eBay Execs Shed More Light On Q2 Hacking, Look Toward Recovery
By Christine Kern, contributing writer
eBay’s U.S.Sales Grow 12% in Q2
Even though eBay managed to squeak out better-than-expected earnings in Q2 2014, the impact was still obvious on the balance sheet.
"The cyber-attack clearly impacted eBay’s performance in the second quarter,” admitted CEO John Donahoe during the quarterly shareholders call, asserting that eBay was performing above expectations for at least the first half of the second quarter.
Internet marketplace eBay reported that revenue for the second quarter ended June 30, 2014 increased 13% to $4.4 billion, compared to the same period in 2013. GAAP earnings increased to $676 million or $0.53 per diluted share, and non-GAAP earnings increased to $868 million or $0.69 per diluted share driven by strong enabled commerce volume growth.
"As John indicated, we got off to a good start, but we hit significant obstacles late May,” concurred eBay chief financial officer Bob Swan.
In May, unauthorized access on eBay’s network, specifically, an eBay database hosting non-financial eBay user information, such as encrypted passwords, had been compromised.
Although Donahoe asserted that there has been no evidence that the passwords were breached in any way, he said it was the company’s “responsibility” and “right decision,” to ask sellers and buyers alike to change their passwords regardless.
Now eBay must focus on recovery. Swan outlined some of the measures eBay has taken to fuel re-engagement, such as coupling, seller incentives, and increased marketing spend.
"We began to see some recovery in the first half of July,” said Swan, positing that thanks to PayPal and the enterprise unit, eBay should be back on track to double-digit growth soon, but Swan also lamented that “the Marketplaces business has to dig itself out of a hole."
Elaborating on the slowdown chief financial officer Bob Swan said “June GMV growth was 7% driven by slower active buyer growth and lower conversion. In light of these events, we have made significant investments to get eBay users reengaged, including couponing, seller incentives and increased marketing spend. We have begun to see some recovery in the first part of July and we are confident we will get these challenges behind us, but it will take a bit longer and we will invest more as we work to get back to double-digit growth.” Swan also pointed to some loss of traffic due to changes Google made to its system for ranking sites in search results, an update that analysts believe may have hurt sites like eBay that do not provide a lot of original content about products.
Furthermore, eBay was forced to cut its annual revenue guidance range by roughly $200 million as a result of the security breach and its lasting impact.
Given that eBay suffered a well-publicized data breach during the second quarter that led it to ask customers to create new passwords, the results were encouraging,” says eBay president and CEO John Donahoe. “PayPal generated another strong quarter while eBay's growth was hampered by its global password reset for all users,” Donahoe says. “We continued our momentum in the four competitive commerce battlegrounds of mobile,