eBay has recently announced its 2017 Spring Seller Update.
A few weeks ago, I visited the San Jose meetup group at eBay’s headquarters.
At the meetup, eBay’s Brian Burke – Director of Global Feedback, talked about the details of the latest updates and answered our questions.
I trust eBay’s public announcement to cover the various updates for you.
In this post, I’ll focus on “behind the scenes”, the “Why” behind the huge change eBay is making.
Among the fees change, new shipping options and performance standards, eBay has also made a gigantic, major change –
eBay is shifting shoppers traffic back to sellers
We’re removing third-party product listing ads across the eBay platform effective May 1, 2017. We will begin replacing the ads with eBay promoted listings at that time, with additional placements coming over the course of the year.
Let me put this into simpler words –
Starting from May 2017, eBay will decrease the traffic it drives to 3rd party advertisers, and increase the traffic it drives to its marketplace sellers.
How does eBay divert shoppers traffic to 3rd party advertisers?
Here is an example of how this works –
eBay places these “Sponsored Links” below the sellers’ item descriptions.
This is fantastic for the advertisers, as they are getting their ads in front of potential shoppers with high intent of buying the item. eBay visitors usually come to buy, not to do research or read articles…
eBay automatically chooses the right sponsored ads to serve, according to the shopper’s search query and the item they’re currently viewing.
Try it for yourself – search for anything on eBay, click on a search result and scroll down, you’ll see 3rd party advertisers (magically) offering you the exact item you searched for.
Why does eBay sell its traffic to 3rd party advertisers?
eBay generates a substantial revenue out of selling its millions of high intent shoppers’ traffic to 3rd party advertisers.
We generate two types of net revenues: net transaction revenues and marketing services
Marketing services and other revenues consists of Marketplace and Classifieds revenue principally from the sale of advertisements …
eBay 2015 annual report, page 51
The total revenue for marketing services for 2015 was $1.7 Billion dollars – Big part of this revenue is attributed to 3rd party advertising on eBay’s marketplace.
How do the sponsored links work?
Advertisers pay eBay for impressions and clicks on their ads, thus driving the high intent, relevant traffic to the advertisers’ own webstores – where shoppers convert to customers.
Our marketing services revenues are derived principally from the sale of advertisements
Advertising revenues on contracts are recognized as “impressions” (i.e., the number of times that an advertisement appears in pages viewed by users of our platforms) are delivered, or as “clicks” (which are generated each time users on our platforms click through our advertisements to an advertiser’s designated website) are provided to advertisers.
eBay 2015 annual report, page 82
As you can see from the screenshot above, there is a limited number of ads – 8 in this case. Advertisers bid among themselves on serving their ads on these spots, the highest bidders win and their ads are served to the shoppers.
eBay has only began driving traffic away in recent years
Sounds like a solid business model for eBay, but surprisingly it’s actually a brand new revenue stream –
Like Amazon, Facebook and Google, eBay is sitting on a huge trove of proprietary customer data.
Unlike those other online giants, eBay had not made that data available for ad targeting by marketers. Until now.
Advertisers will be able to target ads to segments of eBay customers. In a humorous slip of an example, AdWeek quotes Howard-Sarin saying, that while customers expect eBay not to reveal personal information, “that doesn’t mean we can’t create segments of shoe shoppers and let someone like Zappos—or actually not Zappos [which is owned by Amazon]—to target against those shoe buyers.”
Marketingland, April 9, 2013
Ebay Exchange Strategy
Down Under, Ebay launched a localized private exchange with the help of its partner Rubicon Project. The press release tells part of the story, “eBay Advertising Australia has today created the country’s largest private marketplace, via a partnership with Rubicon Project. The newly created marketplace gives brands access to over 7M unique visitors a month and the ability to programmatically trade on over a billion ad impressions.”
adexchanger, July 16th, 2013
Put into simple words – eBay allowed 3rd party advertisers to tap into its Australian marketplace – 7 million unique monthly shoppers who naturally came on the account of its Australian marketplace sellers.
Why will eBay stop selling it’s traffic away?
In eBay’s words –
Based on sellers’ requests, we are providing more opportunity to increase their visibility as well as reduce competition from external ad sources.
For the past few years, sellers have been reporting a decrease to page views and, subsequently, sales.
The following query from Google trends shows what happened to eBay’s traffic VS Amazon in the past 5 years.
eBay is blue, Amazon is red.
Combine these 2 facts:
- eBay’s overall traffic and interest decreased
- eBay is selling traffic to 3rd party advertisers
And you get the idea about why there’s not enough traffic left for eBay’s marketplace sellers.
Why is this change so good for eBay sellers?
eBay’s core business has always been the marketplace itself, and 70% of the revenue on eBay is driven by small to medium businesses.
Under its new management, eBay has set course to refocus on these small to medium businesses as the core it was established upon.
eBay recently rolled out its “promoted listings” program – which allows sellers to pay for premium placings on the marketplace, and this becomes possible by removing 3rd party advertisements that were previously taking these spots.
Brian also talked about eBay renewing TV, Radio and billboard advertising to drive new traffic to the marketplace.
This is a huge change in a positive direction and it suggests a brighter future for the eBay sellers. They can expect more traffic and transactions coming their way on the account of 3rd party advertisers.