eBay, which reported mixed Q4 earnings Wednesday evening, is glad to wave goodbye to 2014, but warns that 2015 will likely be a rough year too.
eBay announced it would cut 2,400 jobs, or about 7% of its total workforce, at the beginning of 2015, as it tries to simplify its structure in preparation for spinning PayPal into a separate business.
On the company’s earnings call, eBay CEO John Donahoe called 2014 a tough year that “quite frankly, we’re glad to see come to an end.”
He also warned that 2015 wouldn’t be a piece of cake either. eBay is expecting 2015 Q1 revenue in the range of $US4.4 billion — analysts had estimated a midpoint of $US4.74 billion.
Here are some highlights from the brutal earnings call, transcribed by Seeking Alpha:
- Donahoe on eBay Marketplace’s quarter: “Q4 was disappointing. Significant events in 2014 have disrupted our ecosystem and overwhelmed the progress we were making on a number of fronts, impacting our performance.”
- Donahoe on what’s to come: “2015 will be another challenging year, and we expect eBay’s performance to soften further before we see stabilisation and improvement. We still have work to do.”
- Reiteration from CFO Robert Swan: “It’s going to get worse before it gets better.”
- Donahoe on losing customer trust: “First, the password reset and SEO changes significantly impacted traffic, which did not recover in the second half as expected. eBay’s loyal customers are back following the reset of our passwords, but our more occasional customers have not returned as quickly as expected in Q4.” (At the end of May, revealed that a big data hack two months prior required all users to change their passwords. Hackers had gained access to a database that contained customers’ names, encrypted passwords, email addresses, physical addresses, phone numbers, and dates of birth, although, luckily, no financial information.)
- Donahoe on the SEO fiasco: “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.” (eBay took a significant hit in 2014 when Google updated its search algorithm. The update, known as “Panda 4.0,” stripped eBay of 80% of its best search listings, according to Larry Kim, CEO of search marketing company Wordstream. Google routinely changes its search algorithms to weed out results from lower quality or spammy websites, and Wordstream’s Kim says that eBay’s bad ad practices caused its results to get punished. This is huge for eBay, because it relies heavily on search traffic. When you Google a product that you want to buy, eBay wants one of its listings to be on the first page of results. Since Google’s update, eBay results have lost their prime real estate. Donahoe says that eBay has “clawed its way back” to its old standings but that it basically has to create a new product catalogue and indexing system that will keep it in Google’s good graces. )
Despite the tough news, the stock is up nearly 4%.