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eBay, Inc's Best Business Segment In 2016 So Far

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It's been a little over a year since eBay, Inc (NASDAQ: EBAY) spun-off its most successful business segment, PayPal Holdings Inc (NASDAQ: PYPL). PayPal is a formidable business on its own, with annual net revenue of $9.2 billion -- more than its former parent's annual haul of $8.6 billion. Outside of its primary "Marketplace" segment, does eBay have any distinct revenue streams which might eventually grow to similar impact? In this slideshow, we look at eBay's best business segment in 2016, and discuss how it's making an impact on the company's profit and loss statement.

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eBay, Inc's Best Business Segment In 2016 So Far

  1. 1. eBay’s Best Performing Business Segment in 2016 So Far By Asit Sharma Follow On Twitter Image source: eBay, Inc.
  2. 2. eBay’s largest business isn’t its best performing segment as of late. • Since spinning off PayPal in July 2015, eBay has worked to position itself for future growth. • Its largest business, the Marketplace segment, has booked roughly $3.0 billion in net revenue so far this year – a 1% decline from 2015. • Key to nurturing high growth revenue streams may be a company eBay acquired in 2007, which is also the organization’s best-performing business segment in 2016 so far: online ticketing giant StubHub.
  3. 3. eBay’s latest quarter clearly illustrates StubHub’s momentum in 2016 versus other segments. Management attributes current year success to innovations in user experience, as well strong sports and concert events in the first half of 2016, including the NBA finals and the musical “Hamilton.” eBay Segments Net Revenue, Q2 2016 v. Q2 2015 Q2 2016 Q2 2015 % Change Marketplace $1,521 $1,524 0% StubHub $225 $161 40% Marketing Services & Other $484 $425 14% Data source: eBay Inc. SEC filings. All dollar figures in millions.
  4. 4. The chart at left shows StubHub’s six quarter growth trend. “GMV” = Gross Merchandise Value, which represents the total value of merchandise sold on the StubHub platform. StubHub averages over 21% net revenue on its GMV. That’s nearly triple the “take rate” of the larger Marketplace division! StubHub’s healthy profitability is another reason the company seeks to scale this division up. Chart source: eBay Inc. Q2 2016 8K Earnings Filing.
  5. 5. StubHub is the largest ticket transaction venue in the U.S. Tactically, to juice sales, management has pushed the following initiatives in 2016: • Ticket recommendations according to price, value, and seating. • A revised pricing engine on the StubHub site, and improvements in the way pricing is displayed. • A virtual reality experience which enables customers to preview event seating in a 360-degree panorama, using StubHub’s iOS and Android apps. Image source: StubHub, Inc.
  6. 6. StubHub is also gaining market share via acquisition. In late May, StubHub announced that it was buying Bilbao, Spain-based Ticketbis, an online ticket marketplace, at an estimated price of $165 million. This will expand StubHub’s reach out of the U.S. market and into Europe, Asia, and Latin America. More recently, in July, the company announced a pending purchase of Ticket Utils, an online intermediary for ticket brokers, for an undisclosed amount.Image sources: Ticket Utils, Inc., StubHub, Inc., and Ticketbis U.S. “Bolt-on” Opportunities
  7. 7. In addition to acquisitions, one of StubHub’s best opportunities for growth can be found “in house.” • The Marketplace segment is a natural partner for StubHub. • Opportunities exist for the two segments to cross-sell goods and services to each other. • An “intensified” effort to bridge native users of each platform is described by eBay’s CEO on the following slide:
  8. 8. ““An example of what we are starting to do is have StubHub merchandise, it is a perfectly natural use case. I'm going to the game, I want to buy the jersey and you are going to see more of that over time as we share traffic and as we merchandise and as we drive the eBay tickets category to StubHub. There is a really good complement between traffic, customers and merchandising…” Devin Wenig, eBay Inc. CEO, Q2 2016 Earnings Conference Call Source: Thomson Reuters Edited Transcript
  9. 9. eBay will contend with a few caveats as it pursues StubHub’s opportunities: • Revenue is event-driven, so long-term success depends on further global expansion into local markets. • StubHub’s business is sensitive to economic conditions: Slower GDP growth and recessions tend to impact consumers’ ability -- and desire -- to spend on entertainment. • After double-digit expansion over the last few quarters, management expects a near-term slowing of StubHub’s growth rate. • Yet in the final analysis, due to the segment’s high margin, and relatively small size compared to eBay’s Marketplace, management is likely to pour additional resources into StubHub over the next several years. Image source: eBay, Inc. Going Forward
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