How Much Will Marketing Services Contribute To eBay’s Top Line Growth?

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EBAY
eBay

eBay (NASDAQ:EBAY) has reported a slowdown in its total Transaction revenues over the last few years, while its Marketing Services revenues have increased in the high single digits through 2016 and 2017. eBay’s total Marketing Services revenues surged from $1.76 billion in 2015 to over $2.1 billion in 2017, a 9% annual increase. In the same period, the company has reported a 4% annual increase in core Transaction revenues, with Marketplaces revenues slowing down overall growth. Much of the growth in Marketing Services and other revenues was driven by strength in eBay’s Classifieds – a trend which we expect to continue in the coming years. We expect combined Marketing Services revenues to sustain 9-10% revenue growth through the end of the decade, adding roughly $420 million to eBay’s total revenue increase. In the same period, we forecast eBay’s net revenues to see mid-single digit revenue growth in the next couple of years. Accordingly, Marketing Services is likely to contribute around 25% of eBay’s overall revenue growth in the same period, per Trefis estimates. We have summarized our expectations for eBay’s Marketing Services revenue growth from 2018 through 2020 on our interactive dashboard on how much Marketing Services will contribute to eBay’s revenue growth.

 Key Growth Drivers For eBay’s Marketing Services

Marketing Services and other revenues are generated mainly from the sale of advertisements, classified fees, and revenue sharing arrangements on eBay’s websites and platforms. Advertising revenue from the sale of online ad space on eBay’s marketplace is dependent on impressions, the number of times an ad appears in pages viewed by users, and/or clicks. On the other hand, Classifieds revenues are generated through fees paid by listing parties paid up front. In recent years, Classifieds revenues have grown in double digits (12-13%) from 2014 through 2017. Much of the growth came from eBay’s platforms in Germany (mobile.de and eBay Kleinanzeigen), Canada (Kijiji) and Australia. Growth has picked up in 2018 thus far, with a 21% increase in Classified revenues. Going forward, we expect the growth spree to continue and result in Classifieds becoming a $1.2 billion business for eBay by 2020. On the other hand, we forecast advertising on marketplaces to continue to grow in the mid to high single digits through the end of the decade. As a result, combined Marketing Services and other revenues are forecast to increase by 7-8% over the next few years. You can modify the assumptions and drivers in the dashboard to arrive at your own estimates.

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