© 2024 Alpha Spread Limited. All Rights Reserved.
www.alphaspread.com is not operated by a broker, a dealer, or a registered investment adviser. Under no circumstances does any information posted on www.alphaspread.com represent a recommendation to buy or sell a security. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, investment advice or recommendations. The information on this site is in no way guaranteed for completeness, accuracy or in any other way. In no event shall Alpha Spread Limited be liable to any member, guest or third party for any damages of any kind arising out of the use of any content or other material published or available on www.alphaspread.com, or relating to the use of, or inability to use, www.alphaspread.com or any content, including, without limitation, any investment losses, lost profits, lost opportunity, special, incidental, indirect, consequential or punitive damages. Past performance is a poor indicator of future performance.
You don't have any saved screeners yet
Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Good afternoon. Thank you for joining us, and welcome to eBay's Earnings Release Conference Call for the second quarter of 2021. Joining me today on the call are Jamie Iannone, our Chief Executive Officer, and Steve Priest, our Chief Financial Officer. We're providing a slide presentation to accompany Steve'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 the 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 Steve'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, in our Earnings release from earlier today. You should not rely on any forward-looking statements. All information in this presentation is as of August 11, 2021. And we do not intend and undertake no duty to update this information. With that, let me turn it over to Jamie.
Thanks, Joe. Good afternoon everyone, and thank you for joining us. Today I'll begin the call with key highlights from the second quarter. Then I will share some updates on the progress towards our strategic vision. At the end of my remarks, I will turn the call over to Steve, our new CFO, who will discuss our financial performance and outlook in greater detail. The second quarter of 2021 marked several important milestones in the ongoing transformation of eBay. I want to thank our team for making it happen.
We've accelerated our pace of innovation while executing several complex transactions. Their dedication and focus have created tremendous value for our customers and shareholders. Let me start with a few of our portfolio enhancements. We completed the transition of eBay's classified business to Adevinta. This deal was originally valued at approximately $9.2 billion, but closing in June had appreciated to 13.3 billion.
Shortly after closing, we announced the deal with [Indiscernible] to sell approximately 135 million of our [Indiscernible] shares for over $2.4 billion. This agreement fulfills regulatory commitments while returning value to eBay shareholders. We also increased our share buyback plan for the year from $2 billion to $5 billion. In June, we announced the sale of over 80% of our Korean business to Emart for approximately $3 billion, bringing together two meeting e-commerce and retail companies that can unlock significant potential in Korea.
We anticipate the deal will close either later this year or in early 2022. These portfolio changes allow us to intensify our focus on the core eBay business moving forward. When I spoke to you last July, I outlined a renewed vision and strategic plan for the Company. We set out on a multi-year journey to become the best global marketplace for sellers and buyers through a tech lead reimagination. Our priorities were to grow the core, become the platform of choice for sellers, and cultivate lifelong trusted relationships with buyers by turning them into enthusiasts. To date, our progress is very encouraging, our underlying growth is positive, and the strategy is working.
Q2 results were strong and all key business metrics met or exceeded expectations. Revenue grew 11% driven by an acceleration in the payments' migration and advertising growth. We funded incremental investments in product development while delivering $0.99 of non-GAAP EPS above the high end of our range. As expected, GMV declined 11% compared to last year when results were heavily impacted by the initial pandemic lockdown. Importantly, compared to prepare endemic levels two years ago, we're seeing positive underlying GMV growth. Our customer metrics remain healthy on both sides of our marketplace. Active sellers grew 5% to 19 million globally.
As more small businesses and consumers continue to turn to eBay's global platform to reach millions of potential customers from around the world. This quarter, global active buyers totaled 159 million, down 2% versus last year, and up 3% versus 2019. We have been focused on building lifelong trusted relationships with enthusiast buyers. Changes in our marketing mix and product investments have been focused on attracting and retaining these enthusiasts, particularly, Gen Z and millennials. In parallel, we have discontinued legacy tactics that led to low-value infrequent or one-and-done buyers. Our buyer base is starting to evolve based on this strategy.
These high-value buyers are growing compared to a year ago, and their spend on eBay is growing even faster. This higher-quality mix of buyers increases value for sellers and will lead to improved health of our ecosystem over the long term. Moving on from buyer trends, the payments and advertising initiatives continue to deliver a simpler product experience, and meaningful benefits for sellers, buyers, and shareholders. Managed payments are now live in every market globally, and the transition is progressing faster than expected. During the second quarter, we processed 71% of on-platform volume through managed payments.
We exited Q2 at a run rate of over 80% and are on track to process over 90% this quarter. Managing the payments experience ourselves enabled us to eliminate a pain point that seller occasionally faced on eBay, unpaid items. Changes to checkout have been made to address this issue, and today, 99% of fixed-price transactions are paid upfront. We have also started to address this issue for best offers and auctions by asking buyers to provide a payment method in order to bid. This is a significant win for sellers as it frees up inventory and reduces their post-transaction costs. Our advertising business continues to perform well.
In Q2, ad revenue outpaced volume driven by [Indiscernible] listings, which delivered almost $224 million up 8%, more than 1.4 million sellers promoted over 430 million listings during the quarter. Growth was driven by higher adoption and technology improvements that increase conversion. We see tremendous growth opportunities in advertising, both from our existing promoted listings offerings and from new product innovations. Following a number of successful trials in Q2, we are scaling several new products globally over the next few months.
