eBay Inc

NASDAQ:EBAY

Earnings Call Transcript 2021-Q1

[Operator]

Good day, and thank you for standing by. Welcome to the eBay First Quarter 2021 Earnings Call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions]

I would now like to hand the conference over to your speaker today Joe Billante, VP of Investor Relations and Communications. Please go ahead.

[Joe Billante]

Good afternoon. Thank you for joining us, and welcome to eBay's earnings release conference call for the first quarter of 2021. Joining me today on the call are Jamie Iannone, our Chief Executive Officer; and Andy Cring, our Interim Chief Financial Officer.

We're providing a slide presentation to accompany Andy's commentary during the call, which is available through the Investor Relations section of the eBay website at investors.ebayinc.com.

Before we begin, I'd like to remind you that during the course of this conference call, we will discuss some non-GAAP measures related to our performance. You can find the reconciliation of these measures to the nearest comparable GAAP measures in the slide presentation accompanying this conference call. Additionally, all revenue and GMV growth rates mentioned in Jamie's and Andy's remarks represent FX-neutral year-over-year comparisons unless they indicate otherwise.

In this conference call, management will make forward-looking statements, including without limitation, statements regarding our future performance and expected financial results. These forward-looking statements involve known and unknown risks and uncertainties, and our actual results may differ materially from our forecast for a variety of reasons.

You can find more information about risks, uncertainties and other factors that could affect our operating results in our most recent periodic reports on Form 10-K and Form 10-Q and our earnings release from earlier today. You should not rely on any forward-looking statements. All information in this presentation is as of April 28, 2021, and we do not intend and undertake no duty to update this information.

With that, let me turn it over to Jamie.

[Jamie Iannone, Chief Executive Officer]

Thanks, Joe, and good afternoon everyone, and thank you for joining us. Today, we'll begin the call with key highlights from the first quarter. Then, I will share some reflections from my first 12 months as CEO and provide an update on the status of our tech-led re-imagination. At the end of my remarks, I will turn the call over to Andy, who will discuss our financial performance and outlook in greater detail.

The first quarter of 2021 was an excellent start to the year for sellers and buyers on eBay. Gross merchandise volume grew 24%, ahead of expectations. Revenue grew 38% outpacing volume, primarily due to payments and advertising. This is the fastest our revenues have grown since 2005, and we lean further into technology and vertical marketing investments, but still delivered $1.09 in non-GAAP earnings per share above our expectation.

Importantly, our customer metrics grew on both sides of our marketplace. Active sellers grew 8% to $20 million globally, more small businesses are joining the platform and more consumers are engaging in selling.

C2C GMV growth outpaced B2C for the fourth quarter in a row. This is positive for the long term as consumer sellers bring unique inventory at compelling prices and spend more than twice as much as buyers, who don't sell. Active buyers grew 7% to $187 million globally.

We are retaining buyers acquired over the last year at similar rates as pre-pandemic level, and we're seeing higher customer satisfaction in several categories as well as increased spend per buyer. We have continued to make progress on our multiyear initiatives payments and advertising, which contribute to a seamless customer experience, increase our platform monetization and deliver compelling financial results.

Managed payments ended Q1 with over four million sellers migrated. This includes millions of consumer sellers and hundreds of thousands of businesses globally. During the quarter, eBay managed payments representing over 52% of on-platform volume, up from 38% last quarter.

In the US, we exited the quarter over 80% complete. By applying what we learned in previous markets, rollouts in France, Italy and Spain progressed at an even faster pace, and we're on track to launch Greater China this quarter in all remaining markets by the middle of the year. We continue to see higher seller satisfaction due to a simpler end-to-end experience that reduces cost and complexity.

For many years before managed payments, sellers had to manage delays between purchase and payment across two platforms that tied up their inventory. As sellers migrate to managed payments that pain point is resolved saving time and money. And in Q1, we reduced unpaid items by approximately 80% on fixed-price transaction.

We remain on track to complete the vast majority of the payments transition by the end of this year which will deliver our stated financial goals of a leased and incremental $2 billion in revenue and $500 million in annualized operating income in 2022.

In Q1 advertising growth outpaced volume driven by Promoted Listings which delivered close to s$224 million of revenue up 58%. More than 1.3 million sellers promoted close to 400 million listings during the quarter. Growth was driven by increased seller adoption and AI improvements that increase conversion. Inspired by the success of Promoted Listings over the past few years, we are investing aggressively in innovation.

We reached $1 billion of advertising revenue in 2020 primarily through Promoted Listings which leverages a risk free CPA model for fixed price inventory. To capture our next billion, we are running multiple experiments, including an ad product for auctions and cost per click capabilities. We are also exploring a new capability that expands seller exposure by increasing off eBay traffic to promoted listings.

Q1 clearly demonstrates that the ongoing execution of our long-term vision is driving better results. Small business and consumer sellers are thriving and buyers are finding unique items at great prices. We have seen strong growth in volume revenue and earnings over the past year due to a combination of mobility driven tailwinds and the execution of our multiyear monetization initiatives. And we are driving value through portfolio optimization and returning capital to shareholders. Despite these notable achievements there's still a tremendous amount of potential to be realized.

Now I'd like to take a step back to a year ago when I rejoined this remarkable company as CEO. I knew eBay as a pioneer in e-commerce with a globally recognized brand, robust organic traffic and long-standing customer relationships. And I've always been inspired the purpose and special culture it creates.

