more enthusiastic buyer with a wider array of category exposure versus turning a non-enthusiastic buyer into an enthusiastic buyer. How should we be thinking about the sort of matrix of what you see in the business and how to best allocate capital to sort of convert buyers into that type of behavior pattern?
Jamie Iannone
Yes. So I’d say a couple of things. One is, if I look at the spend of our enthusiast buyer versus 2019, it’s up double digits. So we’re actually being successful at taking our enthusiast buyers and getting them to do more on the platform.
Part of that is, is the amazing experience that we’ve created. I just bought two pairs of authenticated sneakers, some Nike or Jordan 1, and they come in a beautiful box. They come with an NFC tag. I can hold my phone up to see it. I know that they’ve been authenticated. So, the quality of the experience on eBay has changed dramatically. And I can just tell you stories from both sellers and buyers about, wow, this makes me want to buy so much more on the platform.
For a seller, as well, it’s the same type of experience. So what we’re seeing is sellers may have been giving us 20% of their watches or 30% of their watches. And now, they’re like we’re going to put all of our watches on to eBay, because you’ve created this amazing intermediated experience between buyers and sellers. So, that’s a huge focus.
We still are focused on converting buyers into enthusiast buyers but we’ve moved away from the strategy of, let’s just go out there and get active buyers. What we’re actually doing is trying to acquire enthusiast buyers into a category. So, who is that parts and accessories do-it-yourself enthusiast that’s out there?
And so we’re at the New York Auto trade show. We’re working with key influencers in that category that the customer really reacts to, to bring them directly into the marketplace. We’re working with key influencers like we just did something with Chase Utley and Miles Teller that went viral to kind of bring people in. So the strategy is — will be to graduate buyers to become enthusiasts buyers but more importantly, let’s go out and target and acquire them.
Lastly let me say, because this is important is eBay’s ability to acquire them should be better than any specific vertical competitor, because we can monetize them across eight different categories. So, if I’m a specific vertical competitor in a category, I’ve got to monetize that user just against that category. At eBay, if I acquire a watch buyer, we can sell them art, we can sell them parts and accessories and so that’s great.
The other frankly big benefit is that 80% of our traffic is organic. 10% is paid, 10% is essentially free through things like SEO, so just leveraging the massive scale and traffic that we have coming to us directly is the other huge benefit.
Eric Sheridan
Okay, super clear. I want to turn to other avenues of monetization that you’ve talked a lot about in the last couple of years. You’ve recently talked about the traction you’re seeing in first-party advertising. You have a host of products, but it’s still an area where you expect to see a lot of innovation and continue to see both off-eBay advertising on-eBay advertising benefit for sellers. Talk a little bit about what your suite of ad products look like today and how you see them evolving in the next couple of years to broaden out some of the advertising revenue you have on the platform?
Jamie Iannone
Yes, I’ll start and then, Steve can jump in on some of the things that we talked about at Investor Day. So, we grew this business to over $1 billion top advertisers on the platform really on the backs of a single product, which is our Promoted Listings Standards product, which is essentially a pay per acquisition type of product.
And really great traction in that product, but still a huge amount of opportunity because of the ROAS that we provide to our sellers, sellers in general that use our Promoted Listings are buying — or sorry, experiencing double-digit growth in their sales on the platform, so it’s really healthy.
And so, over the last year, we’ve introduced three new products in advertising. We introduced Promoted Listings Advanced, which is a CPC-based model. We introduced External eBay Advertising, which is the ability to partner with our sellers to list things externally and get them promoted.
And the third is Promoted Listings Express, which is a fixed-fee product, really designed around our auctions format. And so, we announced last quarter, those are up 30% quarter-on-quarter and it’s still early days, but we believe they have a lot of potential. Do you want to talk about the broader things we laid out, Steve?
Steve Priest
Yes. Good morning. Eric. Good morning, everyone. Glad to see you. I think there’s a couple of like data points that I referred to. At the second quarter earnings, we talked about the momentum in advertising. The fact we’re sort of 20% — seeing 20% growth over the sort of core volume on the platform, which is a testament to the execution. We’re about 1.5% in terms of take rate on ad side of things as a percentage of GMV. And at Investor Day, as one of the key pillars of driving shareholder returns, we talked about getting that to around 2% by 2025. So as Jamie talked about four products, three of them relatively nascent seen great execution, a great trajectory for the business that will drive shareholder returns over the next few years.
Eric Sheridan
What are some of the key investments you might have to make whether it’s on the product side or the measurement attribution side? Are there still things we should be watchful for of investments that have to be made to marry sort of your ambition in advertising with the current skill set in advertising?
