eBay Inc. (EBAY) Q1 2021 Earnings Call Transcript

eBay Inc. (NASDAQ: EBAY) Q1 2021 earnings call dated Apr. 28, 2021

Corporate Participants:

Joe Billante — Vice President of Communications and Investor Relations

Jamie Iannone — President and Chief Executive Officer

Andy Cring — Interim Chief Financial Officer

Analysts:

Ross Sandler — Barclays — Analyst

Colin Sebastian — Baird — Analyst

Edward Yruma — KeyBanc — Analyst

Tom Champion — Piper Sandler — Analyst

Shweta Khajuria — Evercore ISI — Analyst

Justin Post — Bank of America — Analyst

Stephen Ju — Credit Suisse — Analyst

Deepak Mathivanan — Wolfe Research — Analyst

Brian Nowak — Morgan Stanley — Analyst

Presentation:

Operator

Good day, and thank you for standing by. Welcome to the eBay First Quarter 2021 Earnings Call. [Operator Instructions] After the speakers’ 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 — Vice President of Communications and Investor Relations

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 a 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 — President and 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 moving further into technology and vertical marketing investments, but still delivered $1.09 in non-GAAP earnings per share, above our expectations.

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 and selling. C2C GMV growth outpaced B2C for the fourth quarter in a row. This is positive for the long term as consumer sellers bringing 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 4 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 and all remaining markets by the middle of the year. We continue to see higher seller satisfaction due to simpler end-to-end experience that reduces cost and complexity. For many years before managed payments, sellers had to managed 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 transactions.

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 at the least an 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 $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 increased 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 expand 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 multi-year monetization initiatives. And we are driving value through portfolio optimization and returning capital to shareholders. Despite these notable achievements, there is 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 by the purpose and special culture, it creates. Last July, we set out a vision for a tech-led 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 identified the opportunity to evolve our relationship with buyers to drive better long-term retention. I am confident we can deliver on these three pillars, position 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, grew at 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 levels close to 90% and it 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 have also rolled certified refurbish out of the UK, Canada, and Germany with more than 100 top brands signed up already. Buyers love the low prices unlike 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 recently launched image-based scanning for our top selling trading cards. In addition, we introduced a new low cost track shipping service and aggressively marketed 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 request 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 on to 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, the category specific changes we are rolling out statewide improvements for all sellers. For consumer sellers in 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 listening 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 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 issued 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 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 to 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 we have seized.

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 engines understanding of longer complex queries and we added functionality be 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’m 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 influencer 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 gifts 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 keep these items out of landfills. A recent survey confirm 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 Z customer surveys said that buying pre-owned items has become more common in the last year.

In summary, we are making great progress on the tech led re-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 4 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 6 points versus the fourth quarter. On a spot basis, this represents growth of 29%, an acceleration of 8 points versus the fourth quarter. As over 60% of our GMV is generated outside of the US, we saw a 5 point translation benefit due to the weaker dollar. On-platform volume, which represents nearly 85% of total GMV grew at 28%, a 7 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 on-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 strengthen our core categories including collectibles. International GMV was up 17% year-on-year, a 2 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 9 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 processed 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 expected to progressively increase monetization of our site while delivering better seller economics, an 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 8 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 4 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 2 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 2 points, primarily from leverage and a disciplined cost control. Transaction losses were down approximately 1.5 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 9. 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 exit 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 27, 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 own 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 are 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 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 enter 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 modernization 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 the $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 2 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 we’ll 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?

Questions and Answers:

Operator

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

Ross Sandler — Barclays — Analyst

Hey, guys. I have three questions, if that’s okay, sorry. The guidance you gave like a loss in the year-on-year. But if you look at 1Q to 2Q sequentially, I think it assumes about a 7% decline Q-on-Q for GMV and were kind of flat Q-on-Q, so I guess can you parse that into how much is like stimulus burning off versus these economies reopening in the context of what Jamie said about buyers retaining 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 going to have emerged over the last year that you guys maybe had were nascent and then just now were being like activated because consumer behavior has changed. Anything else besides Trading Cards you would point to that would be an example coming out of this whole thing why eBay would be in much better shape from a category perspective. Thanks a lot.

Jamie Iannone — President and Chief Executive Officer

Yeah, I’ll start with the Trading Cards ones now, and let Andy talk about the other two. So yeah, we’ve always had a great history in the collectibles business and a great history in trading cards. Obviously, Q1 was really strong doing it 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 changed the NPS and we changed 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 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

Yeah, Ross. And 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, you know, 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 timeframe. 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 — the stimulus — not stimulus, sorry the mobilities 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 you know it’s continuing to be very positive as well. That leaves a little bit into — 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 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, you know 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 you know 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 — Analyst

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 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 — in other markets.

And then secondly, on the margin side and the spending side obviously, dynamics this year are a little bit different, given the comps, but we’ve seen periods of reinvestment with eBay over the last decade. And so, Jamie, 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 — President and 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 is a lot of opportunity left from that perspective to help them be able to move their products with velocity. So what we are 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’ll 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 we’re 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 is significant opportunity above that. And we, as long as we continue to add value to sellers, we think there’ll be a continued opportunity. On the second part of the investments, we laid out in July, the strategic plan and started with the category idea on vertical 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 has 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 yeah, 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 — Analyst

Great, thank you.