Previously, sellers could only promote fixed-priced listings, but now they can increase visibility for a flat fee on auctions to increase conversion. In June, we also introduced a Cost per Click ad product to sellers in our major markets. Initial results from the first 100,000 listings showed that sellers' return on ad spends with higher than industry benchmarks. We're placing more AI-powered recommendations for pricing and keyword bidding into the Seller Hub to help sellers drive predictable volume. Finally, we are beginning to syndicate ads off eBay's platform to drive more buyers to listings.
Importantly, sellers maintain control of pricing invisibility while benefiting from the scaled marketing capabilities of eBay. In addition to advertising and payments, we are driving a number of other site-wide initiatives. For consumer sellers, we're simplifying the selling process with a heavy focus on mobile. This includes easier label printing solutions in the app and faster listing through image or barcode scans. In trading cards, where we first launched image-based listing, sellers [Indiscernible] are able to match scans over 80% of the time. The time it takes to create a listing has been dramatically reduced and we plan to expand the capability to more product categories later this year.
For Small Business sellers, we continue to expand and optimize their eBay toolkit. To help drive repeat businesses from enthusiasts to eBay stores, we built a CRM tool that enables sellers to fund and distribute their own coupons. Since launching a few months ago, over 1 million buyers have purchased items through these targeted campaigns. As you've heard me say in the past, we are focused on a number of categories where we are well-positioned to serve both sellers and buyers. These categories are growing significantly faster than the overall business, and I'm delighted with the progress our team is making.
Our innovation playbook has included increasing customer satisfaction, improving trust, growing supply, and marketing to enthusiasts. As we exited Q2, we have applied this playbook to approximately 10% of our volume across our top 3 markets. With our current plan and ongoing momentum, we expect to expand coverage to approximately 20% by the end of the year. One of these categories is trading cards. In North America, we continue to see substantial growth with approximately $2 billion of GMV in the first half of the year, equal to all of 2020.
Despite these strong results, we see additional untapped potential in the market that we plan to capture with further innovation. We recently launched a price guide and collection tools aimed at trading card enthusiasts. These new features leverage unparalleled inventory and pricing data, allowing customers to view, manage, and track the value of their collections in real-time. As a leader in trading cards with 25 years of transactional data, no one is better positioned to estimate the value of every card ever sold.
In addition, the collection tool seamlessly tracks all eBay activity and offline inventory in one place. This makes it easy for enthusiasts to assess opportunities, quickly trade, and increase the value of their collections. Sneakers and watches continue to outgrow our overall marketplace. Since launching one year ago, we have authenticated nearly 1 million items, enabling a game-changing level of trust. Both categories are seeing close to 90% customer satisfaction rates on authenticated transactions. Our sneakers business saw strong double-digit growth, despite tougher comps from a year ago.
And based on the success, we have expanded sneaker authentication to the U.K., Canada, and Australia. Luxury watches are also sustaining double-digit growth, improved by our trust is leading to strong cross-category shopping behavior similar to what we have seen in sneakers. In fact, luxury watch buyers spend $8,000 on more than 50 items in other categories, well above the average eBay buyer. The next luxury category we were focused on is handbags. We plan to leverage a similar playbook from watches and sneakers to deliver a higher NPS for buyers and sellers.
We have started in the U.S., by authenticating handbags over $500 from major brands. Refurbished electronics continues to be another area of growth across our largest markets. Our certified refurbished experience is strengthening relationships with best-in-class brands by opening new sales channels. We recently welcomed Samsung Galaxy to the program, providing eBay buyers access to exclusive like new products, at exceptional prices. Vehicles, parts, and accessories have historically been one of the strongest performing categories on eBay and remain so today.
Our platform offers a wide inventory selection supported by a robust catalog. The fitment shopping experience matches car parts to vehicles to help buyers shop efficiently and confidently. In Q2, we expanded this capability by enabling a motorcycle parts finder in Germany and the U.K. We also expanded my garage feature, which allows buyers to store their vehicle data, leading to a more tailored shopping experience in Canada, Italy, France, and Spain. We plan to launch more technology-driven innovations in this category later this year to further build on our success.
Taking a step back, eBay exists to create economic opportunity for all, that purpose guides our approach to our customers, our communities, and our team at eBay. This year, our leadership team's individual goals focused on accelerating meaningful change in diversity, equity, and inclusion throughout every level of our Company. We formed an ESG Council composed of senior leaders across the Company whose role is to guide and ensure the success of sustainability initiatives. During the quarter, we published our 5th annual impact report and 3rd annual diversity, equity, and inclusion report, detailing the progress we made in the past year, as well as outlining our 2025 goals.
The full list of activities is extensive, but I would like to share a few highlights. We made progress on our journey to be more diverse, equitable, and inclusive. Our communities of inclusion have conducted 150 events with more than 10,000 attendees in the past year. We have also continued multi-year efforts to ensure gender pay equity, resulting in 100% pay parity in the U.S. and 99.7% globally. Another priority is managing our environmental impact. Investing in clean energy is a focus for the Company and our goal is to source 100% renewable energy by 2025, we have already reached 74% of our goal through a combination of power purchase agreements and local programs.
Just last week, we announced that we are teaming up with McDonald's in an agreement with light source BP to purchase power from Louisiana's largest solar project. The electricity produced will be greater than the power used at our largest data center. Finally, I would like to call up the incredible generosity of our buyers and sellers. During Q2, customers contributed over $35 million to their favorite course through eBay for charity. This represented a 16% growth versus last year. And the platform is on track to hit the 2025 goal of raising $600 million. These are just a sample of the ongoing ESG related activities and I encourage you to check out more at eBay Inc.com.