Last July, we set out a vision for a techland reimagination of eBay. First, we believe that we can drive growth in our core by significantly increasing customer satisfaction. Second, we saw the need to better serve our small businesses and consumer sellers to become their platform of choice. And third, we identify the opportunity to evolve our relationship with buyers to drive better long term retention.

I am confident we can deliver on these three pillars positioning us to more effectively compete and win in a huge and growing addressable market. Our results to date are very encouraging. Our underlying growth is accelerating sellers and buyers are growing and we are making progress in our pursuit to be the best global marketplace to buy and sell. Simply put our strategy is working.

Let me share some examples with you. In the US we are growing our core. In Q1 sneakers valued above $100 who had a triple digit rate once again. Since launching authentication we verified hundreds of thousands of sneakers and we're seeing buyer satisfaction above 80 as a result. In addition, we are expanding our engagement with Gen Z and millennials through a wide range of social channels.

Based on the tremendous success we've seen in the US we are rapidly expanding identical capabilities to other major markets. We have set up local authentication centers and are launching in the UK, Australia and Canada this quarter. These centers will also unlock cross-border trade opportunities in sneakers and in other categories.

In luxury watches we saw growth accelerate from 16% in Q4 to 38% in Q1 in the US. For authenticated items we are seeing customer satisfaction that was close to 90% and is changing customer behavior. Sellers are listing more items and seeing a higher price realization. Buyers are visiting eBay more often and spending more.

One of the key advantages of our platform is cross-category shopping. Our luxury watch buyers like our sneakers enthusiasts spend thousands of dollars on other categories across the platform. In addition based on the value we are delivering in luxury watches we recently raised fees in this category to create more investment capacity.

For our certified refurbished experience eBay sellers continue to see strong velocity and we've expanded in the US to over 150 brands. We've also rolled certified refurbished out to the UK, Canada and Germany with more than 100 top brands signed up already. Buyers love the low prices on like new products as well as free shipping extended warranties and extended returns.

Now I want to highlight the next core category where we see significant potential, trading cards, a key part of our collectibles business. eBay is a market leader in this category with the widest selection across all price levels. We've seen explosive growth to start the year.

In the US, GMV was over $1 billion in Q1, which represents more than half of 2020's record setting volume. Active buyers of trading cards doubled and existing buyers purchased more items at higher prices than last year. To dramatically simplify selling, we've recently launched image-based scanning for our top selling trading cards.

In addition, we introduced a new low cost track and shipping service and aggressively market it to buyers on social and enthusiast forums. We plan to launch more innovation for trading cards throughout this year.

Another area of focus for us is customization. Beginning next month in the UK and Germany, we will offer a new capability to all sellers to offer personalized goods in categories, such as home, fashion and jewelry. This will allow buyers to find and enter specific customization requests to the seller.

In the past, this process was manual, which limited GMV. But we believe this new experience can significantly improve customer satisfaction, bring more supply onto the platform, and capture more growth. We plan to expand this capability to all major markets in the coming months.

As I mentioned upfront, our playbook to grow the core is working. We have a series of innovations rolling out to more markets throughout the year. While we've only touched a small percentage of global volume so far, all of our largest eBay categories collectibles, home and garden, fashion, electronics, and parts and accessories have addressable opportunities that can benefit from this playbook.

In addition to category-specific changes, we are rolling out site-wide improvements for all sellers. For consumer, sellers and small businesses we are focused on significantly reducing complexity, helping maximize value and driving sustainable growth. We believe these changes will increase seller satisfaction and grow the number of active sellers on the platform.

Here are some examples of what we are doing. Image-based listing can remove up to 75% of the time it takes to list an item. We have activated this feature in trading cards, and we plan to expand to multiple categories and geographies throughout the year.

Last quarter we talked about how we have migrated almost all of our store subscribers to our new platform that increases traffic to their items by approximately 20%. This quarter we empowered sellers with new CRM features, allowing them to directly issue coupons to acquire buyers. In addition, they can set coupon budgets, include QR codes on packing slips, and drive repeat business to their eBay stores.

Recently we opened up Terapeak product research free for all Seller Hub users in several markets, including price insights and listing quality reports. In addition, we launched sourcing insights that help sellers analyze trending categories, top products and signals what inventory is most likely to sell.

To acquire more buyers, we are also adding new ad formats to our display and social marketing, including video and we improved the inventory feeds that power them. Once we acquire these buyers, we are making changes to increase engagement and trust in their first 90 days and beyond.

As an example, we are leveraging a mobile-first approach and revamping key communications buyers received. We are seeing increased engagement from Gen Z and millennial customers through social shopping, such as eBay Sneaker Showdown. For our experienced buyers, we continue to optimize the end-to-end shopping experience.

In Q1, we increased conversion by improving our search engine's understanding of longer complex queries, and we added functionality to help buyers identify free local pickup items in their community. We are excited that all three of our strategic pillars are producing volume, seller and buyer growth, but we have a long runway ahead of us. We will continue to drive our investment decisions both organic and inorganic in pursuit of achieving this vision.

While I'm pleased with our business results, I am more proud of the way our employees and our platform are fulfilling our purpose of providing economic opportunity for all. As part of our commitment to empowering small businesses everywhere, we announced an investment of $25 million into the Clear Vision Impact Fund to help support small and medium-sized minority-owned businesses that support historically underserved communities.

