EUR 850.00 For Business Accounts Only

Morningstar | Advertising and Payment Strategies Intriguing, but Marketplaces Remains a Show-Me Story for eBay

EBay finds itself in a position of adapting to an evolving digital commerce landscape as well as changing seller and buyer behaviors. Management's blueprint for bringing back users includes a "back-to-basics" approach, prioritizing unique product selection, improved seller tools (including a streamlined listing process and promoted listing advertising), data-driven merchandising, new structured data/AI investments (focused on optimize search engine listings, improve the user experience, and enable dynamic pricing), increased mobile capabilities, and investing in adjacent platforms like StubHub and eBay Classifieds (both of which have carved out a differentiated network of sellers and buyers). These efforts strike us as prudent, and we believe eBay's consumer-to-consumer platforms have developed a network effect in the broader digital commerce landscape, the basis of our narrow moat rating.EBay has announced plans to partner with Netherlands-based Adyen to simplify the end-to-end payment process on its Marketplace platform with primary goals of lower costs for sellers (charging a single fee for marketplace and payment services) while offering buyers a streamlined process across a wider range of payment options. We're intrigued if this and other Marketplace enhancements like guaranteed delivery, price matching, and simplified returns can make eBay more attractive for vendors looking to diversify beyond Amazon, which could narrow the gap between eBay's gross merchandise volume trajectory and global e-commerce growth trends in the low to mid-teens.Despite platform enhancements and the transition into payment intermediation, we still harbor concerns about eBay's ability keep occasional users engaged as Amazon and other e-commerce marketplaces continue to find new ways to bring small and midsize business sellers onto its third-party marketplaces. This is the basis for our organic revenue growth outlook in the midsingle digits (below our global e-commerce growth projections) and expectations of only modest operation margin expansion due to payment intermediation investments and other seller and buyer acquisition efforts over the next five years.