Monday, March 03, 2008

Sponsored Ads a Huge Win for eBay!

While most sellers believe that eBay's sponsored ad program draws customers away from the site, it is clear that the revenue generated for the company is huge and growing. Advertising is also a high margin business for eBay.

In eBay's 10K filing with the SEC, Advertising revenue grew 89% Y/Y from $171.8 million to $321.7 million. This growth rate makes advertising the second fastest growing business segment for eBay, Inc., behind Skype. To put this in perspective, Skype revenue grew 95% Y/Y from $192.7 million to $376.7 million and Skype is a very low-margin business.

Before long, advertising will be a $1 billion a year business for eBay, so if you were expecting those sponsored ads to go away, it ain't happening. In fact we recently saw listings on the site, which gives you an idea of their plans. eBay's response to the SDC listings was; "Some listings appeared accidentally on over the past two days. This system issue has been resolved. We apologize for any confusion or inconvenience this may have caused. " Notice it wasn't an error, it was accidental. Believe me, the accidental part was, that they showed up now, before they were supposed to. I have a hunch we will see SDC listings on the eBay platform sooner rather than later; first as a test and if that goes over well, they will roll them out site wide.

Back in October of 2006, I wrote a post called The Real Future of Ebay; After Their Recent Agreements with Yahoo and Google!, where I made the point that eBay was becoming a shopping portal rather than a shopping destination, nearly 2 years later their plans are becoming a reality. They still have a long way to go, since Advertising only makes up about 4% of total company revenue, but it is clear Advertising is a big part of their plans.

My recommendation for sellers, who have an independent website, is to start testing Google and Yahoo PPC programs to get access to eBay shoppers and start driving them to your website. Be one of the first sellers to use eBay as a shopping portal.

Just my 12%


Anonymous said...

Thanks... it's the first commentary that actually makes any sense. But, if what you theorize is taking place, how are they helping thier image by shoving around all the "little" people... not to mention keeping their stockholders in the dark?

Goodwill goes a long way and right now ebay's name is synonymous with lies and dirty deeds and greed. Could anyone afford their stock to take the dive that their's is? And, yeah, everyone saw the economic downturn coming, except maybe the delusional goober we have in the white house.

Randy Smythe said...

Anonymous, eBay needs a major over-haul on their image. Sellers don't trust them, buyers think there is way more fraud than there actually is.

eBay has become a punchline rather than a revered brand. Unfortunately, it is what it is and sellers need to start looking out for themselves.

If you can benefit form the sponsored ads then by all means do it.