We continue to support the UK's National Health Care Service efforts and I'm happy to report that we're now up to 2 billion PPE items distributed utilizing eBay's technology. Additionally, we remain active in philanthropy during Q1. We raised over $35 million through eBay for charity. The company also contributed to Asian Americans Advanced Justice and supported employee giving during Black History Month and the Lunar New Year and we quadrupled employee matching gift limits through the eBay Foundation.

Finally, another area that inspires me is eBay's impact on the planet. Many companies make admirable investments into adjacent programs, but at eBay sustainability is the core of our business. Since eBay was founded over 25 years ago, re-commerce or the resale of pre-owned goods has been an integral part of our platform and purpose.

Our community connects and trades pre-owned items that hold meaning and usefulness and keeps these items out of landfills. A recent survey confirmed that re-commerce resonates with our customers. In the US, 87% of respondents say they have sold pre-owned goods in the last 12 months. And they aren't just selling 81% of Gen V customers surveyed said that buying pre-owned items has become more common in the last year.

In summary, we are making great progress on the tech library imagination of eBay. We delivered historically strong Q1 results, putting us in a stronger position today than we thought we'd be coming into the year. Looking forward, we are excited because our long-term strategy is working. By increasing customer satisfaction, we are accelerating our core business while attracting and retaining sellers and buyers. There is more work to do, but I couldn't be prouder of the eBay team. They are focused and driven and they work hard every day to innovate, keeping our customers at the forefront.

With that, I'll turn the call over to Andy to provide more details on our financial performance. Andy?

[Andy Cring, Interim Chief Financial Officer]

Thanks Jamie. I will begin my prepared remarks with our first quarter financial highlights starting on slide four of the earnings presentation. The first quarter was another great quarter for eBay. We generated over $27 billion of GMV, our highest GMV quarter ever. We delivered $3 billion of revenue, $1.09 of non-GAAP EPS, and $855 million of free cash flow, while returning $414 million to shareholders through share repurchases and cash dividends.

Moving to active buyers on slide 5. We exited the quarter with 187 million buyers, representing 7% year-on-year growth consistent with the fourth quarter. We've added 13 million buyers to the ecosystem since the beginning of 2020 and are experiencing retention rates that remain in line with historical trends. And as we said throughout 2020, we continue to see growth in GMV per active buyer across all cohorts.

Moving to slide 6. In Q1, we enabled $27.5 billion of marketplace GMV, up 24% accelerating six points versus the fourth quarter. On a spot basis this represents growth of 29%, an acceleration of eight points versus the fourth quarter. As over 60% of our GMV is generated outside of the US, we saw a five-point translation benefit due to the weaker dollar.

On platform volume, which represents nearly 85% of total GMV grew at 28% a seven-point acceleration versus Q4, driven by site-wide product experience improvements, progress we're making in key categories, increased mobility restrictions and additional stimulus in the US. Our platform business in Korea was relatively stable versus the fourth quarter at 4% year-on-year growth.

In the US, we generated $10.4 billion of GMV in Q1, up 36% year-on-year accelerating 11 points from the fourth quarter, driven by mobility dynamics, stimulus payments and strength in our core categories including collectibles. International GMV was up 17% year-on-year, a two-point acceleration versus the fourth quarter, driven by strength in our core categories and mobility dynamics.

Turning to revenue on slide 7, our Q1 net revenue was $3 billion, up 38% and accelerating 10 points on an FX-neutral basis. As Jamie said this was our strongest quarter since 2005. On a spot basis this represents growth of 42%. We delivered $2.7 billion of transaction revenue, up 40%, accelerating nine points from the fourth quarter mostly driven by our payments migration and volume strength.

In managed payments, we continue to execute and have made great progress on seller migration to the new payments platform. As Jamie mentioned, we process over half of our global on-platform volume in the quarter, which contributed approximately 15 points of incremental revenue growth versus 2020.

Transaction take rate was 10% for the quarter accelerating 20 basis points driven by managed payments, partially offset by category and seller mix in addition to currency hedging impacts.

When we started the managed payments journey, we expect it to progressively increase monetization of our site, while delivering better seller economics and improved experience for both buyers and sellers and overall revenue growth for the business. We continue to deliver across all of these dimensions.

We delivered $291 million of marketing services and other revenue up 22%, accelerating 19 points from the fourth quarter, driven by first-party growth in Korea which grew approximately 120% in addition to strength in advertising and shipping.

Turning to slide eight and major cost drivers. In Q1, we delivered non-GAAP operating margin of 33%. This is up approximately 140 basis points year-on-year driven by volume and advertising, partially offset by product and marketing reinvestments, the impact of managed payments growth, and FX.

For each of the non-GAAP expense buckets, volume and a higher take rate provided leverage as a percent of revenue. I will provide additional context for other significant drivers.

Cost of revenue was up nearly four points year-over-year as leverage was more than offset by scaling managed payments and our first-party inventory program in Korea. As a reminder, the managed payments cost structure includes payment processing costs that scale in line with payments revenue. This dynamic has been fully contemplated in our 2022 margin targets.

Sales and marketing expense was down nearly two points versus the prior year as leverage was partially offset by investments in our vertical strategy, strategic reinvestments in online marketing, and FX. Product development costs were down 10 basis points as leverage was mostly offset by investments in end-to-end product experience in addition to managed payments and advertising.

G&A was down nearly two points primarily from leverage and a disciplined cost control. Transaction losses were down approximately one and a half points from the benefit of fee netting in our managed payments initiative and lapping COVID-driven deferred fees and seller protection increases.

