Doctor Foster went to Glo’ster,
In a shower of rain;
He stepped in a puddle, up to his middle,
And never went there again.
As small children, my generation, without the dubious benefits of television learned nursery rhymes.
Although the rhymes don’t always make sense, they tend to stick with you. Occasionally something will happen to bring a rhyme to mind.
What made me think of Dr Foster?
Yesterday’s first quarter financial report from eBay. Dr Foster is like eBay’s customer base, which despite John Donohoe’s tunnel vision, consists of both buyers and sellers. ‘Glo’ster’ of course is the eBay marketplace. Who likes getting wet?
The quarter was about as bad as it promised to be, despite all the free listings, cheap listing days and promotional gambits. The 6% overall increase over Q1-09, which was deplorable(def. #2), and not a particularly high bar to overcome, can only be called pitiable. (def. #2) When you take into consideration PayPal’s 35% increase in net total payment and 26% revenue increase year over year, eBay’s performance is shabby, (def. #1 - 6) definitely not chic.
Wall Street appeared underwhelmed.
A question from Spencer Wang of Credit Suisse in the call places a precise finger on the pain point:
“On PayPal the decline in the take rate at PayPal . . . should we expect a similar kind of year-over-year decline for the balance of the year? ” and Robert Swan’s answer “I think we do expect take rate to come down more during the course of the year.”
This was enough, combined with the embarrassingly low Q2-10 guidance of of $0.37 to $0.39 non-GAAP EPS to produce this remarkably succinct statement from Kristina Peterson of MarketWatch :
“Shares of eBay dropped 7.7% in early trading. Late Wednesday, the online auctioneer forecast second-quarter earnings and revenue below market expectations.”
Those Moving Goalposts
SeekingAlpha has full transcripts of the post results conference call, quoted here with permission. In John Donohoe’s opening remarks he said
“Last year we set out clear three-year growth and profitability goals for 2009 to 2011″
I believe quite a few, including analysts, thought 2010, the third year of Dononoe’s reign was to be the third and final year of the turnaround. Is this a SNAD? (Seller Not As Described)
“First, we are becoming a more customer focused company.” This means buyer focused, sellers are not our customers, it is not possible for eBay which is only a venue to have two sets of customers.
“Second, we are becoming a more technology driven company.” Our servers are inadequate and outdated and our search is so weighted by secret algorithms it couldn’t find it’s own “ahem” in the dark, but we did let some developers fix things so people can PayPal from their mobile phones…
“- we no longer have the store inventory format and so the fixed price items are now all in sort of core search - The timeframe, if I were to take what happened in Europe I would say it took 2-3 quarters to really fully work their way through.” Hmmm.
I have been hearing increasing whining (there is no other word) from sellers who made a deliberate choice to remain on eBay. Some of whom jeered at those of us who were unable to continue selling profitably on the site, or simply unwilling to continue to try. “All the more for me, ha ha!” PayPal rolling reserves, payment holds contrary to stated policy. Mysterious sale patterns, strange tap on tap off visibility in search results. Many complain of a recent 80% decrease in sales volume.
- How do you feel about it now?
- Are you prepared to tough it out for the next two to three quarters of “in sort of core search” like you are now?
- Ready for the next round of changes you asked JD to make? (Read the transcript)
- Do you have a diversification plan?
- Did you think because you were loyal little cheerleaders you would escape?
Y’all come back!