Q2 was another step forward in the multi-year transformation of eBay. The business delivered strong results, and it's clear that our strategy is working. Customers are delighted with the innovation in our focus categories, leading to volume growth despite tougher comps from a year ago. We are harnessing the power of next-gen technology to make eBay the seller platform of choice, and to attract lifelong enthusiasts. Our payments transition is nearly complete, delivering benefits to sellers, buyers, and shareholders.
Our advertising product portfolio is expanding, giving sellers more tools to grow their business. And we simplified our portfolio, enabling us to focus on the core while creating significant Shareholder value. Our team continues to be relentlessly focused on executing for our customers. I'm delighted to welcome four new exceptional leaders to our executive team this year. In addition, we have hired critical talent in areas such as technology, AI, analytics, and category management.
The teams in place are well-positioned to propel this business forward. With that, I'll turn the call over to Steve to provide more details on our financial performance. Before I do, I want to say how excited I am to have another world-class customer-centric leader on our team to help us realize our vision. Steve, over to you.
Thank you, Jamie. And thank you all for joining today. I would like to start by saying how excited and honored I am to be at eBay. I would also like to thank Andy for his leadership and guidance during my transition into the role. He has done an excellent job creating value for the Company and leading our finance team over the last couple of years. I'll start on Page 4 of our presentation. We have outlined the impact of moving our Korean business to discontinued operations and our guidance for Q2 Earnings. That's an aggregated level, this would have reduced guidance by approximately 2 points of GMV growth, $400 million of revenue, and $0.02 of EPS.
The Q2 results purely reflect the performance of our continuing marketplace business. On July 13th, we published a Form 8-K that includes the [Indiscernible] historical financial statements back to the start of 2019. These figures provide an apples-to-apples comparison versus our actual results. Excluding Korea, the implied Q2 guidance was between $2.58 billion and $2.63 billion of revenue growing 8 to 10% on an organic FX-neutral basis. Non-GAAP EPS was between $0.89 and $0.94 per share, representing a decrease of 5 to 10% year-over-year. Turning to our highlights from the quarter on Slide 5, despite lapping an exceptional quarter last year, we delivered strong operational results.
Revenue grew double-digits, driven by payments and ads. Non-GAAP EPS was $0.99 per share. and our operating margin was 33%. We generated $910 million of free cash flow while returning $1.6 billion to shareholders through share repurchases and cash dividends. We generated significant value from our Portfolio as we work to transform eBay. We announced the agreement to sell about 80% of our Korean business to Emart for approximately $3 billion. We completed the classified transaction for a total value of $13.3 billion, including 2.5 billion in cash, and a 44% stake in Adevinta.
We then reached an agreement to sell a quarter of that stake to Permira for over $2.4 billion in cash. Finally, we increased our estimated 2021 share buyback to $5 billion from an initial 2 billion. Moving to the active part on Slide 6, we exited the quarter with 159 million buyers representing a 2% decrease year-over-year on a trailing 12-month basis. At the beginning of the pandemic in Q2 last year, we added more than 7 million buyers, our largest quarterly increase over. The [Indiscernible] buyers have matured in line with historical trends.
We are also seeing a reduction in the bias of life-priced items due to Chinese in our marketing mix. As Jamie mentioned, our strategy to attract new-time buyers has changed over the past several quarters. We've intentionally focused our marketing and product innovation on high-value buyers. These include buyers who sell or [Indiscernible], at least six days a year and spend over $800. This high-value segment represents approximately 20% of our buyer base, and they purchase around 75% of our GMV. High-value buyers grew in Q2, as did the spend per buyer. Low-value bars on eBay like approximately half of our buyer base but the only purchase, about 5% of our GMV.
As we drive the strategy, we expect to see a further drop in active buyers on a rolling 12-month basis. But an increase in GMV per buyer over the coming quarters. Moving to Slide 7, in Q2 we delivered $22.1 billion of GMV, down 11% year-over-year. On a spot basis, this represents a decrease of 7% year-over-year. Compared with Q2 of 2019, GMV grew 19% on an FX-neutral basis, and 23% on a spot basis. There were several factors that contributed to the Q2 GMV dynamic. First, we lapped the peak of the early impacts of the pandemic, including the first wave of my ability restrictions, stimulus payments, and supply chain disruptions. Second, there was a meaningful ongoing macro benefit from global mobility, although it was significantly less at the end of the quarter than at the beginning of Q2.
Our underlying business continued to show positive growth from site-wide product experience improvements and category performance. In the U.S. we generated approximately $10 billion of GMV in Q2, down 5% year-over-year. International GMV decreased 16% year-over-year to $12.1 billion. Our U.S. volume [Indiscernible] paced International primarily due to strength in trading cards, as well as benefits from government stimulus earlier in the quarter. Turning to Revenue on Slide 8, our net revenue for the quarter was $2.7 billion, up 11% on an FX-neutral basis and up 14% on a spot basis. We delivered $2.5 billion of transaction revenue up 11% year-over-year, mainly driven by payments.
We continue to make great progress on seller migration. As Jamie mentioned, 71% of our global OEM platform volume was processed through managed payments during the quarter, which contributed approximately 18 points of incremental revenue growth year-over-year. The success of the payments ramp also drives the quarterly acceleration of 80 basis points to our transaction take rate, which is 11.3% for the quarter. We expect its rate to continue to grow throughout 2021 as we complete the payments rollout. We delivered $172 million of marketing services and other revenue up 11% year-over-year, driven by strength in shipping programs.