Turning to EPS on slide nine, in Q1, we delivered $1.09 of non-GAAP EPS up 59% versus the prior year. Non-GAAP EPS growth was driven primarily by higher volume, growth in payments and advertising, and the reduction in share count driven by our repurchases, partially offset by investments in product and marketing.

GAAP EPS for the quarter was $0.82 up 44% versus last year. The increase in GAAP EPS is mostly driven by the same factors as non-GAAP performance, partially offset by the fair value of the Adyen warrant.

Moving to slide 10, in Q1, we had a very strong quarter of cash generation, finishing Q1 with $855 million of free cash flow, a 65% increase year-on-year driven by topline growth, increased working capital, and lower capital expenditures.

Turning to slide 11, for the quarter, we ended with cash and investments of $3.9 billion and debt of $7 billion. In Q1, we repurchased approximately 5.2 million shares at an average price of $55.70 per share amounting to $292 million. We exited the quarter with $5.7 billion of share repurchase authorization remaining.

Moving to slide 12 and investments, when we announced the classifieds transaction with Adevinta on July 20 of last year, the valuation was $9.2 billion based on a mix of cash and the value of Adevinta shares at that time.

As of April 27th, the Adevinta share price had appreciated by nearly 37%, which increased the value of the deal to over $12.7 billion. We continue to expect the deal to close in the second quarter with the cash portion of the transaction providing approximately $2 billion net of tax.

Turning to Adyen. The warrants we acquired in the second quarter of 2018 are valued at $1 billion at the end of the first quarter, an increase of over $700 million year-on-year. You can find more information on the Adyen warrant in our 10-Q. We remain excited about both of these investments, the optionality they provide and the significant value each can generate for our shareholders.

Turning to guidance on slide 13. For Q2 we are projecting revenue between $2.98 billion and $3.03 billion, growing between 8% to 10% on an organic FX-neutral basis, representing 12% to 14% growth on a spot basis. This assumes marketplace volume declines high single to low double digits on an FX-neutral basis, representing a decline of mid to high single digits on a spot basis.

This volume guidance is driven by three main components. First, the negative impact from lapping our second largest quarter ever, which was fueled by the first wave of mobility restrictions, stimulus payments and supply chain disruptions.

Second, the ongoing benefit from macro factors, including mobility and stimulus payments across our on-platform businesses, which we estimate are contributing high single-digit growth this quarter. Third and most importantly, continued delivery on initiatives driving us towards our vision, many of which Jamie highlighted earlier.

On a year-over-two-year basis, this guidance represents growth in the high teens on a spot basis, which is more than $4 billion of incremental GMV versus the same quarter in 2019, as our sellers and buyers have discovered or rediscovered the power and reach of our global platform.

We expect non-GAAP EPS of $0.91 to $0.96 per share, representing a 6% to 11% decrease, primarily driven by volume deleverage and continued investments in product and marketing in support of our strategy, partially offset by managed payments and a lower share count.

We expect non-GAAP effective tax rate of 16% to 18%. We are expecting GAAP EPS from continuing operations in the range of $0.67 to $0.72 per share in Q2. Finally, on Q2 our EPS guidance assumes approximately $400 million of share buyback. While we aren't providing guidance for the full year, we do want to provide some additional context on our path forward.

On volume, our conviction in the vision is increasing and we are confident these efforts will continue to drive additional growth as we scale. While difficult to forecast, mobility will likely continue to improve throughout the second half, pressuring growth. And when combined with easier lapping, that could result in second half FX-neutral volume growth rates similar to those of our second quarter guidance.

For buyers, similar to GMV we expect growth will be pressured as we lap periods of high buyer acquisition. We expect revenue growth will continue to materially outpace GMV growth, as our monetization initiatives drive a higher effective take rate.

Specifically in payments, we're more than halfway done with the migration of on-platform GMV and expect to deliver at least $1.7 billion of revenue in 2021, well on our way to realizing at least $2 billion of revenue in 2022.

On margin we are on target and remain committed to delivering 2 points of margin expansion versus 2019, achieving at least 30% by 2022. We said along the way that margin accretion won't be linear. And in 2021, we expect margin will be approximately 29% for the full year.

With regards to cash and capital allocation, we will continue to deliver strong free cash flow. We remain committed to our targets and tenants and we will continue to optimize our capital structure within them.

Specifically, on buybacks. For the full year we anticipate repurchasing approximately $2 billion of stock excluding deal proceeds. We will update plans for use of proceeds from the classifieds transaction at the time of closure.

For our Korea business, we have a strategic review process underway, which includes the possibility of a sale, with interest from multiple parties. We are exploring that interest and we'll provide an update when we have material information to share. And finally, on FX. At current rates, we'd expect the benefit of currency to be smaller in the second half, as we lap a relatively weaker US dollar.

In conclusion, Q1 was a record quarter for eBay and we entered Q2 excited about the path forward to deliver on all aspects of our long-term plan. We will continue to execute on our multi-year monetization initiatives, which are driving material benefits to our customers and shareholders, as we move towards at least $2 billion of revenue and $0.5 billion of operating income in managed payments and the next $1 billion of advertising revenue.

We are delivering on our core strategy, increasing customer satisfaction and attracting and retaining customers as we capitalize on a $0.5 trillion addressable market that is growing double-digits. We're delivering consistent strong free cash flow and continue to deploy that cash in a disciplined manner by investing in our platform for the long-term and returning capital to shareholders.

