• Mon. Sep 28th, 2020

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Technology

eBay, Inc. (EBAY) CEO Jamie Iannone at KeyBanc Capital Markets Future of Technology Conference (Transcript)

eBay, Inc. (NASDAQ:EBAY) KeyBanc Capital Markets Future of Technology Conference Call September 9, 2020 1:30 PM ET

Company Participants

Jamie Iannone – President and Chief Executive Officer

Conference Call Participants

Edward Yruma – KeyBanc Capital Markets Inc.

Edward Yruma

Hello, and good afternoon, everyone. Welcome back to our Future of Technology Conference. I’m Ed Yruma, KeyBanc’s Internet and E-commerce analyst. We are really excited to have Jamie Iannone from eBay. Jamie, I’ve known you, gosh, maybe seven, eight years now. I think I knew you back from when you were at Walmart, at Sam’s. You took a new role out of Walmart, and we were excited to see you land at eBay. So really good to reconnect with you.

Question-and-Answer Session

Q – Edward Yruma

I guess just the first question I had for you though is, you really were able to drive a lot of innovation at Walmart, particularly at Sam’s using technology and doing it quickly. Can you tell us – you clearly had a great runway there. What brought you back to eBay today?

Jamie Iannone

Yes. Well, I spent eight years at the company earlier in my career. And it was the enormous potential of eBay that I saw, Ed, that said, I want to go back and leave this special company. eBay has got such a special purpose and mission and the values and it’s really a unique business. Amazing assets. When you think about the organic traffic that eBay has, its unique cross-border trade business, longstanding seller relationships. And having been away from eBay and seeing different kind of e-commerce and omnichannel and other things, and time at Walmart and other places, I really felt like eBay had a little bit lost its key focus.

I think it was chasing new, in-season, and it had a real opportunity to get back to the core of what it’s great at, its amazing core categories, its consumer business and consumer selling. And I thought this was a unique opportunity to come in and really drive that kind of tech-led re-imagination at eBay. And since I’ve been back, it’s been even more exciting than I thought. All the magic of what’s special about eBay is there in terms of the passion of the community, the way they lean in. And I see just an enormous untapped potential to really go after that opportunity.

Edward Yruma

Back at Walmart, I think you moved really quickly to kind of improve both the consumer-facing as well as actually – and this is probably some of the untold experience, but the coworker experience by using technology. I guess kind of talk about the opportunity at eBay and what can you do in short order?

Jamie Iannone

Yes. Well, I see the opportunity to do this tech-led re-imagination of eBay, and I’ve done it multiple times in my career, and it starts with a real focus on the customer. And how do we remove the friction points and enable just a much better experience. There’s a couple of pillars that are really important to us. One is, defend the core business by being the best marketplace. That has a lot to do with consumer selling. So individuals like you and I selling on the platform. And we have a real opportunity there. The average consumer has $4,000 of goods in their home that they could sell and less than 20% of that is online.

And when we get a buyer to become a consumer seller, they become twice as valuable as a buyer. So we have an opportunity to really look at that consumer selling experience and just make it completely super easy and simple. So we get more of that $4,000 in everybody’s home available online.

In my past, I’ve taken these experiences, which take 15 or 20 minutes and say, how do we do them in under two minutes? And that’s the same type of thing we’re going to do here in the selling proposition, is figure out how to make that really seamless and easy and bring that inventory on. And its unique inventory to eBay and it’s what makes us special.

The second key tenant is really being the seller platform of choice. And there, it’s really about using technology to make it easier for sellers to list, to manage their business. And I’ll just go to one example there, which is managed payments. Managed payments is a fantastic opportunity for us, not only for financially what it does to the business, but what it does to the customer experience because it takes the friction out for buyers. I don’t have to go set up a separate account, Ed. I can come in, that’s all on file and it makes it really easy

And now for a seller, while all of their transaction information and all of their seller information is together that makes it easier for them to run their business and manage it. And what we’re hearing from sellers who have converted to managed payments is they love the platform. The vast majority of them are seeing lower fees. And so it’s an example of using technology to really change the game. And that’s what we’re doing.