While we continue to purposely reduce third-party advertising, the drug on total [Indiscernible] growth rate was less due to easier comps from a year ago. Turning to Slide 9, our major cost drivers. In Q2, we delivered a non-GAAP operating margin of approximately 33%. this represents a 6-point year-over-year decrease, driven primarily by lower volume. The cost of revenue has increased in line with payments growth due to processing costs. While these variable costs will increase as payments revenue grows, the incremental revenue provides leverage for our fixed expenses.
Most notably sales and marketing, and G&A. Product development costs increased year-over-year as we continue to invest in product innovation, supporting our strategic initiatives. Transaction losses were flat versus the prior year. As the benefits of netting seller fees against our net proceeds were offset by higher customer protection losses. Turning to EPS on slide 10, we delivered $0.99 of non-GAAP EPS in the second quarter, flat versus the prior year. Negative impacts from lapping COVID - driven volumes were offset by strategic initiatives, particularly payments, as well as a lower share count related to sharing repurchase.
GAAP EPS for the quarter was $0.43, a decrease of 56% year-over-year. We elected the fair value accounting method for our investments in [Indiscernible]. The change in stock price between the close of the sale on June 24th, and the quarter-end on June 30th, drive a majority of the GAAP EPS to decrease. In addition, while we recognized further guidance on the Adyen launch in Q2, we're lapping significant guidance in the [Indiscernible] year. Moving to slide 11, we saw another strong quarter of cash generation with $910 million of free cash flow. The 7% year-over-year growth was driven by strong operational results, payments, and improvements in working capital.
This is partly offset by higher cash taxes. Turning to slide 12, we ended the quarter with cash [Indiscernible] investments of $7.6 billion and debt of $9.1 billion. As I mentioned in my earlier remarks, we completed the [Indiscernible] of our classified business to Adevinta during the quarter, generating cash proceeds of $2.5 billion. We expect to pay cash taxes associated with the sale of approximately $400 million in the third quarter. As a result of our strong underlying free cash flow performance, and the prices from this transaction, we updated our capital allocation plans for 2021 by increasing the estimated share buyback to $5 billion. In Q2, we returned $1.6 billion to our shareholders through stock repurchases and dividends.
We repurchased approximately 24 million shares at an average price of $62.60 per share, amounting to 1.5 billion, and paid a dividend of $121 million. We exited the quarter with $4.2 billion of share repurchase authorization remaining. Our Board has approved an additional share repurchase authorization of $3 billion with no expiry, raising the total to approximately $7.3 billion. Finally, we issued $2.5 billion of senior unsecured notes during the quarter, part of which will be used to repay our 2022 debt maturities. Moving to investments on Slide 13 on June 24th, we closed the classified sale and recorded investments on our balance sheet of $10.8 billion to reflect the 540 million shares we received as consideration.
The value of this stake stood at $10.4 billion at quarter-end. By some other venture stock price. Between the announcements of the deal last July and the close of the transaction this June, the value of our equity stake appreciated 61%. As a regulatory condition of the classified sale, we agreed to reduce our ownership stake in another vantage of 33% or less over the 18 months following the close of the deal. We recently announced an agreement with Permira to sell approximately 135 million shares for more than $2.4 billion.
This will reduce our ownership stake to 33%. We expect this transaction to close in the fourth quarter. Turning to Adyen, the ones we acquired in the second quarter of 2018, are valued at $1.1 billion at the end of the second quarter. an increase of over $500 million year-over-year. You'll find more information on the [Indiscernible] in our [Indiscernible]. We also want to highlight [Indiscernible] at the end of the second quarter, our investment was worth approximately $300 million. On August the 6th, they completed their IPO, which increased the value of our stake to over 900 million. Finally, on June 24th, we announced plans to sell about 80% of our Korean business to Emart.
We will retain an interest of less than 20% to the implied value of our interest was approximately $800 million at the time of the announcement. We remain excited about all these investments. The optionality they provide, and the significant value they generate for each of our shareholders. Turning to guidance on Slide 14, for Q3, we are projecting revenue between $2.42 billion and $2.47 billion, growing 6% to 8% on an organic FX-neutral basis, and approximately 7% to 9% on a spot basis. We anticipate payments and advertising, we'll continue to drive revenue to grow faster than volume, leading to type rate expansion.
This revenue guidance implies GMV is down low-to-mid teens on an FX-neutral basis versus last year and up high single-digits compared to 2019. On a spot basis, today's rates would indicate a 2-point benefit versus FX-neutral growth rates in Q3. This is 2 points lower than the 4-point benefit we saw in Q2 GMV. We are [Indiscernible] that macro benefits, including stimulus and my ability, will be significantly less in Q3 than Q2. We also expect our efforts to improve the business will continue to enable modestly positive underlying growth. We expect non-GAAP EPS of $0.86 to $0.90 per share, representing 4% to 9% growth. Year-over-year, we plan to continue investing in products and technology to deliver better [Indiscernible] experiences while improving marketing efficiencies.
We are expecting GAAP EPS in the range of 64 to $0.68 per share in Q3. Looking at the full year, the macro environment remains dynamic and difficult to predict. And we are not providing full-year guidance at this time. However, there are variables within our control that we're sharing in this context. Given the accelerated pace of the transition of the payments, we are raising our full-year forecast for payments revenue from $1.7 billion to $1.8 billion. Payments' margin contribution continues to ramp towards our long-term target of 25%. The total operating margin for the business was expected to land at approximately 33%, which would be close to 150 basis points, better than 2019.
