eBay Earnings Call Insights: Site Redesign, PayPal Progress

On Wednesday, eBay Inc (NASDAQ:EBAY) reported its third quarter earnings and discussed the following topics in its earnings conference call. Take a look.

Site Redesign

Heath Terry – Goldman Sachs: John, anything you can share in terms of what you’ve observed during testing or just even the very early days that would suggest what kind of impact we should expect from the site redesign, weather its conversions, customer repeat rate, average order size, that type of thing.

John Donahoe – President and CEO: Heath, I think the last set of changes that Devin and the team announced last week of streamline registration. Streamline registration is one that from the outset tested positive and I think it’s partly contributing to our increasing new user growth, and we’ll continue to streamline registration to make it easier for a new user to sign up on eBay. On the other end of the spectrum, you had just what we internally called (Turbo) checkout, which is a much improved checkout experience where it’s now in essence two click checkout. We’ve always had that on mobile and on the iPad, and now we’ve got it on the web. Again that’s something is just taking friction out of the shopping experience to tested positively, and I think it’s a positive enhancements. Then some of the inline stuff, the improvement in search results, the digital cleaner experience, each of little component pieces have tested positive and I think they’re partly explaining why we’re continuing to make progress in that business. Interestingly, the two areas that I am frankly most excited about in the medium to longer term are neither a things you can particularly test. One is just the brand logo. The brand logo I think just communicates the new eBay is here, the eBay that’s a fresh clean safe shopping experience. We know that we are getting a lot of people that have tried eBay site 10 years ago that are coming back to eBay and they like what they see. This brand logo will be one of the things that attracts them in. Then the innovation I think is one of the most exciting one is what we call the feed, which is the ability on your own home page to customize what is a wonderful personalized browse experience. Any of you that haven’t tried it, I encourage you to going onto the homepage, sign up for the feed, put in your interests, put in searches that you’ve done in the past. It will pick up historical searches, things you bought and you will see eBay inventory coming in a very compelling user experience that I think is very entertaining and engaging. Certainly, our qualitative research site, our customers love it. We haven’t been able to test the incremental impact, but it’s one we feel really good about. So, overall this business is continuing to get stronger, the product experience is continuing to get better.

Heath Terry – Goldman Sachs: Just one more question. in the context of the product reorganization you mentioned, how should we think about the reports of headcount reductions at PayPal?

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John Donahoe – President and CEO: So, first of all, let’s be clear, PayPal is a very strong franchise, strong business, strong opportunity. While that’s true we are absolutely committed to accelerating the pace of innovation at PayPal and since David’s taken over, he is taking what is in essence nine different product organizations across PayPal and streamlining and consolidating them into one global product organization and PayPal employees know about that. We haven’t finally landed on the impact of that and once we do we’ll communicate that to the employees and elsewhere. But the few things I would say is one this is clearly now a case where we are trying to pursue any cost reduction or efficiency goals. This is 100% focused on streamlining and simplifying how we create and consistently deliver great products, and that’s something we are committed to do and I think you are going to see real strong evidence of PayPal doing that in the coming weeks and months.

Bob Swan – SVP, Finance and CFO: John the only thing I might add is that we are working through things at this end and I would say we haven’t announced anything yet, externally and, when we get along to where we have something to announce as usual we in fact will. It’s probably worth just highlighting that I think as you are aware historically when we have situations like this that we would characterize as one-time in nature. That had an impact on the financials, our historical practice has been if its material and I would use material as roughly $10 million as a threshold. If it’s above that, we usually put it in GAAP-only numbers and if its below that we just absorb that in our non-GAAP results. So to just tell you that just so you understand how we think about items that are onetime in nature over time so you have context.

PayPal Progress

Sanjay Sakhrani – KBW: Specifically on PayPal I was just wondering I know it’s kind of early but how is the offline rollout progressing, are merchants receptive to wanting to take your brand at the point-of-sale and maybe just some color there? Secondarily on the Marketplaces business, I was just wondering how – if there is any other initiatives that you guys are working on in terms of larger merchants and how those are progressing as well?

John Donahoe – President and CEO: Sure, Sanjay. On PayPal Offline, again this represents an enormous opportunity for our Company, it’s both – PayPal more broadly. We’ve gone from competing in a $500 billion ecommerce market to now are $10 trillion retail market, where half of that today is being web-enabled. So, there is strong interest and strong interest from retailers of bringing PayPal to point-of-sale. Our approach has been what we outlined at the beginning of the year, which is the use of this year to focus on merchant coverage. So, we started off with the large retailer direct integrations, right PayPal point-of-sale that launched Home Depot initially, and now it’s live in 10 retailers and over 7,000 locations in the U.S. and we’ve proven that that can work with existing hardware, existing software. On the other end of the spectrum, at the very small merchants, we launched PayPal Here and that will cover small merchants and individual business people, and then the Discover deals are an important piece in the middle, because the Discover deal gives us coverage with over 7 million locations. So, you see what we are trying to do, which is built merchant coverage or merchant ubiquity, and position ourselves where PayPal will be very widely accepted going forward. Having focused on the merchant side of equation, we’re now focusing on the consumer side and beginning to run some small tests with different retailers. With merchant specific balances and other things to try to create little pockets of consumer engagement, and that will continue to be – that will be 2013, will be the year of test and learn with consumer experiences. So, we are using a – we are trying to not to a press release a week, or some facing flash and sizzle, but trying to build the fundamental so that we get a scalable business in PayPal offline. As I said before, if we get 1% of offline that’s another PayPal. So, we are trying to build it in a way that achieves that. With regards to large retailers, the large merchants on eBay, we are continuing to make progress. We are making a good progress, large retailers are looking for help to deal in this increasing multichannel environment, and they understand that we are on their side. Our entire Company is focused on helping those retailers grow their business. We are on their side, we don’t compete with them. So, we are pleased with some progress. We are pleased with the progress that we’ve made in a relatively short period of time. We have got retailers like Toys’R’Us, Best Buy, GMC,. Sony, American Eagle, Macy’s, Target, Walgreens using different products and capacities we have. That being said, I would say we are only beginning to scratch the surface here. There is just so much more opportunity where we can leverage the capabilities we have to help these retailers compete and win in this commerce environment. so, I would still say it’s early days, but the more we see it, the more opportunity we see to really partner with them, to help them grow their business.

Bob Swan – SVP, Finance and CFO: The only thing I might add on the first question on merchant activity that you highlighted on the last couple of calls, and maybe worth mentioning here is, what the merchants – this is an area in the offline world that we didn’t start with in our strategic plan and we were almost pulled into it to a certain extent by large retailers and in essence what they were looking for were, as you might imagine the basics can you help us drive more traffic with your large user base and your technology. Second can you educate me more about consumers when they enter my offline store so we know that they are there and we can reach out to them. Third based on that can we use your functionality to help increase conversion when they are in the stores. Fourth can you do it for lower costs than I paid today and fifth can you do it without cost, where I don’t have to invest a lot of capital. So those are kind of where the merchant started it’s kind of the five things that they were thinking about and asking us if we could help them in solving those five key fundamental challenges that they are wrestling with. That’s kind of how we started this game I think John walked you through how we have been going at and the progress that we made.

A Closer Look: eBay Earnings Cheat Sheet>>