On margins, we remain on target for at least two points of improvement in 2022 compared to 2019, while we continue to drive efficiencies and strategically reinvest to accelerate growth. And finally, we're executing on our portfolio reviews and will deploy capital in a disciplined manner balancing reinvestment in the core, capacity for mergers and acquisitions, paying a dividend and buying back our undervalued stock.

And now, we'd be happy to answer your questions. Operator?

[Operator]

[Operator Instructions] Our first question comes from Ross Sandler with Barclays. Your line is open.

[Ross Sandler, Barclays]

Hey, guys. I can ask three questions if that's okay, sorry. For the guidance, you get like kind of loss in the year-on-year. But if we look at 1Q to 2Q sequentially, I think, it assumes about a 7% decline Q-on-Q for GMV normally kind of flat Q-on-Q. So, I guess, can you parse that into how much is like stimulus burning off versus all these economies reopening in the context of what Jamie said about buyers retaining at a high level and spend per buyer going up just trying to reconcile that.

Second one is on the margins. So, the 29% margin guidance. Is that just from all this payment revenue coming in at a lower margin? Or is there other discrete areas that you're layering in on the investment?

And then lastly on the trading cards. Are there other categories like this that just kind of have emerged over the last year that you guys maybe had that were nascent and just now are being like activated because consumer behavior has changed? Anything else besides trading cars you would point to that would be an example of like coming out of this whole thing why eBay would be in much better shape from a category perspective. Thanks a lot.

[Jamie Iannone, Chief Executive Officer]

Yes. I'll start with the training card ones and then I'll let Andy talk about the other two. So, yes, we've always had a great history in the Collectibles business and a great history in trading cards. Obviously, Q1 was really strong doing over $1 billion in the quarter, which was more than half of last year's record setting.

And I'd say, in general, what we see is that when we take category-by-category and we change the NPS, and we change the customer experience that changes the buyers and sellers and the GMV follows. And in that case, it's similar to what we saw in sneakers and in watches where that change led to a dramatically different performance.

We see customization which we just launched this quarter as another one of those opportunities. We do millions of items on the site today, but we do it in a way that's really full of a lot of friction between the buyer and the seller. And this makes it really seamless and things gives us the opportunity to open up more GMV.

But as I said upfront, we haven't even touched the -- some of the major categories that we have like home and garden, fashion, electronics, and parts and accessories. These are big core categories that all have addressable opportunities that we think can benefit from this playbook.

[Andy Cring, Interim Chief Financial Officer]

Yes, Ross. On the other two questions on Q2, and Q1 versus Q2 dynamics. I mean, clearly, the first quarter was a huge quarter for us, as I said, our largest quarter ever. As we indicated in January, we had seen increasing restrictions late last year through most of our markets and those kind of persisted into the first quarter, and the growth in the first quarter driven by two main factors.

As we've said, the continued underlying performance and then the correlation between mobility and GMV. And then as the quarter progressed, a lot of further developments and things we learned along the way back to January pace of vaccines were very different from where they are today. Mobility has improved throughout the quarter in most markets.

And then you've got as you mentioned the impact of stimulus payments in the US, which it's hard to say exactly the impact, but -- or when it started or when it will stop, but we believe the peak of that impact was probably in the March time frame.

So when you look then on a quarter-over-quarter basis, the biggest difference between Q1 and the outlook for Q2 would be the fact that the stimulus -- or not stimulus, sorry, but the mobility is in a better place today than it was at the beginning of the first quarter. Underlying performance continues to be great. And then as we've said, progress on payments is continuing to be very positive as well.

That leads a little bit in to your second question on margin rate for the year. I think a couple of things to consider. We're still on target for the 30% that we said for next year. And we have said all along, it's not going to be linear. We're going to have quarters where we're up or down and we're going to continue to balance growth and margin along the way.

A couple of things, when you look at Q1 relative to the rest of the year and then the second half -- and again, you hit on a couple. I think it's important to remember, our historical trend is that Q1 is a bit higher than the rest of the year, and typically, higher than Q2. Last year that was a bit muted with the amount of growth that we saw. But I think this year we're -- with the relative size of the two quarters more on that trend. And then without getting into a specific walk on the second half, I think three things.

One would be, moderating growth which will have some impact on volume and deleverage. We continue to invest for long-term health. So we're not going to be managing to a quarterly margin target. We're working towards longer-term business health. And then you did call it, and it's a great problem, which is payments is scaling rapidly. It's delivering a tremendous amount of incremental op income and it does come with a minor bit of pressure on operating margin, but we feel great about that progress and what it does for the P&L.

[Operator]

Our next question comes from Colin Sebastian with Baird. Your line is open.

[Colin Sebastian, Baird]

All right. Great. Thanks for the questions. I guess, first off, bigger picture question for you Jamie. You talked a bit about some of the additional product planning with advertising. And so more broadly, I wonder, how you think about the ramp of overall seller monetization, how much additional upside do you see there? Or if you see perhaps an opportunity longer term to shift the model towards more ad orientation like we see with marketplaces in other markets?

And then secondly, on the margin side, on the spending side, obviously dynamics this year are a little bit different given the comps. But we've seen periods of reinvestments with eBay over the last decade. And so Jimmy, you outlined a bit of a division last year and it sounds like you're happy with the progress this year so far this year with the verticals. But how do you weigh the need to invest long term and measure your performance on a short-term basis? And how quickly, are you going to be able to pivot if necessary?