As I mentioned before, we expect to repurchase shares totaling $5 billion in 2021 at this time, which implies an additional $3.2 billion in the second half. In conclusion, during the quarter we delivered strong short-term results ahead of expectations while transforming the Company for the longer term. We are excited about the path forward on the growth potential of eBay. Innovation is leading to volume growth and our focus categories, despite tougher comps from a year ago. Our payments and advertising initiatives are driving better customer experience, resulting in incremental revenue and earnings growth.
Our balanced approach to cost management allows us to reinvest in our customers while delivering high margins with low capital intensity. We continue to deliver strong free cash flow and return value to our shareholders through stock repurchases and dividends. Our portfolio simplification has created over $20 billion of shareholder value, allowing us to intensely focus on growing the core.
As a purpose-driven Company, we're enabling economic opportunity for all, while supporting our people, our communities, and our planet. I would like to once more take this opportunity to thank our teams across eBay for their tremendous work at the last quarter and for their support for our buyers and sellers in the eBay community. We will now take your questions. Operator.
[Operator Instruction] [Operator Instructions] Please, standby while we compile the Q&A roster. Your first question is from Tom Champion with Piper Sandler.
Hi, good afternoon, and thanks for taking the question, Jamie, I'm wondering if you could elaborate a little bit on your buyer strategy. It sounds like we should expect that maybe that metric is under pressure the next couple of quarters. But what sort of underlies that the strategy around focus, around that, that's 20% of the buyer base.
And I guess relatedly with the portfolio improvements in streamlining the business, does this enhance your ability to execute more rapidly going forward? And maybe just the last one for Steve would love to hear a little bit more about your thought process and what -- what drove you to the business, given it's a little bit different from your prior background. Thanks very much.
Yes. So first on the buyer strategy, this is something that I laid out last July when we talked about the tech lead reimagination as being focused on turning buyers into lifelong enthusiasts on the platform. And moving away from the tactics that we had in 2019, where it was really just about the number of active buyers, even low-value buyers, or one and done buyers.
I've got the whole organization pivoted to focusing on those high-value buyers, buyers that are buying over $800, buying 6 times a year, or buyers who sell, and so as you think about these buyers, they are so strong at EBITDA. 20% of them, they make up 75% of GMV. and the goal is, how do we turn more buyers into these lifelong enthusiasts? I've met a lot of these buyers, they wake up and they get a cup of coffee, and they turn to eBay and open the eBay app.
And our focus is really not on just the total number, but really focused on how are we driving these buyers to become enthusiasts? The metrics that we show in the Board deck, are [Indiscernible] 12-month metric. So, we're obviously lapping the buyers that we acquired in Q2. But going forward, our focus will really be on these long-term enthusiasts.
So, I'm excited to say that their GMV is growing. They're growing as a population, and more and more, you're going to see us doing things to drive that longevity because we know the things that move buyers up the cohort curve into long-term buyers. On your second question on the portfolio, absolutely. A huge part of the portfolio simplification is about being able to focus on the marketplace, and as Steve talked about, we generated $20 billion in value for shareholders starting with the StubHub transaction. But I think more importantly now, it enables us to focus all of our attention on the Marketplace business. As I've talked about, we see a lot of growth opportunities in that business. The strategy that we have is working. We're in year one of a multi-year re-imagination of eBay.
But if you look at what we talked about a second ago with the 10% now about to reach 20% of categories. It's really working. Customer satisfaction is at 90, it's leading to a very strong GMV. And we see the same potential for this innovation playbook in every category on the site. And Steve, maybe you want to take the last one.
Thank you, Jamie. And thank you, Tom, for your question. It's good to meet you this afternoon. I suppose, I [Indiscernible] in two areas, I've [Indiscernible] from two Companies, which were leaders in an industry around customer-centricity and innovation.
And coming over to eBay a Company that's got a real sense of purpose. An amazing team and our hearts around customer-centricity and innovation were some of the core facets that I looked at when I came out to eBay. Since I've been here, it's really clear about the sheer size and scale of the enterprise and what opportunities are ahead of us in terms of its growth.
We really do have incredible durability of the financial model with a fortress balance sheet, best-in-class margins, incredible free cash flow. And even after a few weeks, I feel that the value of the enterprise is really misunderstood because of the potential that's ahead of us and the strategy that Jamie's laid out. So, I'm really excited to be here. I think there are huge opportunities for the enterprise and I'm looking for to my journey over here and eBay
Thank you, Doug.
Your next question is from Stephen Ju with Credit Suisse.
Okay. Thank you so much. So, Jamie, I know this question goes back away in terms of what we could be doing once the managed payments are fully deployed. But now we're pretty much at the goal line here, so there have to be pockets of the global demand base. You otherwise could not cater to before, because you just simply could not take their money.
So, what are the prospects of opening up the buyer acquisition funnel to that audience a bit more in those regions? And I guess on the second point, recently, you've launched the fulfillment service in the U.K. with a partner. So, can you talk about what kind of improvement you think you may see to either conversion rates and the buyer experience as you step up the level of service for the buyers in the country? Thanks.
Thanks for the question. On the first one we're excited that as we get through managed payments, we announced that next quarter we'll be at 90%, that it opens up even more opportunities for us from a, how do we service our buyers and sellers? So, some examples of things that we've already launched, for example, is we launched a partnership with After pay as an additional form of payment in Australia, allowing people in that market to pay with installments.
