eBay’s marketplace growth plunged into the negatives in Q1 (EBAY)

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eBay reported earnings for Q1 2019, revealing that it brought in $2.6 billion in net revenue, up 2.4% year-over-year (YoY). During the quarter its marketplace’s gross merchandise volume (GMV) totaled nearly $21.6 billion, decreasing 4% YoY and marking the fourth consecutive quarter of GMV growth deceleration for the marketplace.

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Here’s what it means: eBay’s marketplace GMV growth going negative indicates that the e-tailer is behind its competitors and the industry overall.

eBay won’t be able to compete with the likes of Amazon if its GMV growth is negative and its net revenue growth is lower than that of the US e-commerce industry. E-commerce sales in the US rose 12% YoY in Q4 2018, and while estimates for Q1 2019 haven’t been released yet, they will surely be significantly higher than the marketplace’s 5% YoY growth in net revenue for the quarter.

eBay will continue to lose share to Amazon, Walmart, Target, and a bevy of other e-tailers that are posting better growth numbers, and eBay may find it even more difficult to turn its performance around if consumers shift more of their spend elsewhere.

The bigger picture: While eBay’s negative GMV growth is bad for the company, there are reasons to believe it may be able to improve its overall performance going forward.

eBay has posted consistent active buyer growth. The marketplace now boasts 180 million active buyers after growing 4% YoY in Q1 2019 — the fifth consecutive quarter where the metric has grown 4% YoY. CEO Devin Wenig suggested that eBay’s number of buyers and its base’s growth are good indicators of its future GMV and revenue on the company’s earnings call; if that proves correct, the marketplace’s GMV may rebound in the near future.
The marketplace still saw its revenue grow despite its negative GMV, which is partially due to Promoted Listings. Its revenue was up 5% YoY, and the growth of Promoted Listings, which sees merchants pay to increase their items’ visibility on eBay, helps explain the difference in GMV and revenue, according to Wenig. In Q1, 800,000 merchants promoted more than 200 million listings, earning eBay $65 million, up almost 110%. If eBay can continue to grow revenue through advertising on its marketplace, its GMV performance may hurt its bottom line less.

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