Jamie Iannone
You know, we think about – we think about getting 5% better every day with what we’re doing in advertising. So we just think about a continuous evolution of how do we make it easier for sellers to participate in our Promoted Listings product and then how do we accelerate the benefit for our buyers.
So I’ll give you an example is recently we launched a visually similar Promoted Listings part of the experience, where if I’m in let’s say apparel and I’m looking at black cocktail dresses with red roses on them, I’ll see visually similar other dresses like that. It’s a Promoted Listings product but it’s also providing benefit back to our buyers on the platform. We just introduced in parts and accessories new fitness based fitment based modules. So if I’m looking for a specific parts for an Acura MDX from 2017, I’ll see Promoted Listings very similar to that specific fitment.
So the idea with advertising is really just this continual march to make it better every single day. And as Steve talked about, that’s why we said, for the foreseeable future. We expect our advertising revenue to outpace volume because of the innovation that we’re doing from the product and technology standpoint.
Eric Sheridan
Okay. Super clear. Turning to the payment side of the business. This was the other amplifier or a mix of revenue growth and dynamics that have improved a lot of the damage around sellers. Maybe just take a step back first and remind folks what has been built on the payment side and the transition eBay has gone through. It’s been quite a transition over the last couple of years on the payment side and how the payment side now sets the company up in terms of thinking about whether it’s growth, seller dynamics flexibility. However, you guys want to frame up sort of the future of payments on the platform?
Jamie Iannone
Yes I’ll start and then Steve you should jump in. So if I go back a couple of years, we said we do $2 billion in payment revenue and $0.5 billion in operating income. And I thought nobody thought eBay could pull off with that speed getting $80 billion of volume transacted on the platform, and really pleased with the performance of what we accomplished there.
The launch went very smoothly and we’re now intermediating, which gives buyers and sellers so much more choice on the platform, right? We can now see Google Pay and Apple Pay. We had launched Afterpay in Australia. We just announced and implemented a relationship with Klarna, because in Germany there’s very specific payment methods like invoicing that are very attractive in that market and so opening up new payment methods. But even having just launched the platform, we’re continuing to innovate into new areas like buyer, FX, et cetera. So maybe you want to talk about some of the future things that we’re excited about?
Steve Priest
Yes. So I think I’d break it down into three areas. As you said Eric, tremendous execution from the team over the last couple of years to drive forward. Number one is services, two is trust and three is about choice. And so as Jamie alluded to in terms of going after services in the various countries that we’ve rolled out, not only to give that for customers but also to monetize.
Buyer FX is such a great opportunity for us, high ASP. We’ve recently launched the Bolt at eBay, where you’re driving and selling higher average selling price items. That’s the important imperative. The second thing, as I mentioned is about trust. And so the fact that we have a cradle-to-grave platform now, not just from the commerce side but the payment side as well, will enable us to really drive greater trust on the platform particularly for our sellers. The volume of unpaid items has gone down significantly and that really is driving the underlying trust on the platform, because we’re able to seamlessly manage that as we go forward.
And then the third element is choice. And so think about as Jamie alluded to different markets, different opportunities. Klarna paying invoice in Germany, it’s a different market. Faster payout, so if I’m a seller and I want to get paid out more swiftly, I can pay for those services. And I think the backbone of having that concept of services trust and choice, is a real opportunity for us to go forward as we laid out an incremental $300 million of benefit, through the cycle of the investor period that we talked about at our Investor Day, back in March.
Eric Sheridan
Certainly, volatility around FX, as a service is pretty apropos in the environment, we find ourselves right now with foreign currencies moving around the way they are. Just try it all together on payments for us. When you think about GMV growth versus payments growth, how should investors think about those things either being correlated with each other, or less correlated with each other, as you layer in certain elements of services in the payments piece.
Steve Priest
We’ve obviously, seen momentum over the last few years, in terms of our overall take rate. The margin should actually the business and the income that we’ve been generating. And so to your point, Eric, the core underlying take rate the final value fee has continued to be relatively consistent, as we get the balance right between our investor community and being a platform of choice as sellers.
The incremental benefits that we’ve seen payments, we’re starting to get towards the end of the lapping of that another created tremendous value from a take rate standpoint, as we’ve gone through payments. That will moderate a little over time, despite the fact that we’ve talked about incremental opportunities with the payments initiatives that we laid out back in March.
The third element is really around advertising. And as we mentioned earlier, going from about 1.5 percentage of GMV in the last quarter through to just around 2% by 2025. So we should continue to see the evolution of the take rate Eric, as we continue to bring these monetization items in. But a bit of the dislocation that we saw, as you went through the payments intermediation process for the last couple of years, saw some divergence in GMV and revenue and that should normalize a little bit as we sort of go forward, but still plenty of opportunities ahead for us as a business.