[Jamie Iannone, Chief Executive Officer]

Yeah. So, first on the monetization side. So look obviously both payments and advertising are leading to the significant growth in revenue ahead of payments. Since you asked more about advertising, I'll talk about -- we feel great about the business in part, because our sellers are seeing a great return on the ad spend. And we think there's a lot of opportunity left from that perspective to help them be able to move their products with velocity.

So what we're announcing this quarter is that, we're basically rolling out three new experiments or pilots in our advertising business. The first being placement for our auctions. So the growth that we've seen to date has really just been on the fixed price business. So that will be a new capability. We're also testing a CPC-based capability for our sellers, which is a new potential growth vector. And we're looking at off eBay opportunities for our sellers to even further increase their exposure.

So we continue to look at the monetization and are we adding value to sellers? A great example for that is in watches this quarter, we saw an opportunity to increase our fees there, because of the value that we're creating for our sellers in that category. Overall, when I look at advertising, it's still only 1% of GMV. And if you look at benchmarks, there's significant opportunity above that. And we -- as long as we continue to add value to sellers we think that will be a continued opportunity.

On the second side on the investments, we laid out in July, the strategic plan and started with the category idea on verticals specifically of reinventing the experience, changing the NPS and driving GMV. And if you look at the results of the past few quarters, this is the fourth quarter in a row where we have triple-digit growth in sneakers. This is a business that had been declining double-digits. Our watches went from 16% last quarter to 38%.

More importantly though we're seeing customer satisfaction metrics in the 80s and 90s. And so we think this concept of really applying it to other parts of the business. So what you're going to see over the next coming quarters and years is us continuing to expand that focus and invest in and roll out additional categories.

Like I said upfront, the majority of our big categories like parts and accessories, electronics, fashion all have similar opportunities to follow that playbook. So we're going to continue to do it in a balanced way as I talked about in July, managing what we spend with what we see as the growth opportunity. And we've already done that in a lot of areas especially in marketing over the past couple of quarters.

[Colin Sebastian, Baird]

Great. Thank you.

[Operator]

Our next question comes from Edward Yruma with KeyBanc. Your line is open.

[Edward Yruma, KeyBanc]

Hey. Thanks so much for taking the question. I guess just first as a follow-up to the previous question, it was interesting that you took up take rate and watches. I guess, Jamie if you step back and look at take rate overall base take rate, are there more opportunities to take uptake rate? Are there services you can continue to add that exclude advertising that would allow you to have that higher take rate?

And then I guess as you guys make some of these muscle moves in specific verticals, any sense as to how large these verticals are as a percent of total GMV? And then a follow-up on fashion. I know you've been doing some off-price fashion tests in the UK timing on rolling that out to the US? Thank you.

[Jamie Iannone, Chief Executive Officer]

Yes. So on take rate, obviously, with payments we actually think we are -- for the vast majority of sellers they're going to experience lower fees even though it will mean at least $0.5 billion of operating income to our business. And we continue to look for ways that we can drive kind of the new experience. The off eBay advertising is a great example of that.

And to your comment on watches, it's really kind of a category-by-category basis of us looking at what value are we creating and what opportunities are there for our sellers. On how large this can be? Why we're focused on the non-new in season is because we believe it's a $500 million total addressable market. And if you look at our categories on the site, we have high single-digit, low double-digit penetration. And so we think there's lots of opportunity.

And coming back to the core of what we said about re-commerce, I think more and more especially in younger generations are interested in the re-commerce of pre-loved items. And so it's why we're leaning in so much towards that. Also we're seeing this strategy is working with C2C. So our C2C again, outgrew our B2C growth 34% versus 21%. But that only -- not only brings the unique inventory, but it turns those buyers into twice as valuable buyers when they try casual selling.

And then lastly, the tests we've been doing on the brand outlet side in the UK has been performing well. We're growing double-digits ahead of market rates. And as I mentioned before, what's great is that while we went out and sourced all of the initial programs to kind of build that up and now the brands are actually calling us and asking us to be part of that program. So you've seen this playbook from us over the past few quarters where we're trying things in different markets, finding success and then rolling them out more broadly. So we've had a lot of success with sneakers in the US and we're now rolling that out to UK, Canada and Australia this quarter. And you could see us continue to follow that playbook.

[Edward Yruma, KeyBanc]

Good. Thank you.

[Operator]

Our next question comes from Tom Champion with Piper Sandler. Your line is open.

[Tom Champion, Piper Sandler]

Hi. Good afternoon. Just wanted to ask a follow-up to the prior question. I think last quarter, you framed GMV covered by new category experiences and it was single-digits or kind of less than 10% of GMV in the fourth quarter. And just curious if you could update that metric, where these new category experiences reach this quarter and maybe what could be achieved by year-end? Any comments on that would be helpful.

And then Jamie I'm just curious, if you could talk about what are the remaining seller pain points that you're really focused on? You've clearly done a lot of work with payments and maybe reach on the advertising side. But what are you hearing from sellers as to the features that they'd like to see? Thank you.

[Jamie Iannone, Chief Executive Officer]

Yeah. So look what I'd say is that on the categories that we've tackled thus far we're still in single-digit percentage territory. And what we've said is that we believe that over half over the -- coming years over half of the GMV is addressable in this type of opportunity and especially in some of these major categories. And frankly there's probably opportunities across all categories over time to be able to ever change it. We really wanted to see if the thesis that we laid out worked and it's been working pretty consistently and that's the feedback we're getting from buyers and sellers and we're obviously seeing it in the business.