The last key pillar for us is building longstanding buyer trusted relationships. And their technology plays a key part. How do we help bring buyers at the life cycle? How do we build new specific capabilities in verticals to really allow them to have a great experience between a buyer and seller? So we think this tech-led re-imagination is a big opportunity. We’re really moving forward quickly to go after it across all three of those dimensions.

Edward Yruma

Can we click down a little bit on the managed payments opportunity because I think it’s one of these initiatives you have underway that maybe still doesn’t get enough attention. You talked about the benefits to the sellers. Are you seeing any goodness on the consumer side? You talked about not needing two logins, but are you seeing any good purchase behaviors that leads you to believe that this will help drive stronger topline?

Jamie Iannone

Yes, there’s a couple of key benefits. Obviously, there’s know – not two logins. I can manage it all in the same place, save my payments, et cetera. Second is, there’s new forms of payments so I can use Apple Pay, I can use Google Pay, I can use credit card. Of course, PayPal is still a key partner for us. I can still pay with PayPal and have that. So the choice is the second key benefit.

And then the third is really the seamlessness. When you look at a single checkout experience on the platform, it just really makes it easy. What I’d say from there is that we have flexibility. At the point we are managing the payments all on our platform, we have the capability to do more things for sellers in terms of financing and other capabilities as well as do more things for buyers because they’ll have stored credentials on our account. And so there’s just more in terms of promotions, capabilities, things that we can do between buyers and sellers when we’re managing the payments completely. So we’re really excited not only for what it does in the short-term Ed, but for what it does in the long-term.

Edward Yruma

How would you assess the overall tech stack at eBay? Are there areas you’ve identified for improvement?

Jamie Iannone

Yes. So there’s some parts that I think are really strong in next-gen. I’ll give you a couple of examples. Payments has been on all next generation technology stack. Our ad business and promoted listings business really well done. And I think it’s a nice balance between giving sellers capabilities and really having a great buyer experience. And then there’s other parts of the experience that I’ve talked about, which I think could be a whole lot smoother and easier. So how we list getting through registration.

So when I look at our technology stack, it’s really about accelerating our investments in those areas to make everything that we have on a next-gen technology stack to really enable us to innovate and move faster. And let me just touch on one example there, which is, we built a new QR Code capability for local pickups. So in some cases, a buyer and seller will meet up in person. We have a local pickup feature. And we build a mobile QR Code experience so that as soon as they meet up and we transfer goods, we use the QR Code and then money transfers seamlessly in the background.

An example of how you use technology to really make the transaction much more seamless, much more smooth. And so we’re on what I call a multiyear journey to make significant improvements in the technology stack. We’re going to have a lot of wins along the way, but it’s a very key focus for us.

Edward Yruma

You had some interesting news at the other day about authentication for watches. Watches have really been an area of interest of the company I think for a little while. Can you kind of talk about the authentication process and what do you think it can unlock in terms of an opportunity?

Jamie Iannone

Yes. So as we talked about in the earnings call, what we’re looking at is specific verticals of where eBay has a right to win, a very strong category for us where we have good market share and enthusiast community of buyers and great sellers who have a lot of products. Our specific focus is on non-new in-season where we think there’s a huge TAM. But when I think about watches, so what we did in watches is a great first example is now we’re authenticating every watch that’s over $2,000. So if you sell that product, you will actually go through a third-party intermediary to authenticate it, so the buyer can be certain that he or she knows what she’s getting.

In addition, the seller gets additional protections because returns now are also going through an authentication process. And that’s actually making it so that for the buyer and seller, it’s a much greater experience. We’re also adding escrow. So we partnered with escrow.com and over $10,000, the money will be held in escrow to make sure that the buyer receives it. So it’s building a lot more trust, authentication and guaranteed quality into the platform.

At the same time, we’ve launched new channels, so really helping the discovery experience of watches. So when people – watches is a great enthusiast category, people buy multiple watches and we’ve redone the whole discovery experience to make that even better. So it’s just one example of how we’re looking at the end-to-end experience in a vertical and saying, how do we make this really work better for buyers and sellers and go after the TAM. The TAM in this case is not only the significant online addressable market, but what we’re seeing is more offline moved to online and that opens up even more potential for us.