Eric Sheridan
When you think about take rate broadly and you compare your marketplace to other marketplaces there’s been a divergence. Maybe there’ll be this theme of convergence back to some degree, but how do you think about the wider divergence take rate. Some of these categories have authentication. They’re very different than commoditized versus non-commoditized. E-commerce is very different, in terms of what you might be able to charge. How do you think about take rate as a dynamic mechanism in the business, over the medium to long term when you think about the buyer and the seller components of take rate?
Steve Priest
I’ll kick off and maybe Jamie, can add. I think it’s about — as I mentioned earlier, it’s important that we have to trust right, not only with our buyers and sellers. We remain incredibly competitive and so we’re looking through the lanes of the competition and making sure that we get best-in-class services for our buyers, as they sort of come on to the platform and making sure that’s competitive.
The other thing, that I want to say that, we do have a very resilient financial model and it gives us the flexibility to ramp things up to get traction and then monetize them at a slightly later date, as we go forward. And so you saw us do that in sneakers for example, as we sort of lent into authentication initially and took it forward.
I mentioned this on our last couple of earnings calls. If you think about the economic model or the financial model such as eBay, last quarter, we announced we touched four million items from an authentication standpoint and it’s around a point of margin.
For many competitors that would be incredibly challenging. For company like eBay, it means we can lean in. We can invest for the future. We can build services that sellers and buyers really crave for. It drives competitive advantage, but then it fits in with the overall take rate and economics that we see for the business as we go forward.
Eric Sheridan
Yes. Understood on what you’ve invested in authentication and how it’s built momentum. I think that’s been an area that surprised investors positively because there’s a lot of companies that really struggle with authentication business models we’ve looked at before.
So, I want to get back to the balance between growth and margins and maybe I’ll ask it a couple of different ways. Obviously, in the short-term we live in this environment where there’s volatility in the macro environment that’s outside of your control. You’ve talked about growth getting a little bit improved in the second half of this year and then you’ve got targets for 2023.
How do you think about the buckets of, Jamie, you’ve talked about before investing in what you have to invest in for growth for the long-term versus managing to a margin structure versus managing growth volatility to a macroeconomic environment? How do you think about balancing those three sort of countervailing factors inside the company?
Jamie Iannone
Yes. Well, we’ve always said that investing in our core business is our priority and we’re fortunate enough to have a really robust financial model and balance sheet et cetera to really have flexibility and be able to do it all, to invest in our core business, to look at opportunities, to build buy and partner like we’ve recently announced, and also to return a lot of value to our shareholders and that’s a real benefit of eBay.
So, we’re really continuing to lean in on the opportunities in tech reimagination [ph] because they’re working. The success we’re seeing in focused categories is great. The opportunities that we laid out in payments to go after another $300 million of revenue we’re right on track with our commitments that we announced on Investor Day. So, we feel great about it. As our CFO would you add some thoughts?
Steve Priest
Yes, of course. So, if you think about it, Eric it’s all about earnings growth, right? So, we sort of sit there from an earnings growth very much focused on operating income and getting the balance right because if you look back to the sort of last decade, a lot of that earnings growth is fueled by capital returns and capital allocation. And I think we know a new paradigm at eBay which is again in the balance right between operating income and the right levels of sort of capital allocation as we go forward.
As I stand back overall and I think about eBay and where we are in 2022, there’s not many entities at this point in time that are seeing the midpoint of their guidance with earnings growth over 2021. And I think we’re lapping the first half of 2021 where we saw the lockdowns associated with COVID. We’re in quite a dislocated macro environment at the moment and despite that again the midpoint of our EPS guide for the full year is seeing earnings growth.
And I think that goes back to the testament and the leadership Jamie is bringing to the organization about getting them the focus right between leaning into the short-term and driving operational efficiencies to give us the ability to do that. While at the same time we continue to invest in eBay for the long-term with the build by partner framework that Jamie laid out.
Eric Sheridan
Okay. I want to ask one more on the investing side that ties back to how you deploy your marketing dollars. The first one would be when you think about the broader marketing environment we found ourselves and a lot of companies have talked about marketing inflation and ROIs being compressed and it being tougher with some of the privacy changes that have been made. I know you get a lot of direct traffic, but of the areas where you have to deploy marketing investments, what’s your current view of the landscape you see out there in terms of earning the ROIs you’re trying to achieve from a marketing dollar standpoint?
