Yesterday, eBay
announced second quarter earnings which just beat analysts’ expectations. However, revenue fell short of projections. The company earned $0.69 per share (vs. $0.68 expected) against revenue of $4.37 billion (vs. $4.38 billion expected).
During the quarter, eBay suffered a major security breach and global password reset. In addition, it faces intensifying competition from Google, Amazon and a host of smaller rivals.
The company acknowledged that Google algorithm changes had adversely affected its growth in the quarter. On the earnings call yesterday eBay CFO Bob Swan said that SEO wasn’t driving as much traffic to eBay’s core Marketplaces business, which adversely impacted growth:
Now, let’s turn to the Marketplaces business. Marketplaces delivered $2.2 billion in revenue, which grew 6%, GMV grew 8%, and operating margin declined 340 basis points. It was a challenging quarter. As John indicated, we got off to a good start, but we had significant obstacles late May. The combination of the cyberattack and the Google SEO had an immediate and dramatic impact on GMV growth. June GMV growth was 7% driven by slower active buyer growth and lower conversion. In light of these events, we have made significant investments to get eBay users reengaged, including couponing, seller incentives and increased marketing spend . . .
Swan later added that eBay’s Marketplaces business now “has to dig out of a hole. While we are confident we will work through the global password reset and the SEO changes it will take longer and cost more.”
Initially, it seemed that eBay had been hit by a change to Google’s automated “Panda” algorithm, which seeks to prevent low-quality “thin” content from ranking well. However, it turns out that eBay was hit by a manual penalty, where a human being at Google decided some of the site was engaging in spam.
Accordingly eBay will probably be compelled to spend more on AdWords. That’s ironic because the company recently re-issued a report that forcefully argued paid search was mostly ineffective as an advertising vehicle for major brands.
Also see our story on Search Engine Land, which goes into more depth, including an estimate of how much the penalty may cost eBay in lost revenue, plus eBay’s plans to do better with paid search and social: Google Penalty Hits eBay’s Bottom Line, May Cost Up To $200 Million In Revenue.
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