Edward Yruma

Yes. I’m a watch collector and I’ve candidly avoided eBay for those reasons or issues of fraud or concerns about fraud. And I’m really excited to try out some of this new authentication because to your point, I think it’ll help me both as a buyer and as a seller. So I think that’s something that’ll be really interesting.

When you think about the consumer experience, how would you score it? And I guess, you’ve been I think pretty thoughtful, your previous tops about looking at kind of pain points in ways to solve some of those pain points. You talked about payments. Where are the other obvious pain points that you see in the process today?

Jamie Iannone

When I step back and think about it, eBay is an amazing business. We have 80% organic traffic, and so it’s really about how do we leverage that traffic to get people to buy in more categories to get them to convert to become sellers, et cetera. So we think – when I look at the site experience, I think there’s still areas of friction points that we need to just remove friction, take steps out of the process. A good example is if you look at our app and the app development that we’ve done recently, we’ve made that a whole lot simpler, bringing that to the desktop and to our mobile web is an opportunity for us, really taking all the friction out of the process.

On the positive side, we’ve done a lot of investments recently in search and in browse and in discovery. And that has actually taking friction out because it’s making it easier for people to find the items that they want on the site. Let me give you an example. We added search filtering into the mobile app. So now it’s much simpler, a cleaner interface. And as you know, I know you’re a big user of the site, Ed. People use those features to really kind of narrow down and figure out what they want. So changes like that are really helping.

A huge requested feature for us was dark mode in our apps. Especially the younger generation really loved dark mode. We rolled it out and immediately a huge percentage of the population started using it, and just find that experience better for them. So we’ll continue to innovate on those pain points, but it’s been a big focus for me in every role that I’ve had is how do we simplify everything about the experience make it incredibly easy because that drives conversion and not that ultimately drive the CLTV for buyers.

Edward Yruma

One thing I’ve noticed, and it’s improved my listing flow efficiency significantly, just the ability to remove a background off of a photo, right? To put an item down, not think about the background and have eBay basically make the background white to me has been a huge time saver. So it does feel like these little wins that you can put up that would really improve both the selling and the buying experience.

Jamie Iannone

Yes. We have a great AI computer vision team, and so we use them and leverage them to create next generation experiences. The one you’re talking about, the easy background removal, sellers have loved it. They’ve given us great feedback. We also use that in trust and safety, where we’re using next-gen computer vision to really help us identify items, make it easier to do categorization, all of those types of things. So it’ll be a big investment area for us is reimagine the future of what could those next-gen technologies do. And that’s a small example of what’s to come of how we’re going to leverage those technologies.

Edward Yruma

Your predecessor ran a test on a third-party fulfillment solution, kind of what your view on a long-term basis on whether eBay needs to be either offer or have an in-house managed fulfillment service?

Jamie Iannone

We spend a lot of time talking to our sellers and listening to their needs and saying, what do they need? And that’s an area where they’re saying, we don’t really need the eBay to do that. We don’t need eBay to run the warehouses. Especially as we think about shifting to non-new in-season and focusing there, and I’ll come back to that in a second. That’s not a real – a big need from our customers. What they are telling us is they want more streamlined integration to make shipping options even easier on the platform.

So you may have seen, we recently announced a partnership with UPS. So now you can integrate with UPS. A seller gets significant savings on their transportation and logistics costs of managing through UPS and it’s integrated into the platform pretty seamlessly. So now they have multiple options between USPS, FedEx and now UPS and the platform, save money, do it much easier, et cetera. There are cases where we do manage the logistics with partnerships. A good example of that is cross-border trade.

So to make our cross-border trade even easier for sellers and more predictable for buyers, we do have partnerships where we forward-deploy inventory to allow for just a more seamless experience. We do that with Winit and SpeedPAK and other partnerships that we have set up and we’ll continue to find those areas where sellers really need us to provide it. But for the most part, the things that we’re doing, like these integrations, making it more predictable for buyers and their delivery times are being really successful for us.