It's very strong in Australia, and that's certainly helped us in Australia business. In our U.K. business, we've launched a partnership that allows us to do seller financing and help sellers out there. And we'll continue to expand in different ways throughout the globe on more opportunities around managed payments.
The other big one that I talked about earlier is that now that commerce and payments are one, and we can manage all of that on eBay, there's a lot of friction we can take out of the platform, so unpaid items are a great example where for 25 years since I was here the first time, sellers have had to face items where buyers wouldn't pay. We've now eliminated that in the 99% of options on our way to do that in best price -- I'm sorry, the best offer in auctions. We've eliminated fixed price on our way to do it, is the best offer in auctions.
And two weeks ago, we had eBay open with thousands of sellers online and we announced this. And it was massive rejoicing from them because this has been a key pain point. So, the other thing I'm excited about is just eliminating those pain points. On your question on the fulfillment service, what we saw in the U.S. and especially in our cross-border trade, coming out of Greater China, for example, is the ability to forward-deployed inventory is a benefit because of the predictability that it gives to buyers from that standpoint.
We're using it to help scale small businesses, to drive the ability to have for deployment. And basically, pass those savings onto the customer. So, we're just getting started with that program, but we've learned a lot about cross-border trade and, and we're excited that fulfillment services are going to help scale some of our small businesses and in their cross-border inventory.
Thank you.
Your next question is from Michael [Indiscernible] with Bank of America.
Hey guys, thanks for taking my question. Two, if I may, the first just on promoted listings, it looked like they were -- so the promoted listings revenue is on change quarter-on-quarter. So, there's a bit of a deceleration.
I was just wondering if there was anything to call out specifically for that in Q2? And then secondly, looking at the decline in sold items, it looks like the sold items were down by more than the GMV was down. And looking back to last year, GMV grew more than sold items last year. So, it looked doesn't look to be driven by comps. So, is there anything to call out for the decline in sold items for Q2 as well? Thank you.
Yes. So, on the first one on Promoted Listings, no, that business is doing well, we frew it 8% in the quarter, despite the volume being down 11. And we actually are starting to scale up a couple of pilots that we launched in Q2. Specifically, ads for auctions, what we're calling Promoted Listings Express, which is a CBC business.
And then -- and off eBay advertising business. So, we continue to see lots of potential in that business, and these 3 areas are just getting started. On the sold items, that's really a reflection of the purposeful decisions that we've made, to one is moving away from low-value items that weren't driving the type of return and low-value buyers specifically, as well as a shift to higher ASP in general because of the strategy to focus categories strategy working.
So, we talked about the strength that we're seeing in trading cards and collectibles. Already having done $2 billion this year, the same as all of last year. Really driving our C2C business, and C2C tends to have a higher ASP. Our higher average selling price than our B2C business. And so that's also driving kind of that dynamic. so, it's actually in line with what -- with where we wanted to be, we think it's healthy for the ecosystem, and we think it's going to continue to be driven that way because C2C, as we look at it, we hope to continue to outpace B2C and lean in on these categories of value, like our luxury goods collectibles, et cetera.
Okay. That's great. Thank you.
Your next question is from Colin Sebastian with Baird
Thanks. Good afternoon, everyone. Welcome, Steve. I guess jimmy first just wanted to follow up on the buyer strategy. I'm just trying to figure out how we should think about that, ultimately translating into marketplace growth, and is there going to be, for example, an extended period of decay in those fewer active users before the marketplace essentially normalizes, and then you can show growth. And then, secondly, I guess more housekeeping, in terms of, what was behind the acceleration and the move to manage payment stream, Q2? It seems like you may be about a quarter or 2 ahead of plan there, if I have the metrics right Thank you.
Yeah. So, on your first question on the buyer strategy. Yes, we're purposely moving away from low-value buyers who are kind of low CLTV, low GMV per buyer. If you remember back in 2019, we talked about that strategy and because some of these are trailing 12-month metrics, some of those numbers are actually still in our numbers even from 2019. But the reason I'm focused on is if you look at that 50% of buyers, they only contribute 5% of GMV. And the top 20% contribute 75%.
And so, by focusing the organization not on just how many buyers do we have on the platform, but how many of our buyers are we turning into these high-value buyers? We think that's much healthier for the growth of the platform in the long term, much healthier for sellers, et cetera.
Jive's better with the marketing strategies that we're going after while we're really focused on the first 90 days of a customer and getting them up to their lifecycle. So, this is going to be a purposeful strategy you are going to see us on for years, walking away from the work that we did back in 2019, what when you ask about the managed payments, what I'm really happy about is the execution from the team. If you look at when we started, for example, enabling greater China, we got to 90% penetration within 10 weeks.
And so, we took the learnings from what started two years ago with the U.S. and Germany, and we've learned a lot as we've rolled out all of the other countries. And that pace speaks to the -- the pace of execution of the team and what they're doing and another, a lot of questions of what we'd be able to even reach the targets we had for next year originally. And I'm just excited that we're ahead of schedule and we're starting to do things like the After pay and the seller financing because there's just a lot of potential for this business as we fully manage the payments by -- all through eBay.
Okay. Thanks, Jamie.
Your next question is from Edward Yruma with KeyBanc Capital Markets.
