Jamie Iannone
President & Chief Executive Officer at eBay
Thanks, John. Good afternoon, everyone, and thank you all for joining us today.
We delivered another solid quarter in Q2, exceeding expectations across all key metrics, while investing in a disciplined manner to support our long-term objectives. Before I jump into the details around our second quarter results, I'd like to discuss the evolution of our strategy.
Three years ago, I articulated our ambition of becoming the best global marketplace to buy and sell, through a tech-led reimagination at eBay. This would help us realize the enormous untapped potential of this company and put us firmly on a path to sustainable long-term growth. Since then, we renewed our focus on products, where we are uniquely positioned to offer meaningful choices and value for our customers. We've accelerated innovation, so we've adapted the changing needs of buyers and developed world class shopping experiences in our focus categories. And we've changed our marketing strategy to support these experiences, pivoting to a full funnel approach aimed at attracting and retaining enthusiast buyers.
These accomplishments make it a logical time to embark on the next phase of our journey. The foundational work of our tech-led reimagination will continue, including our prioritization of non-new in season products, expansion of focus categories in ads and payments initiatives. And now, we're raising the bar for innovation and have set our sights on an even more ambitious vision, which is reinventing the future of e-commerce for enthusiasts only at eBay.
We will achieve this vision in the coming years by focusing on three key pillars: relevant experiences, scalable solutions and magical innovations. Let's start with our first pillar, relevant experiences. This means we are solving the specific and ever-changing needs of our customers across all shopping occasions. Through our focus category strategy, we've proven that when we build relevant experiences, we can dramatically improve customer satisfaction, which translates into faster GMV growth.
While we continue to understand customer needs and innovate at the category level, we will leverage the new tools, capabilities and technologies we have developed over the last few years to enhance more elements of the site-wide experience. This includes developing a more relevant, consistent experience for the next-generation of online shoppers through a comprehensive overhaul of our user experience and design rolled out in phases over the course of 2023 and beyond.
This evolution will result in simpler, more personalized browsing experiences that will inspire people to sell, shop and connect with their community on eBay. This initiative is a cross-collaborative effort between design, product, core AI, search, engineering and other key stakeholders to ensure our modernized shopping experience as powered by intelligent computing at scale. Enabled by Artificial Intelligence, we will fine-tune the breadth of inventory and other aspects of the shopping journey to cater to the varying needs of new buyers, infrequent shoppers and eBay enthusiasts. We believe these innovations will increase our ability to bend cohort curves, drive higher lifetime values and ultimately grow enthusiasts and average spend per buyer.
We began rolling out these changes to consumers in recent months. Starting with testing a more modern and intuitive View Item page, which is the most visited page on eBay. The updated page offers a streamlined appearance, larger and higher resolution images and an optimized information hierarchy. Early test indicated measurable uplift in GMV versus our existing design.
Over the next few quarters, you will see a continued evolution of the look, feel and experience of our marketplace, including updates to View Item, our header, homepage, search results and other landing pages. Alongside this work, we are investing in new capabilities for search where relevant is also critical. We are investing in technologies like deep learning and visual similarity to improve ranking and retrieval, reducing queries with low and no results to surface more of our amazing inventory for customers.
Now let's turn to our second pillar, scalable solutions. Combined with improving relevance, our scale is a powerful asset. As we discussed at our Investor Day last year, eBay has five categories that each generate more than $10 billion annually in GMV, making up more than 80% of volume on our marketplace, in aggregate. Our global footprint across the 190 markets and density of supply and demand across major trade quarters are tremendous advantages in cross border trade. And our proprietary data assets are powered by tens of billions of cumulative transactions, and commercially relevant product information and images accumulated over our nearly 28-year history.
Our scale enabled us to launch a proprietary managed payments solution capable of processing more than $70 billion in annualized volume in less than two years. It also allowed us to build our nearly $1.3 billion advertising business, driven by Promoted Listings which help our sellers drive greater velocity and price realization for their inventory.
Ads and payments have dramatically enhanced our financial architecture, but now we are widening the scope of scalable solutions on eBay to develop a broader suite of value-added services. Our payments infrastructure makes it possible for us to launch new financial services like FX conversion, alternative payment options and seller financing partnerships informed by transactions on eBay. We're also investing an improved in-house risk modeling to alleviate transactional friction for sellers and buyers on eBay, which has led to measurable uplift in conversion and hundreds of millions of dollars of incremental GMV during the first half of 2023 alone.
Our scale and cross-border capabilities allowed us to launch the eBay International Shipping program earlier this year. This program simplifies paperwork, lowers cost for buyers, streamlines returns and enables sellers to tap into our global demand. While this program is still ramping up in the U.S., we are seeing positive proof points and the number of listings migrated, increased exportability of new listings, as well as conversion delivery times and operational costs in line with our expectations.