Jamie Iannone
I’d say a couple of things. One is, I’ll just reiterate that 80% of eBay’s traffic is organic and what a great asset. You look at us versus any other market or vertical specific competitor or whatever and that’s just such a fabulous opportunity to monetize the vast amount of traffic that we have on the platform. As you look at marketing in general out there, we still see competitors leaning in to spend marketing dollars despite having to — having a very different perspective on the world. We’re obviously really balanced in terms of what we’re doing, but I would say is it’s been a big mix shift as well.
So we’ve taken some of the kind of pure lower funnel work that we’ve been doing and really invested that in a full funnel marketing which has a really better — sometimes it takes a little bit longer, but as a better long-term ROI in terms of the customers that we’re able to bring on the platform from that shift. We’ve also done things like we stopped doing a 1% loyalty program that we had for a long time to really take those dollars and reinvest it back in the things that we know are working the influencer marketing that we have out there partnering and doing more full funnel perspective category by category and that’s made a huge difference. Would you add anything?
Steve Priest
No nothing.
Eric Sheridan
Maybe one last one on marketing. You talked about enthusiastic buyers. How much of that is an effort that could be done in-house by showing products the UI that an enthusiastic buyer has versus marketing dollars to drive enthusiastic buyer behavior? How much of that is sort of owned and operated inside the house to where you can drive relatively high ROI versus having to spend some marketing dollars against the enthusiastic buyer dynamic?
Jamie Iannone
Yeah. So I’ll tell you what we see which is that because of the change in experience in terms of market-leading customer satisfaction that alone is really helpful in driving the CLTV for enthusiast buyers. So I talked about them being up in their spend double-digits versus 2019. A lot of that is because what a great experience buying that watch on eBay. And if you take a watch buyer they’re going to buy $8,000 — our enthusiast buyers in watches will buy $8,000 in watches on eBay, but then they’ll go by $9,000 in other categories on the site as well. So you think about what’s our ability to kind of really monetize against the CAC. So that does two things: one is it just helps the overall business and helps our relative position in the marketplace; but two, it gives us the opportunity to go out there and acquire more enthusiast buyers directly into that category onto the site because we can effectively monetize that CAC across a much broader set.
And so it’s a long way of saying for any given category we’re trying to do both, right? Make sure that the existing enthusiast buyers take parts and accessories. We give you an amazing experience at a ridiculous value with perfect fitment, you’re going to come back and buy more and more of those parts on eBay. I had a my dentist during COVID is like I’m doing less dental appointments because of COVID, I’ve started restoring my old truck. So I bought my first part on eBay and then my second part is like I’m now up to like 10 different parts to restore my old truck on eBay, he’s going to have a great experience. But then, how do we go acquire a new buyer into that category who’s also an enthusiast — who could potentially buy a lot of parts and accessories.
Eric Sheridan
Okay. Since the last earnings call, you guys have done a lot on the M&A front. There’s been this sort of range of announcements in the last couple of weeks and months. And I wanted to take this opportunity for you to sort of lay out the strategy behind what we’ve been seeing from the outside on the M&A, you’ve been doing how does it fit into the broader narratives you laid out an Analyst Day? And then maybe we’ll bring it back to the wider capital allocation strategy, but I wanted to give you the forum to just help us understand a little bit of what’s been driving some of the M&A activity we’ve seen?
Jamie Iannone
Yeah. So collectibles has always been and is still a huge business for us on eBay. So, we talked at Investor Day, it’s over a $10 billion category in the platform. And so we’ve been leaning in to really extend the experiences on eBay and make them game-changing better. So, over the course of the last 18 months, we’ve done things like computer vision, so you can list your cards so much easier. We launched a my collections and a price guide feature so you can track your items on eBay.
We put in new shipping methods to make things really easy. This last quarter, we announced the Vault. We did a partnership with PSA for authentication for high-end greeting cards. So the acquisition of TCGplayer, which was our latest acquisition, was really consistent with this idea of really focusing on collectibles as one of the focus category and the opportunity.
So TCGplayer is a – has phenomenal relationships with collectible card game enthusiasts. They have amazing relationships with hobby shop, which brings a whole diverse set of inventory on the platform. They have great fulfillment capabilities. They have great collection capabilities. So it’s very consistent with how we look at the business and as we’ve said all along, we look at build buy or partner. In cases like jewelry, we did a partnership with GIA. Here in this category, we thought what a great opportunity to bring TCGplayer into the fold in terms of what we’re doing for collectibles. And we’ll have more to say about that, when the deal closes.
The next one – well, I guess, the other one to talk about in the focus category is our acquisition of KnownOrigin, that was really about talent in the digital space. eBay is the place that people go to collect. So when NFTs become popular, they just started showing up on the eBay platform. So here we have talent to think about how physical and digital can work together in the future. It’s early days, but we’re excited by what that can do.
