Why eBay plans to get its Marketplaces business back on track

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Setbacks in the last quarter affected eBay’s Marketplaces business

In the prior articles of this series, we discussed the setbacks eBay (EBAY) faced last quarter. The most notable of these setbacks was the cyberattack on eBay’s database that forced its users to change their passwords. Then the sudden exit of David Marcus—the former president of eBay’s Paypal division who joined Facebook (FB)—and a decline in search rankings exacerbated the company’s problems.

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These issues affected eBay’s Marketplaces business such that this division’s revenues of $2.2 billion grew only 8% last quarter over the corresponding quarter a year ago. The business’ gross merchandise volume (or GMV) increased only 12%. The operating margin of this business declined 3.4%. This is a cause of worry for eBay’s investors.

As the chart below shows, eBay’s Marketplaces GMV growth has slowed. Plus, the e-Commerce market has become more competitive. This means eBay would need to resolve these issues sooner to ward off competitive threats from Amazon (AMZN) and Google (GOOGL).

 

How eBay plans to get its business back on track for growth

During the conference call to announce its earnings, eBay’s management mentioned that it’s making significant investments to re-engage eBay users who were forced to change their passwords. These investments include discount coupons, incentives, and targeted marketing. eBay has also started to leverage user data to provide personalized offers and recommendations through email campaigns for users to purchase goods from its platform.

eBay’s recovery would not only placate its own investors but also exchange-traded funds (or ETFs) like the DJ Internet Index Fund (FDN), which has decent exposure to eBay.

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