The cross category nature of eBay makes our investments in individual focus categories more scalable to other areas. This is because technology and capabilities that are developed for one category can be adapted quickly and seamlessly to others. For instance, eBay's Authenticity Guarantee program has enabled us to rapidly transform trust across new categories and countries from watches to sneakers, handbags, jewelry and trading cards. Now, it's faster and more cost-efficient to launch authentication for a new category like we did this quarter with streetwear. We believe only eBay is in a position to bring hyper relevant experiences like these to customers at scale across this breadth of categories.
Lastly, our third pillar is magical innovations. The foundational work we've accomplished over the past three years has set us up for a new phase of innovation. Our teams are focused on thinking bigger and moving faster as we've got game-changing features and functionality for customers to keep eBay at the forefront of e-commerce. Our improved tech velocity has allowed us to launch and rapidly iterate on exciting features like Live Commerce. Other examples include the ability to instantly buy and sell trading cards in the eBay vault and our improved computer vision capabilities that streamline buying and selling on eBay.
Over the next few quarters and years, we expect advancements in artificial intelligence, including generative AI, impact nearly every aspect of our organization, driving meaningful efficiency and productivity improvements. More importantly, they enable truly compelling customer-facing experiences that I am confident our customers will love, such as the magical listing experience I'm excited to discuss with you shortly.
You will continue to hear us talk about the progress of our Evolve strategy and how we're delivering on the three pillars of relevant experiences, scalable solutions and magical innovations. This work is all in service of our plan to reinvent the future of e-commerce for enthusiasts only at eBay. As I've mentioned, these efforts are already underway and we have begun delivering these innovative features and functionalities to eBay customers.
Now let me turn to the second quarter. We delivered better than expected results across the board in Q2 despite continued macro uncertainty. Gross merchandise volume was over $18.2 billion, while revenue grew 5% to $2.54 billion and outpaced GMV growth by roughly 6 points. And we delivered non-GAAP earnings per share of $1.03, up 5%.
Our improving growth trends continue to be led by our focus categories, which grew roughly 7 points faster than the remainder of our marketplace during Q2. This outperformance continues to be led by motors, parts and accessories, or P&A, where GMV grew mid single digits year-over-year for the second straight quarter, which we believe is in line with market rates of growth for this segment of e-commerce. We also extended our focus category coverage through new launches and category expansions during the quarter.
In early June, we launched Authenticity Guarantee for streetwear in the U.S. and are now authenticating new and pre-owned streetwear items from 20 trusted brands including KITH, Off-White, Palace and Supreme. In July, we expanded eligible streetwear to mass appeal brands like Adidas, Jordan and Nike. And later this year, we'll expand coverage to luxury brands, including Gucci, Prada and Louis Vuitton. This marks our entry into authenticated apparel, a category that has strong overlap with our passionate community of sneaker enthusiasts, adding another layer of trust when they shop.
In April, we launched the Certified by Brand program, which we also expect to facilitate more e-commerce in the luxury space. There are already more than 20 brands participating in this program, offering new and certified pre-owned inventory across the watch, jewelry and handbag categories. Listings from this program will show a direct from brand or brand authorized seller badge, bringing enhanced level of trust to these listings similar to visual trust signals for Authenticity Guarantee.
Brands benefit from eBay's scale demand, gain access to consumer and pricing insights, while being able to maintain control of the brand equity and image online. eBay shoppers will benefit from these brands' unique inventory and enhanced trust, as these products will include certifications and/or warranties from the brands themselves.
Our expertise in fashion is further extended by our recently closed acquisition of Certilogo, a provider of AI-powered authentication for apparel. Certilogo empowers brands and designers to manage the lifecycle of their garments, protect their customers from counterfeits and encourages recommerce via QR codes that serve as digital product passports. While we are just beginning to explore the synergies between our companies, Certilogo already works with a number of leading global fashion brands and we are incredibly excited to leverage this technology to accelerate the circular economy.
Next, I'd like to discuss the groundbreaking work our team is doing with artificial intelligence. In particular, I'm excited to announce that this quarter, we're ramping-up a new feature we've been calling magical listing, which will make it significantly easier for sellers to list their inventory. One of the biggest challenges operating a listings based marketplace is the burden on sellers to fill in descriptions and item aspects for their products
In May, we launched the first version of our magical listing experience, which dramatically reduces this friction for our sellers via AI generated item descriptions. We integrated Azure's OpenAI API into our core listing flow. And now sellers can choose to have detailed product information instantly populated by generative AI based on the product's title, category and any item aspects that have been implied.
During the quarter, we ramped this data feature to more than 50% of iOS and Android users in the U.S., and expect to reach a 100% in the coming weeks. Early signals have been extremely positive. Approximately 30% of users have tried to feature at least once and we've observed acceptance rates of over 90% for AI generated descriptions, including those with edits [Phonetic].