Lastly I’ll talk about myFitment. So what I’ve said with focused categories all along that it’s a different playbook that brings a game-changing level of trust in the categories. In handbags and watches and sneakers, part of that was authenticating, or actually touch the product.
In parts and accessories, it’s really about perfect fitment on the product, a much easier shopping experience. We’re already a great leader in P&A in a lot of the geographies that we operate in. So myFitment is a fabulous capability to actually – for probably 70% of our US GMV, we can accelerate the work that we’re doing from a fitment standpoint to make it available to more buyers on the platform et cetera. And so that one is really about continuing to drive that very strong category for eBay with what helps to be a really game-changing level of trust in that category.
Eric Sheridan
And last sort of big-picture topic, I want to talk about when we see that kind of M&A, we always come back to the capital return targets from the Analyst Day. And just want to check in and make sure that, there hasn’t been a change in the capital allocation philosophy? How you think about balancing some of the commitments made at the Analyst Day versus seeing opportunities, especially in an environment where VC capital has become more restrained and maybe there’s more opportunities to accelerate inorganic growth. So, how do each of you think about those broader goals on what you’ve said so far in the public domain versus accelerating some of the longer-term initiatives?
Steve Priest
There’s no change to the capital allocation strategy, we laid out at Investor Day. We remain committed and confident with regards to that. I think, it’s some of the themes you’ve heard from both Jamie and I today, which is we have an incredibly resilient financial model, despite navigating through choppy waters in this macro environment that we see.
First priority is to invest in the business, through the build buy partner framework. But at the same time, you’ve seen us continue to return capital to shareholders. We’ve created through the simplification of eBay and the divestitures that we went through over the last couple of years over $20 billion of value. We’ve been very thoughtful about how we allocate capital, and the team continues to do a tremendous job.
Eric Sheridan
Okay. Well with the last few minutes we have Jamie I always like to turn it over to our speakers to say. You’ve got the floor. How you’re most excited about thematically for the business?
How you’re aligning investments against those thematic elements, especially going back to Analyst Day which wasn’t that far long ago. Maybe just bring us home in terms of some of what’s top of mind for you and messages you want to leave with investors on the broader eBay story?
Jamie Iannone
Yes. Well look we talked a lot about focus categories today, and I’m incredibly excited about the innovation that we’re doing there, continuing to innovate category-by-category, continually span across international in different markets. But that’s just one piece of what we’re doing even though we talked a lot about it today, we are also making a lot of investments horizontally on the business.
So we’re investing in things like eBay stores. We’re in the middle of launching a new unified listing experience to make listing on the platform so much easier. We’re investing in the overall experience in our apps and our technology and computer vision. And so those horizontal investments are also incredibly important for us.
Our two biggest horizontal investments of massive scale are advertising and payments. And what I’d tell you is I’m really excited by the pace of innovation that’s happening at the company. When I came back, I really started this effort around our tech velocity and that had two components. Both, just literally tech velocity of we’re now deploying our mobile app weekly and we used to do it monthly. The test time used to take hours and now it takes minutes, so that we can drive a level of pace of innovation to go after all of those opportunities on the platform has been important.
The second key part of that has just been the talent in the organization. We brought in a ton of new talent into eBay and obviously a tough macro environment is also another good time to bring in great talent. So we continue to hire world-class talent. I’ve changed out more than half of the leadership team with amazing great leaders. We’ve got new heads of various — new Head of AI, a new Head of Selling. That talent is a really important part of our strategy as well. And we’ve been really successful there.
So you put the combination of what we’re doing in focus categories, you put together the combination of the horizontal investments that we’re making to complement what we’re doing on the category side. And then, you look at the talent that we’re bringing in, I think it’s great. The last thing I’ll say is that, for those investors out there who really have an ESG focus. ESG is not an initiative at this company it’s the core of what we do.
We’ve driven the Recommerce industry of what’s happening at eBay. We put our carbon neutrality, our new Scope one and two targets out, but I think more importantly, what this platform does to create small businesses, to create over one million jobs for the economy. Since I’ve been back — since we’ve launched it we’ve raised $1 billion to eBay for charity. So I’m also just really proud of the role that this marketplace plays in the global economy.
End of Q&A
Eric Sheridan
Great. Well thanks to both of you for being a part of the conference. Please join me in thanking Jamie, Steve and the whole eBay team being part of the conference this year.
Jamie Iannone
Thanks Eric.
Steve Priest
Thanks gentlemen. Thank you.
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