Edward Yruma

So it’s still early, but obviously it seems like big business has navigated COVID pretty successfully, however, walk around any downtown. It seems like small businesses continue to struggle. How can eBay continue to ensure this vibrant small business ecosystem?

Jamie Iannone

Yes. The pandemic is unfortunate in the implications for offline. But what we’ve seen is that eBay has been there for small businesses and said, look, if you haven’t tried online, or if you haven’t been a seller, bring that business online and really drive sales. We have 182 million buyers, and a really phenomenal opportunity. What’s unique about eBay is we partner with our sellers so we don’t win unless they win. We’re not competing with them. So we ran programs and we’ve been running programs in all of our key geographies.

A good example of that is up and running in the U.S. where we encourage those sellers to bring their inventory online. We gave them a free basic store training and those types of things, and we’ve invested over $100 million globally in the program, really helping sellers come online and get started. And eBay has really good economics. We charge a base fee for the transaction and then they have other optional capabilities like promoted listings. So in our promoted listings advertising business, it allows them to get immediate exposure for their items even if they’re a brand new seller

One of the things that I love about the platform is it’s truly a level playing field. I can come on as a brand new seller and sell right alongside someone with 20 years of experience, who’s a large seller, and the economics work. And now that we’ve integrated payments, it’s even easier for them because now all of their fees are combined. It’s really easy there. So we’re continuing to look at ways to make it easier to sell on eBay to bring those sellers on. We’ve been running promotions in each of our key geographies to encourage that selling, and really working on driving velocity. As we talked about last quarter, we had 8 million new buyers on the platform, so obviously a lot of demand for our sellers to bring items onto eBay.

Edward Yruma

We did have a question from the audience in terms of what percentage of GMV is currently non-new in-season. And then I guess maybe a bigger picture question, there’s been a lot of debate as to what should be done sold auction style versus what should be sold by it now, and any thoughts on what the right kind of contribution from either side of the continuum would be?

Jamie Iannone

Yes. So let me talk about why we’re focused on non-new in-season. So we’ve seen non-new in-season, which is N minus one used vintage collectible, and just non-new in-season product, as a massive opportunity. It’s $500 billion TAM by all the accounts of the research that we’ve done. And we’re a small high single-digit maybe low double-digit in some categories percentage of that TAM. So there’s a real big opportunity. That doesn’t mean you won’t be able to buy new in-season on eBay. We’ll still have new in-season products available. But when you think about the focus, I think we were focused too much on new in-season and eBay really has a unique opportunity to drive that.

You asked about the percentage, it’s at least 50% of our business is in that non-new in-season bucket. And it’s a significant and unique value proposition for us. When I talk about consumer sellers bringing on product, they bring on really great unique inventory, like, some of the pre-owned watches that you maybe buying on the platform. And our B2C sellers, massive opportunity for our small business sellers to bring on more of that product as well into eBay given where we are in penetration, there’s just a really big opportunity, and we’re excited by that focus. And you’ll see us in the verticals that we’re focused on, like I talked about watches really go after that non-new in-season where we have a unique right to win.

And as it relates to fixed price and auction. Over time, fixed price has been a larger percentage of the business, auction still remains a really strong format for a high price realization and unique items, but what we’ve done over time is introduced new formats into fixed price to make it even more flexible. And I’ll give you two examples. One is our best offer feature. We’ve had that for a long time, but penetration continues to grow and people love the opportunity to put in best offers. And then we inverted that and created seller initiated offers.

And so now, if a buyer has browsed an item or is watching something, a seller can actually initiate an offer to a buyer and we’ve seen already $1 billion of business being transacted in that type of format as well. So by creating this new flexibility into fixed price as well as having that platform, we think buyers and sellers can transact in multiple ways.

Edward Yruma

Let’s click down, I guess, for a minute on this next-gen consumer experiences. And in particular vertical experiences, I know we talked a little about watches, but there are a lot of public and private competitors that are now building very targeted and focused vertical experiences. I guess, how do you kind of regain share that maybe should be eBay’s? How do you engage and identify some of these enthusiast communities, and what do you think long-term it’ll take to win share?