Hey guys, thanks for taking our questions today, I guess first you guys have made a big push into authentication as part of your focus on some of these vertical enthusiasts’ communities. And I know -- or we believe that a lot of this is done on an outsource basis, I guess at some point, you need to bring this in-house and kind of how scalable are your current authentication solutions.
And then kind of broadly speaking, it seems like you guys have been fairly innovative with adding more functionality to eBay stores. What is the uptake been of the subscription product and kind of what does the product roadmap look like from here? Thanks.
Yes. So first on your question on authentication. Look, we're really excited at how we've been able to scale this program. We've now authenticated 1 million items on the platform. We've expanded that authentication too, for sneakers to U.K., Australia, and Canada. This quarter we announced that we're authenticating handbags over $500 in the U.S. And we're using a mixture of third-party and in-house resources to do so.
But what we're seeing is that this authentication has a great ROI. What it's able to do in terms of driving GMV, driving new buyers into the site. I will just give you -- I'll reiterate the stat we talked about last quarter in sneakers, which is acquiring a Gen Z, they buy $500 in sneakers, but they buy $2,000 in other categories on the site. We're seeing the same thing in watches, where a luxury watch buyer is buying $8,000 in categories outside of watches, and that's over 50 items.
And that's one of the benefits of eBay, is that cross-category shopping nature, and that's really hard for other competitors to replicate. On eBay stores, we talked about being the seller platform of choice and a big part of that is our strategy of really growing eBay stores. This quarter we announced a new program where it's much simpler to set up your eBay store. And I'm really excited by one of the features the team now -- announced, which was the ability for a seller to send coupons to repeat buyers. So, this is something that sellers have been asking for.
We built it in as part of the store's platform. And in just a few short months since launch, that product already has 1 million buyers taking advantage of those coupons from sellers. So, another thing that -- as we had our big eBay open event 2 weeks ago, our sellers were really excited. And frankly, we're just getting started on that program. so, we're even continuing to make sellers aware of these new capabilities. So, you'll continue to see quarter-after-quarter and year-after-year innovation on eBay Stores because it's an important part of our strategy.
Thank you.
Your next question is from Ross Sandler with Barclays.
Hey guys, two questions on the model here. You've got about a 10-point easier comp for GMV on an [Indiscernible] basis. In the third quarter and you're calling for a little bit more? re-sell? from here. So, do we chalk that up to a kind of purging some of the low-quality buyers and that chunk of that 25% of GMV that they represent or is that just the macro is kind of dropping off any color on that would be great? And then your 33% operating margin for 2021, that's got the brunt [Indiscernible] payment ramp in there. So, as we look ahead to '22 and we expect GMV to start growing again, how should we think about that operating margin? Like what are the puts and takes on that going up or going down next year? Thanks a lot.
hey, we got Steve here. [Indiscernible] So I'll start off with -- the second quarter. And as it relates to everything else on an Apples -- Apple basis, we've obviously exceeded our expectations across all of the major metrics. We laid out our Q3 - third-quarter guidance, and obviously, that reflects the best view based on what we're seeing in our most recent trends in the first part of the quarter. And our latest outlook on my ability.
And this is actually an unchanged view versus what we communicated when me [Indiscernible] in the second quarter and what we indicated was that we expected the second half GMV growth will be similar to Q2 as the Asia comps will be offset by lower macro benefits in 2021 as some mobility got back to normal and we are seeing some of that, in particular, a couple of our key markets in the lights of Germany and the U.K. That underpins that.
And again, we still to -- when we look through that lens, we expect that to lead to a mid, low-to-mid teen volume declines year-over-year, which actually at the heart of it indicates modestly positive growth from the underlying business on the basis of us continuing to improve the customer experience and execute on the vision that Jamie has a light out. Specifically, with regards to your second question about the 33% operating margin for 2021, obviously, we're ramping payments up.
We talked extensively about the fact that that's actually a lower margin part of the businesses sort of 25%, we've guided our expectations that 2021 will end with that 33%. With our recast financials ties a 150 basis stronger than 2019. So, we're right on track with the margin accretion from all of the initiatives that we're driving forward. We're not guiding 2022 at this point, but I'm very pleased with the trajectory that we're sitting on.
Your next question is from Richard Kramer with Arete Research.
Thanks very much. Jamie, first of all, you spoke about being the platform of choice for sellers, but you've also hit a record transaction take rate of 11.3%, you're suggesting that a rise year-on-year. What's your message to sellers with the notion that they are seeing in terms of their costs on eBay continued to go up as there's been a lot of issues and glitches with working on final value fees and tax and so forth. And then a couple of quick questions for Steve.
Can you give us a bit more detail on the decline in gross margins you mentioned payments on authentication? And also, adjusting for the fair value of both warrants, and equity, and the investments, it looks like free cash flow would have been about a 1/3 lower. So, can you talk about what you're seeing in the underlying free cash flow of the business when we remove all these very noisy investment income and changes in fair value of warrants? Thanks.
On your first question, I think is important there is to think about the fact that there used to be a separate take rate associated with payments. And now what our sellers are seeing is a blended take rate. And in general, the vast majority of sellers will actually be paying lower fees when you look at the combined take rate that they pay, because they're no longer paying that separate piece, and it's one single rate. The reason you are still seeing a rise in intake rate and may continue to do so is just because of the ramp of payments. So as payments ramp up, that starts to get reflected in eBay's take rate.
