eBay Inc (EBAY)’s Q4 2014 Earnings Call Transcript

Bob Swan
First, just on the workforce reductions, at this stage, all I would say is that 2,400 positions will be eliminated. That will be a little bit higher on the Marketplace side and a little bit lower on the PayPal side. And the reasons and rationale differ a little bit by business, where Kevin, John highlighted, where Devin is more focused, and therefore, he’s aligning his cost structure to be more focused. I think as John sees the opportunities in PayPal and the need to accelerate the rate of innovation, he thinks there’s opportunities to simplify the structure that exists. So the reasons they’re a little bit different by business, in the aggregate, that’s roughly 7%. And at this stage, all I would say is a little bit higher on the Market Place side and a little bit lower on PayPal side.

John Donahoe
And Paul, the SEO, the foundation of the issue is what I talked about last quarter, which is Google’s SEO is most tuned to what retailers have, which I would call structured data and use of product catalogues. And eBay is kind of a unique beast. We have the world’s largest collection of unstructured data. And our listings, by the very nature of the marketplace, turn over every 7 to 14 days. And so it’s always been a struggle for us to get that to work sustainably and effectively in Google’s SEO. And we have the sort of repeated pattern where every a couple of years, there’s a rule change that impacts our business. So Kevin and team have set out to fix this the right way, which involves us, in essence, creating our own product catalogue and creating it in a way so that it has more sustainable performance in SEO. And unfortunately, we can’t do that overnight. We clawed our way back to where SEO traffic is more or less where it was before the event, but it’s not yet driving growth and it’s not yet driving the same new buyers. I’ll remind you, SEO is a modest part of our traffic, but it is an important source of new buyers for us. And so the remaining work to be done in over the first 3, 4 quarters of 2014 is building out that product catalogue and getting so where SEO is generating traffic growth and back to generating the new buyers in a sustainable way.

Paul Vogel
I’m sorry, so you basically have to re-do, sort of all the indexing and the entire taxonomy of how you index the products, so this doesn’t exist going forward? Is that sort of the right way to think about it?

John Donahoe
At the extreme. We’ve clawed our way back doing what we can do in the short term. But the fundamental, it’s like rebuilding search 5 years ago. It’s building it, building it the right way and building it in a way that sustains. And so that’s what we’re focused on. The good news from a lapping standpoint, if you will, is this new buyer effect works its way through our ecosystem, the disruption to the new buyer funnel I talked about earlier. That will continue to work its way through up through the anniversary date and then the lapping. At least the lapping numbers get a little bit easier. But focused. The team is ruthlessly focused on getting it right and building it in a sustainable and healthy way.

Operator
Our next question comes Ken Sena of Ever Core.

Ken Sena – Evercore
I’m just wondering if you could maybe explain a little bit more the contribution margin versus the transaction margin pressure you mentioned. And is the 60% transaction margin still assured? And also, is there any potential to maybe negotiate the card present status as you look forward to maybe kind of offset some of those transaction pressures you’re seeing?