Jamie Iannone

Yes. So that’s where I talk about our key initial premise on our vision is really about defending our core business. So that starts with the non-new in-season focus, but it’s also looking at our key verticals, whether that’s luxury items or motors, parts, and accessories, or fashion, or collectibles, really looking at the end-to-end experience and saying, what does it take to be best of class to really make buyers and sellers feel like this is the destination.

We have amazing scale with the buyers that we have on the platform already, and obviously the seller enthusiast. And so it’s building in the new capabilities to make those communities even more loyal at eBay. And so the watches is a great example. Not only did we make the changes with the authentication of the escrow, but we lowered the seller fees for high SP transactions or high selling price transactions and introduce these new discoveries. So it’s an example for us of looking at a category end-to-end and looking at the full customer experience and saying, what does it take so that eBay is the best in that specific category.

Now, let me be clear. We’re not trying to create 30 different experiences. We’re not trying to create 30 different eBay motors. If you think about motors, we have a separate app for eBay motors, and it’s a really specific experience. But what we are looking at is what features do we need to be really successful in the category to really make that transaction as best it can be between a buyer and seller?

So a lot of things that we’ll build in a single category will actually be relevant for other categories. And what you’ll see us over time is to continue to drive that innovation, continue to get stronger with the marketing to bring those buyers and turn them into enthusiasts and that’s how eBay really captures it. I think what these niche competitors are showing us, Ed is how much untapped potential there is for eBay. And that gets me really excited because the scale of what we have on the platform to really go after it is truly amazing.

Edward Yruma

We had a question from the audience about your view on the structured listings effort. And do you expect it to be successful in specific categories?

Jamie Iannone

Yes. So what we did with our structured data is really pivoted to be really about facets and attributes and how we build all of the correct items to – or the correct way to describe an item for a seller. So that’s different than previous efforts where we were just focused on catalog. We’ve expanded that really across the site to make it easier. So as you go through the selling flow, for example, we’ll tell you, 20,000 people searched on this attribute, it’s really important for you to put that in your listing. And what that does is it really helps the buying experience.

I talked about us adding search filters into mobile. So as you add attributes as a seller, that structure provides more capabilities. It actually increases the recall or the items that come back from a search result. And what we found is that really helps us to increase conversion. So by pivoting to this structured data methodology, it’s actually really helped us drive the buying experience. We’re doing more and more to help sellers make it easier to put those items against their listings. And we think it will be really effective for the platform.

Edward Yruma

Historically the business has been really focused on share repos as a way to return capital to shareholders. I guess kind of any initial thoughts on capital allocation and in particular, as you start to think about driving a growth agenda, how much capital will be required for that, and do you think that M&A is appropriate?

Jamie Iannone

Yes. We’re really excited. We feel like we have a clear vision as a company and a clear strategy to go after it. At the same time, we’ll continue to be a disciplined capital allocators, really balancing our growth and balancing margin. Specifically with share repurchases, yes, we’ll continue to move forward with those, we think the stock is undervalued, we’re committed to our dividend.

And what you saw us do in the past quarter, in this last quarter, with really the tailwinds, is start to reinvest in some of the long-term things that we know drive value on the platform. So some of the technology acceleration that I talked about, which is a big opportunity for us, we have actually accelerated into this year. At the same time, we’ve put money against specific marketing to drive more longer lifetime value buyers. So things like driving app downloads because we know who gets the app and they get engaged and they get a second and third purchase or they move across categories that drives CLTV. So we’ll continue to look for those opportunities. We’ll be open to M&A, our focus is really on asset-light things we think can help this really clear strategy that we have for the business and continue to be discipline about how we allocate capital.

Edward Yruma

We had a question from the audience asking about your thoughts on the talent that the company or the gaps that you think you need to fill. And then just broadly, how do you think you compete relative to like a Facebook or Google for talent?