Operator

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

Edward Yruma — KeyBanc — Analyst

Hey, thanks so much for taking the questions. I guess just first as a follow up to the previous question, it was interesting that you took uptake rate in 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 other services you can continue to add that exclude advertising that would allow you to have a higher take rates. And then I guess as you guys make some of these muscle moves in specific verticals, any sense as 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 test in the UK, planning on rolling that up to the US. Thank you.

Jamie Iannone — President and Chief Executive Officer

Yes, so on take rate obviously with payments, we actually think we are for the vast majority of sellers they are 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 a new experience behalf 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, we — why we’re focused on the non-new in season is because we believe it’s a, it’s a $500 billion 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 is 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 grew 34% versus 21% but only not only that brings the unique inventory, but it turns those buyers into twice as valuable buyers when they try — when they try casual side. And then lastly, the test we’ve been doing on the brand outlets 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 source 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 — Analyst

Great, thank you.

Operator

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

Tom Champion — Piper Sandler — Analyst

Hi, good afternoon. I 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 less than 10% of GMV in the fourth quarter. I’m just curious if you could update that metric where new category experiences reached 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 the 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 — President and Chief Executive Officer

Yeah. So look at what I’d say is that the categories that we tackled thus far, we’re still in kind of single-digit percentage territory and 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 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 is 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 longstanding ask if there is so that they can remarket to buyers through packing slips through email etc. So that’s been pretty significant. And then even things like the customization that we’re launching as a longstanding 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 seller sometimes would have a transaction closed without getting paid.

The ability — now that we’ve launched managed 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-based listing is because we want to take all the friction out of the experience and make it a really short couple of minute process to get your items up onto the platform. 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 out of the experience and making this the best marketplace in the world.

Tom Champion — Piper Sandler — Analyst

Thank you.

Operator

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

Shweta Khajuria — Evercore ISI — Analyst

Hi, 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. 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 categories 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 part of, as a percentage of GMV and how do you think the cross category shift plays out in case of reopening. Thank you.

Jamie Iannone — President and 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 longstanding 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 focus categories like watches and sneakers, certified refurbish where you now have a two-year warranty and hassle-free returns.

So we’re really, we’re really pleased with that. You know 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 $2000 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 of the 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 was recommendations etc is really centered on this idea of capturing buyers and having them transact in multiple categories.

Shweta Khajuria — Evercore ISI — Analyst

Okay, thank you.

Operator

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

Justin Post — Bank of America — Analyst

There’s going to be a lot of moving parts this year with e-commerce facing the comps and it’s not just you. 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 — President and Chief Executive Officer

Yeah, so I mean, one that we’re clearly looking at is with last year being such an anomaly with the pandemic at the 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 them 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 that 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 — Analyst

Great, thank you.

Operator

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

Stephen Ju — Credit Suisse — Analyst

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 proportion 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 POA because it seems like advertising should bode best for probably those categories where there are multiple sellers trying to sell a fairly homogeneous item. Thanks.

Jamie Iannone — President and Chief Executive Officer

Yeah, 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, etc., but you no longer have to set up two different accounts you no longer have to manage the claims process returns process in two different areas. It’s one eBay money back guarantee. So to us a 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 to because I mentioned the unpaid item example earlier on the call, but also the ability for them to manage all of their business in one place, it 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, the cost-per-acquisition model has been just the simplicity of it, I’m just adding the percentage and it makes it really easy, but the CPC model that we’re launching also give 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 ads feature for auction and testing that is to, is to really go after it and it’s still, 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 — Analyst

Thank you.

Operator

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

Deepak Mathivanan — Wolfe Research — Analyst

Great. Hey guys, thanks for taking the question. So first, can you provide some color on what categories are specifically seeing robustness with mobility improving in second quarter. And then on the commentary around the second-half GMV trends comps were 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 is one-time items in 2Q and there is 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 — President and Chief Executive Officer

Yeah, 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 buy — 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

Yeah. And look, we didn’t provide guidance for the second half, just because of the dynamic environment in 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 is certainly some benefit in the second quarter to those. And it’s possible that as regions open up and mobility improves that offset 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. 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 — Analyst

Thanks for taking my question. I wanted to ask about, you’ve done a great job of tackling a handful of these categories, the sneakers, watches authenticated and that trading cards and now, someone who sold their trading 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 re-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 — President and Chief Executive Officer

Yeah. 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’ve built authentication of ones it took us a couple of months to build it out, but then we brought it even roll it out to the next category and a couple of weeks and expand that geographically. And so I think that’s actually true for a lot of areas where there is components or features that we’re building specifically to drive the NPS of the 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 SEO which apply to the whole business. So the way I think about it is kind of a good amount of investment in verticals to really change the NPS of those categories, but a significant amount of site wide investments as well which is mixed all categories. So that’s the strategy. That’s how we think about it and we’re really pleased with the performance.

Operator

[Operator Closing Remarks]