Customer satisfaction is over 80% thus far, which is among the highest CSAT for any new feature launch in recent memory. Sellers have told us that this feature will unlock more of the unique inventory in their closets. And on average, we are seeing description lenghts double when GenAI is used. But we're just getting started.
The next generation of our magical listings will leverage our improved image recognition capabilities to provide photos with the option of a more seamless camera-based listing. Sellers can utilize their smartphone camera or existing photos to start a listing. And based on our visual understanding of the product, the eBay app can pre-populate the title, category, description and item specifics wherever possible. We have been testing this tool with our employees for several weeks, and we are incredibly excited to launch in public beta in the coming months.
The advent of generative AI aspired an explosion of creativity at eBay among our product and engineering teams, who have conceptualized new and innovative shopping experiences that can be rapidly deployed onto the site. Two compelling examples that launched in July are the shop by upgrade and engine code look up features that went from concept to production in the eBay Motors app in adjusted a few weeks. Shop by upgrade uses generative AI to help customers discover the most relevant fitment enabled upgrade options for their vehicles, which are personalized based on the specific users preferences. Engine code look up offers specific P&A products available on eBay that can address the root cause of hard to decipher error codes, aiding them in identifying and fixing the source of the problem. I'm thrilled to see how quickly our teams are moving with this technology at their disposal and look forward to more of these experiences launching in pilots in the months ahead.
Turning next to our advertising business, which continues to build impressive momentum. We reached a major milestone in Q2 as advertising revenue reached 2% penetration of GMV. Total ads grew 35% while first-party ad revenue grew roughly 50 points faster than GMV. Over 2.1 million sellers adopted a single ad product in Q2, while we reached more than 800 million live Promoted Listings. Promoted Listings standard, our CPA product, once again the largest contributor to growth in Q2 driven by attribution enhancements, continued optimization and ad rate improvements.
At the end of March, we adjusted our attribution methodology for CPA adds, expanding the definition of what constitutes a qualified sale. This change referred to as a halo attribution in the industry, enable us to more efficiently optimize our ads as we capture a more complete picture of the downstream sales driven by Promoted Listings. While sellers maintain the full flexibility to adjust their bidding behavior after this change, halo attribution had a net positive impact on our ad business in Q2.
During the quarter, we also introduced a new way to rank ads on search, which leverages our in-house AI capabilities to optimize CPA placements for both conversion and ad rates. Additionally, we improved our precision in calculating trending and suggested ad rates and made it easier to adopt dynamic bidding, both contributed to a modest lift in Q2 ad rate.
Our emerging Promoted Listings products also scaled nicely in Q2, growing more than 30% quarter-over-quarter. Promoted Listings Advanced, our CPC product was the largest contributor. Advanced recently exited beta into general release as we have simplified the process of creating and managing campaigns, increase the visibility of CPC ads on eBay and demonstrated healthy return on ad spend levels to sellers.
During Q2, we introduced suggested campaigns for Advanced, which provide a one click activation experience by offering customized keywords, bid and add group structures for B2C sellers across five major markets. These campaigns we pushed out to sellers on a monthly cadence and can drive further adoption of CPC ads.
Now let's discuss the impact we're having on the communities we serve. Last quarter, we published our annual Impact Report, which recognizes the progress we've made toward environmental and social goals. As a pioneer of e-commerce, we are committed to helping sellers earn extra cash selling pre-loved items and helping buyers find items and value while promoting a healthier planet and economy. I am proud that we continue to make important strides toward our own climate goals while weaving sustainability throughout our company culture and philanthropic efforts.
Additionally, we will soon publish our first ever UK Social Impact Report, which takes a closer look at the programs we're delivering for hundreds of underserved entrepreneurs, social enterprises and charities in the UK. This includes programs like eBay for Change, which support social entrepreneurs, increase jobs in marginalized and vulnerable communities.
Another program with considerable impact is eBay for Charity, which raised more than $38 million during the quarter. And I'm excited to announce that Engage for Good, a non-profit organization dedicated to supporting the practice of cause marketing recognized eBay for Charity as a 2023 Charity Checkout Champion.
In closing, I would like to thank our incredible employees for another strong quarter of execution and for continuing to bring our strategic vision to life. I have never been more confident that we are on the right path to unlocking our enormous untapped potential and reinventing the future of e-commerce for enthusiasts only at eBay. Our focus on relevant experiences, scalable solutions and magical innovations will greatly benefit our loyal community of sellers and buyers in the quarters and years ahead as well as better cater to the needs of the next generation of online shoppers.
With that, I'll turn the call over to Steve to provide more details on our financial performance. Steve, over to you.