Jamie Iannone

Yes. So I think what’s really been great is to see how many people we’ve acquired recently or have joined the company recently. We are really I think in a position to go after the best talent. As I talk about a tech-led re-imagination, that’s really about how are we getting the five and 10X engineers to come back to leave this kind of game changing next-gen experience in eBay. And we’ve actually been having a lot of success with that of bringing in great engineers. We just hired a new Chief Architect. We’ve just hired new leads in engineering, and really focusing on that top quality talent bringing them in because that can be a game changing in the business.

It’s also important for us to have diversity. So building a diverse organization across all levels has been something that we’ve been really focused on. But we have the benefit of being a global corporation so we can hire talent all throughout the world. So we not only have our U.S. business, but we have great talent overseas, great talent in our European businesses and being able to leverage the different market capabilities and talent along with those local pools has been really successful for us. So we’re going to continue to do that.

Edward Yruma

One question we’ve been asking all of our companies throughout the conference. How do you think the consumer is faring right now? Do you think that they might benefit from shifts away maybe from experiences to things? What do you think is in the consumer mindset today?

Jamie Iannone

Yes. What we’re seeing is that there’s really the shift from offline to online as a result of COVID obviously. And it was interesting to watch how it evolved. So on the platform, it started really with one of the things that I need specifically for this crisis, face masks and hand sanitizer, et cetera. And then it evolved to say, well, what do I need because I’m sheltering in place. So people were buying stuff to create a home office. Fitness equipment was on fire for people working out at home. But then over time it really transformed to be across the board from apparel to motors, parts and accessories.

I was talking to a buyer who said, the free time has allowed him to work on his 1988 truck. And he’s buying all these parts on eBay and we keep sending them new stuff for his truck. And so I think the trial has been accelerated for that move to e-commerce and we’re seeing it really be across the board.

Now there’s some areas that have been truly impacted, like in our Korea business, we have travel as part of that business. And obviously we’re seeing implications there from that business. But when we look at the total business and we think about this $500 billion TAM, people are at home right now, this is a great time for us to get people exposed to eBay, have them try out consumer selling, turn that $4,000 of stuff into cash so that they can buy other stuff and create the flywheel on eBay. And so that’s the thing that we’re seeing in our business and it’s exciting.

Edward Yruma

A question from the audience, really asking about Classifieds. When do you expect it to close? And do you think you’ll be a long-term shareholder? Would you spin it to the shareholders?

Jamie Iannone

Yes, we’re excited about the Adevinta business. When you look at the two assets coming together, it really creates 20 number one leading markets for the Classifieds business. And we see real synergy opportunities with that business both on the cost side and on the revenue side. When you think about motors and real estate and Classifieds, so we’re excited by it, we are really focused on, everything is on track for closing that business. We’ve said that that will close at the beginning of next year, and we haven’t talked about our plans front end. But what I would say is that – what we’re focused on now is closing the deal and setting it up for success. And we’re really excited about the new company and what it creates.

Edward Yruma

So we’re just about out of time, but I just want to see if you had any other last comments or things you wanted to highlight for the audience.

Jamie Iannone

No. I think I’ll just summarize and come back to where we started with this vision. I’m really excited by the tech-led re-imagination to create the best marketplace. We’re going to be really focused on defending our core. That’s the vertical focus that we talked about, like in watches as well as that consumer selling really being a seller platform of choice, and making sellers really win on the platform and making sure that’s the key focus.

It’s been important to me in the eight years that I was at eBay. And it’s really important now to make sure we don’t compete with sellers. We win when they win. And then third is turning these buyers into lifelong trusted relationships related to turning them into enthusiasts. We think it’s the right strategy. The whole organization is really rallying behind it. I’m excited to come back and talk at future conferences with you at about it.

Edward Yruma

We look forward to that. Next week, we’re actually hosting a panel on collecting vintage watches, so we’ll make sure that, hopefully, you can participate and listen in. Or we’ll make sure that we make a plug that that eBay will now be the destination to do that. So thank you very much, Jamie.

Jamie Iannone

Awesome. Thanks for having me on.

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