eBay’s next big move: eBay Now
Skip down to the last paragraph for more details about the eBay Now.
SAN JOSE, CA: John Donahoe may have rescued eBay from decline, but the e-commerce company has yet to convince some corners of Wall Street it can sustain its rapid growth.
In its first quarter financials out this week, eBay slightly beat earnings estimates, with net income up 19% year-over-year to $677 million on revenues of $3.7 billion, led by PayPal’s continued rise and the recent turnaround of Marketplaces, which includes the eBay website. But a lower-than-expected second quarter outlook — between $3.8 billion and $3.9 billion in sales versus analysts’ consensus of $3.95 billion — paired with PayPal’s slowest growth period in some time, did not sit well with investors. The news sent eBay shares down 2% in after hours trading.
The results have left some analysts wondering: with the turnaround in its rear-view mirror, how can eBay keep up the pace?
At the company’s Investor and Analyst Day last month, eBay CEO Donahoe and other executives outlined their goals for the next three years. The company projected revenues as high as $23.5 billion come 2015 — versus last year’s $14.1 billion in sales — tied to $300 billion in global commerce from eBay’s Marketplaces, PayPal, and GSI Commerce, the last of which builds and manages online shopping sites for big retailers. Just as ambitious? Donahoe wants to double eBay’s user base to 200 million-plus by 2015.
To achieve such lofty goals, eBay is focusing on boosting its customer experience. Marketplaces, for instance, will be rolling out features in the coming months and years that will amplify users’ relationships with the retailer and use mobile devices in new ways. At Investor Day, eBay put together an impressive demo of a mobile feature dubbed Neighborhoods. Far from finished, Neighborhoods will be a comprehensive mapping feature that aggregates available items from all participating stores — large and small — in your neighborhood (e.g. New York City’s West Village). Items will be displayed onscreen and can be purchased with a few finger taps, then shipped home, possibly via same-day delivery, or picked up in-store.
Although PayPal remains the fastest-growing eBay segment, its 18% growth last quarter falls short of any quarter last year, indicating that the payments business could be feeling the squeeze from competitors like Square and Intuit, both of which are also developing online, offline, and mobile payment solutions. This likely explains why the company is aggressively pushing into brick and mortar locations. PayPal announced a deal late last year that will allow shoppers to pay using their PayPal accounts at any one of the 7 million-plus brick-and-mortar stores that take Discover (DFS), for instance.
EBay has its eye on additional international expansion. Indeed, 61% of Marketplaces revenues already come from outside the U.S. In China, where American online retailers are often rebuffed, eBay announced eBay Style, a partnership with luxury online retailer Xiu.com that allows Chinese shoppers to buy items from abroad. Meanwhile, Xiu.com handles domestic tasks like shipping and customer service, helping eBay gain a foothold in the region. “When we did that, we knew it was a small step back into the market,” Wendy Jones, eBay VP of geographic expansion and cross border trade, told Fortune earlier this year. But she suggested the partnership with Xiu.com could be done with other Chinese companies to widen local distribution.
EBay also has big plans for eBay Now, the iPhone app that offers one-hour shipping of items from partners like Target (TGT) and Home Depot (HD) in three cities. The service will eventually find its way into Marketplaces, and Donahoe said recently he hopes the service will be ubiquitous, whether a customer lives in a big urban sprawl or small suburban town. Such an expansion would call for partnerships with third-party shipping and transportation systems. “I’ve had newspaper companies come to me and say, we have all these trucks. We deliver these newspapers, and these trucks don’t get used after 8 a.m. in the morning…. Can we help deliver?” Donahoe recently told Fortune, who pointed out that newspaper trucks are in every city in America.
That’s a growth opportunity if ever there was one.
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