There's a lot of opportunity for us on the seller side. So on the store side, we're migrating all of our stores to the NextGen platform. That's mostly complete, which is a much better platform for them. This quarter we're rolling out CRM capabilities, which has been a long-standing ask of theirs, so that they can remarket to buyers through packing slips, through e-mail et cetera. So that's been pretty significant. And then even things like the customization that we're launching is a long-standing seller request to drive their business.

We didn't talk much about this but one of the pain points that's existed in the eBay community for our sellers has been unpaid items for -- since the company really started payments was divorced from -- or separated from purchase, and so sellers sometimes would have a transaction close without getting paid. The ability -- now that we've launched manage payments and we're migrating a bunch of new technologies, we actually reduced that by 80% for our sellers. So that's a pain point that we're really happy to be able to eliminate for them.

And then on the C2C side, it’s really about making it easier, why you see us launching things like image base listing? It is because we want to take all of the friction of the experience and make it a really short couple of minute process to get your items up on to the platforms. So, we’re doing a lot more education, things around the seller business, really focused on continuing to drive that C2C business. So I think each quarter, we'll be rolling out features that really address this key thesis of taking all the friction of the experience and making this the best marketplace in the world.

[Tom Champion, Piper Sandler]

Thank you.

[Operator]

Our next question comes from Mark Mahaney with Evercore ISI. Your line is open.

[Shweta Khajuria, Evercore ISI]

This is Shweta for Mark. I was wondering if you could please comment on buyer growth. You laid out some of the initiatives that you are taking to continue to drive growth. So where do you think -- what do you think could be a sustainable growth rate for buyers?

And then the second thing, you also pointed to some of your top category and that includes collectibles, home and garden, electronics, fashion, parts and accessories. I may have missed some, but how big are they currently today as a part of -- as a percentage of GMV? And how do you think the cross-category shift plays out in face of reopening? Thank you.

[Jamie Iannone, Chief Executive Officer]

Yeah. So first on buyers look in Q1, we added 7% to our active buyer count to $187 million globally. Over the past year we've added 13 million buyers to the marketplace. And what we're seeing is that those buyers are behaving with strong performance like pre-pandemic. So they're not just coming to eBay for during the pandemic time period and leaving. We're converting a good amount to our strategy of long-standing enthusiasts.

We're really focused on the first 90 days for buyers and making sure that they have a great experience on the site. And what you're seeing is that the NPS is up, especially in focused categories like watches and sneakers, certified refurbished where you now have a two-year warranty and have the free returns. So we're really pleased with that.

The cross-category nature and the size of these categories is one of the best assets of eBay. We talked last quarter about our sneaker buyer where we acquire a new Gen Z buyer; they end up buying $500 in sneakers but another $2,000 outside sneakers. We're seeing the same type of thing in watches where we're acquiring a buyer of new high-end watches and they're spending thousands of dollars outside of other categories.

So we continue to lean in because it's a huge accelerator for us to get buyers purchasing cross-category and a lot of the marketing technology that we've built and we worked on, the AI with recommendations et cetera is really centered on this idea of capturing buyers and having them transact in multiple categories.

[Shweta Khajuria, Evercore ISI]

Okay. Thank you.

[Operator]

Our next question comes from Justin Post with Bank of America. Your line is open.

[Justin Post, Bank of America]

There's going to be a lot of moving parts this year with e-commerce facing the comps and it's not just you. And so what do you think is the best way to measure your progress this year as we think about it? Is it market share versus e-commerce spend? And what specific milestones if GMV matches your outlook, should we be looking for that really show you're making progress this year? Thank you.

[Jamie Iannone, Chief Executive Officer]

Yes. So I mean one that we're clearly looking at is with last year being such an anomaly with the pandemic is a year over two-year and the growth that we're seeing there, which we're excited by. Clearly we'll be lapping some of the buyer, extensive buyer growth that we had in last Q2 but we're looking at the performance of those active buyers on a go-forward basis and we're pretty pleased with that performance.

And then the last thing I'd say is that, look, a lot of the stuff that we're doing on the core strategy is really about the long-term growth. So we're going to see things in the short-term variances versus prior year. But I think for me the core thing is the playbook that we put in place is working. This thesis of really changing the growth trajectory of the category by investing in the playbook is what the team is focused on. And we're going to stay on that for the near to medium future.

If I look at coming into this in 2019, we were I think declining 2% from a GMV perspective. And if you look at our revenue growth projected next quarter, we're looking at double-digit revenue growth. So we feel good about where we're positioned coming out of the pandemic.

[Justin Post, Bank of America]

Great. Thank you.

[Operator]

Our next question comes from Stephen Ju with Credit Suisse. Your line is open.

[Stephen Ju, Credit Suisse]

Okay. Thank you so much. So Jamie, now that the US payment penetration is -- seems to be approaching the finish line here, is there anything you can say about how the simplified checkout versus what the buyer has had to go through before? And how that might be resulting in, hopefully a decrease to the overall friction and hence an increase in conversion rate or purchase velocity?

And I guess as a follow-up to some of the earlier questions on advertising, as an increasing portion of the transactions end up being C2C or what might be more unique, collectible or enthusiast items, should we still be thinking that that type of gross merchandise value is still appropriate for PLA because it seems like advertising should work best for probably those categories where there are multiple sellers trying to sell a fairly homogeneous item? Thanks.

