The threat of social commerce
The Marketplace division of eBay’s (EBAY) is the company’s largest operation as well as the source of cash that it uses to build its other businesses, such as online classified. But eBay’s most important business is facing a significant threat.
Not only have traditional rivals Amazon.com (AMZN), Etsy (ETSY), and Alibaba (BABA) continued to stir e-commerce competition, but also social media companies Facebook (FB) and Alphabet’s (GOOGL) Google are threatening to intensify their e-commerce competition within their social commerce offerings.
Crimping eBay’s search traffic
Facebook now allows its users to shop online without leaving the social networking site. This has been made possible through the Facebook Marketplace. Google is also up against eBay as its Buy button means that shoppers who use its online search service don’t need to head to eBay.com to buy what they want.
As such, social commerce threatens to crimp eBay’s revenue growth. The company generated overall revenue of $2.4 billion in 4Q16, which represents a 3.4% YoY (year-over-year) rise, as the chart above shows.
Threats to eBay’s marketing services business
Besides threatening to eat eBay’s lunch in the e-commerce business, Facebook and Google are also posing threats to the company’s online classified business. For this reason, eBay is revamping its classified business in the hopes of attracting more online advertisement spending from merchants already using its marketplace and other brands that may want to appeal to its audience. Its classified business produced $313 million in revenue for eBay in 4Q16, which represents a 4% YoY fall.
While eBay is working hard to build an internal sales team to help it draw more advertisers, it still faces the tough challenge of stealing market share from larger advertising incumbents like Google and Facebook.