|
Please join The Information at the New York Stock Exchange on Monday, April 27, to hear from top executives and investors on how the rapid buildout of AI is reshaping tech, finance, and capital markets. Learn more here.
Hi, it’s Valida and Ann! EBay struck a bargain this week with its agreement to purchase Depop, the popular secondhand clothing resale app, for $1.2 billion in cash. That’s less than the $1.63 billion Etsy paid for Depop five years ago. There’s a reason eBay got a good deal. Even while Depop increased its total sales last year by roughly 25% to $1 billion, Etsy had been spending heavily on marketing the U.K.-founded garment reseller to U.S. shoppers. This spending weighed on Etsy’s adjusted margins on earnings before interest, taxes, depreciation and amortization, which slipped to 25.2% last year from 27.8% the year before. Etsy acquired Depop in mid-2021, a period of high demand for e-commerce startups that led to frothy valuations. Since then, Etsy had marked down Depop’s valuation on its own books, and eBay is paying a premium to the current book value, according to people with knowledge of the financials. The sale has delighted Etsy’s shareholders: They bid up the e-commerce site’s shares more than 14% Wednesday even after it reported that profits sank in the fourth quarter. Meanwhile, eBay shares rose 7%. EBay, which plans to operate Depop as a stand-alone business, is in a better position to pay for the expenses needed to get it in front of more shoppers. The e-commerce giant’s $11.1 billion in revenue last year was nearly four times Etsy’s revenue. And eBay doesn’t have to contend with the anemic sales growth Etsy has been trying to revitalize for nearly four years. In an interview, eBay CEO Jamie Iannone pointed to Depop’s fast growth and said the company would continue to “invest in integrating and bringing these capabilities to eBay.” Fashion is also a category that’s becoming increasingly important to eBay, and Depop could be a good way to expand its foothold as secondhand and vintage clothing continues to grow in popularity. Iannone told analysts on Wednesday that fashion generated more than $10 billion in overall sales volume last year, and eBay has sought to build up its fashion bona fides through recent marketing partnerships with publishers like Condé Nast and creators such as Emma Chamberlain. The acquisition also gives eBay a way to deepen its relationship with millennial and Gen Z shoppers, who Iannone said are the fastest-growing demographic in eBay’s active buyer base. Most of Depop’s users are younger than 34. Iannone said eBay will use the same playbook it’s applied to other recent acquisitions: buying up smaller companies in niches like sports memorabilia where eBay already has expertise selling goods. (It acquired trading card marketplace TCGplayer in 2022 and Goldin Auctions in 2024 to grow its collectibles business.) For example, Depop’s customers could make sure the luxury handbag they’re purchasing is authentic using eBay’s Authenticity Guarantee, a service Depop doesn’t currently offer. And eBay could feature Depop listings on eBay Live, where shoppers can make purchases while watching video livestreams, as well as cross-list Depop items on eBay and vice versa. “We built [eBay’s] technology to have flexibility over time to be able to cross-list inventory where we think it’s appropriate and it really helps accelerate the marketplace,” Iannone said. “So we’ll continue to look at all of those opportunities to make the platforms stronger.”
| 