[Jamie Iannone, Chief Executive Officer]

Yes. So first on the payment side, I would say, yes, not only buyers now have more choices of how to pay including Google Pay, Apple Pay, credit card, debit, PayPal, et cetera. But you no longer have to set up two different accounts. You no longer have to manage a claims process or returns process in two different areas. It's one eBay money back guarantee. So to us it dramatically simplifies the whole experience for a buyer and makes it easier.

They keep that payment on file and it's just a dramatically easier experience. And then it's helping the seller too because I mentioned the unpaid item example earlier on the call but also the ability for them to manage all their business in one place makes it much more streamlined to just run a business on eBay.

On the Promoted Listings, we see opportunities really across every category and every price point of GMV. The beauty of the CPA model that we've had of the cost per acquisition model has been just the simplicity of it of just adding the percentage and it makes it really easy. But the PC model that we're launching also gives the opportunity to really kind of push volume in a different way with a different set of capabilities.

But even on single and unique items, people want to promote those items and get more exposure for them. They have for the longest period of time. It's why we're launching the ad feature for auction and testing that is to really go after it. And it's still not -- we still have a lot of opportunity across our listings to increase the penetration. Like I said before, we're only at 1% of GMV.

[Stephen Ju, Credit Suisse]

Thank you.

[Operator]

Our next question comes from Deepak Mathivanan with Wolfe Research. Your line is open.

[Deepak Mathivanan, Wolfe Research]

Great. Hey, guys. Thanks for taking the question. So first can you provide some color on what categories are specifically seeing reversals with mobility improving in second quarter? And then on the commentary around the second half GMV trends, comps are also progressively getting easier once you navigate past second quarter, but you're saying that potentially GMV trends could be similar to second quarter.

I know there are always certain one-time items in 2Q and there's potentially some geographies coming out later in terms of mobility. But can you parse out between those? And do you expect further reversal in terms of kind of comparable basis on volumes beyond 2Q?

[Jamie Iannone, Chief Executive Officer]

Yes. I'll take the first one and I'll let Andy take the second. So on the category piece, we talked about last year was, people started by panic buying everything that was related to kind of health needs across the board on eBay.

And then we saw that expand into kind of stay-at-home categories, fitness and laptops, those types of things in our electronics business. And then, really went kind of across the board over the course of the year. So as you think about this year it's really just a change against the backdrop of what we were buying last year. I'll let Andy take the second part of that.

[Andy Cring, Interim Chief Financial Officer]

Yes. And look, we didn't provide guidance for the second half just because of the dynamic environment and the wide range of outcomes. You are right. When you look at the comps for Q3 and Q4 they are modestly easier as we go through the year.

The second piece, I'd say is, we continue to expect to see the underlying business perform. I think the wildcard in all of this is the macro factors, mobility and stimulus, incredibly hard to predict.

There's certainly some benefit in the second quarter to those. And it's possible that as regions open up and mobility improves that that offsets some of the comps, the easier comps that we see in the second half. It's a scenario. It's just -- it's hard to accurately predict where mobility heads.

[Deepak Mathivanan, Wolfe Research]

Got it.

[Joe Billante]

Operator, we've got time for one more.

[Operator]

Our final question comes from Brian Nowak with Morgan Stanley. Your line is open.

[Brian Nowak, Morgan Stanley]

Thanks for taking my question. I wanted to ask about -- you've done a great job of tackling and handling these categories with sneakers and luxury watches authenticated and now trading cards. And as someone who sold a Barry Sanders rookie card, it is a much better experience.

So the question is, as we sort of look ahead to the next 10%, 20%, 30%, 40%, 50% of GMV that you're going to redo, what is sort of the main technological constraint that you think is going to sort of dictate how quickly or slowly you're going to be able to sort of redo the rest of the categories on the platform? And as you're talking about the back half, are you assuming you're going to have more categories rolled on to the new stronger interface yet?

[Jamie Iannone, Chief Executive Officer]

Yes. So the first thing I'd say is that, on the category piece, in some cases the categories have overlapped in terms of features or capabilities we need to build in order to make that a winning NPS for us.

So we build authentication once. It took us a couple of months to build it out, but then we're able to roll it out to the next category in a couple of weeks and expand that geographically.

And so, I think that's actually true for a lot of areas, where there's components or features that we're building specifically to drive the NPS of a category that will be applicable to a broad set of categories across the experience.

And in terms of pace, we're going to continue to do what we've done before, which is, roll them out in a specific geography, make sure that we're seeing the intended impact and then roll it out across the board.

We don't really want to talk about which category is next and what we're focused on for competitive reasons. But I would just say that, we're really pleased with the playbook. We're really pleased that we're able to drive significant growth and a significant change in trajectory and most importantly, a significant change in the customer experience. And so, you're just going to see us continue feature after feature, category after category.

The second thing I'd say is that the verticals is not the only investment that we're making. A lot of our investment is going to site-wide investments that impact all categories. Clearly, that's true for payments and advertising, but the same is true across our seller tools, across our API business, across the CRM and couponing capabilities that we just rolled out, investments that we have in search and in SEO, which apply to the whole business.

So the way I think about them is kind of, a good amount of investment in vertical to really change the NPS of those categories, but a significant amount of site-wide investments as well, which lifts all categories. So that's the strategy. That's how we think about it and we're really pleased with the performance.

[Operator]

There are no further time for questions. This concludes today's conference call. Thank you for participating. You may now disconnect.