But the seller is no longer paying that PayPal or other forms of payment take rate. The second key -- the second key thing for us is making sure that we return the value to the sellers for the fees that we're charging. And so, when you think about the scaling demand that we can bring in terms of 159 million buyers, in terms of new capabilities that we're bringing to them on the platform, like the ability to go back to repeat sellers. There are areas where we've discounted our fees like sneakers, which has worked out really well in terms of growing those categories.
We look in general at the value that we provide. And I would say in our core business, we actually feel really good about that. And what we're seeing in our advertising business is that the ROEs of the return on ad spend that our sellers are seeing, are actually higher than what they're getting on other platforms. Which also, I think speaks to the value of the demand that we're providing. I'll let Steve take the other questions.
Hi Richard, good to meet you remotely. I'll turn off the first question with regards to margins. So, I think about the 3 key areas that the underlying business, there are payments, and then there are the lights of authentication. And so, as a reminder, we laid out the strategy around payments a couple of years ago.
With regards to $2 billion of incremental revenue, $500 million of incremental [Indiscernible] margin, and as Jamie alluded to, that is going very well, the momentum's going well, we've increased the full cost for 2021 to 1.8, [Indiscernible] on the revenue side. And as I said earlier, we are continuing to be on the path for the incremental 150 basis points over two years on our margin story. So, it's not necessarily driving any dilution in the margin story.
It's great from a Net Income standpoint as we go forward. The second point on authentication, Jamie mentioned the return on investment that is providing, it rather de minimus when you look at the overall cost structure in terms of, in fact, less than the half of points of margin is where you go from authentication, but the amounts of stickiness that are providing for our customers when they are going to cost cross-category buying more than pays for itself, and it's an investment that we're really glad we're making as we think about the whole ecosystem and And then the ability for that to move [Indiscernible] -- across categories.
With regard to our free cash flow at an underlying level which generated a free cash flow of $910 million in the quarter. The warrants are not achieved yet, and the free cash flow's investments. What I would say is that we continue to invest in the product as part of our core platform. In terms of the payment’s rollout, which is going extremely well, and other product investments with regards to moving this side forward in the categories that Jamie alluded to earlier. So, we're doing very well in terms of the organization and how we're moving forward, and very happy to follow offline if there are any further questions.
Your next question is from Deepak Mathivanan with Wolfe Research.
Hey guys, thanks for taking the question. To start off, just to follow up on Ross's question. Low-to-mid teens GMV decline in 3Q. Any way you can sort of giving us color on mobility assumptions behind that, should we expect some incremental deceleration in 4Q, or is 3Q sort of the reflection of all potential reversals due to mobility may [Indiscernible] that it's hard to forecast COVID dynamics. But I want to understand your guidance assumptions. And then the second one, you monetized some of your Adevinta stakes, how should we think about the approach with the rest? Is there any specific guidance or timeline that you have in mind? Thank you.
Good afternoon, Deepak. So, I'll address the first question as you laid an eye in terms of my ability, we have, as I said in my prepared comments, assume that we start to ramp off the significant lockdowns coming from 2020 through '21.
We talked about the fact that mobility, in terms of people getting out and about would increase as we went through the second quarter. And so, as we got into the third, then that's rolling off. In fact, just -- if you look at, particularly, Germany, one of our biggest markets in the U.K., things are pretty much back to normal from my ability standpoint, travels going through the roof. If you look at Search, in terms of leisure activities in travel I think that's as it is going forward.
Obviously, it feels a little different, maybe over here at the moment with regards to the Delta variant, but in that sense, we are missing things where we're expecting that going forward, I'm not going to get beyond quarter 3 Deepak you know because we chose not to guide further than that because of the uncertainty.
But we are [Indiscernible] in the third quarter that things are starting to get back to some normality. And -- and we're not in the lockdown scenario. With regards to the Adevinta transaction, obviously, that was completed. When we think about Adyen and Korea, whilst we have a great [Indiscernible] transactions and not closed yet.
And obviously, therefore we're not getting into any discussions about the proceeds of [Indiscernible] those transactions until those are closed. So obviously leading into the [Indiscernible] venture Very pleased that we were able to increase the share buyback from 2 billion to 5 billion this year in terms of driving those returns to shareholders. But it's too early to say with regard to the other transactions that have not closed yet.
Okay. Operator, I think we'll take one more, please.
Your final question is from Dan Solomon with BMO Capital Markets.
Hey, good afternoon, everyone. Jamie can come back and review the rollout of Promoted Listings Express and CPC pricing, whatever your key goals there, is it a greater advertiser base, deeper spend per advertiser, and bring more of your sellers in more deeply to the program, any more color on that would be great. And maybe an appropriate last comment for the call, you've mentioned eBay open a seller forum a couple of times here, and some of the pieces [Indiscernible] see back that you got. What would you say were the 2 to 3 most important that you heard from the sellers [Indiscernible]?
Yes. So first on the Promoted Listings, yeah, the rollout of CBC is really to have additional ad formats and additional capabilities, for sellers to drive visibility of their listings. So, we talked last quarter about how we're only at 1% of GMV. And if you look at other platforms, we think there's significant potential in the kind of low-to-mid single-digit percentage of GMV. The backs of the existing program, where we've already done over a billion dollars, grew 8% this quarter. We're really on a single type of advertising in a single format. So, it was all CPA on fixed price.
So, as we expand now to auctions as we expand to a CPC where we introduce more bidding capabilities for our top spot and search, which just enables sellers to have more tools. So, we're in beta on that product right now, and I would just say in general, we're really excited by what we're seeing because our ROEs are really strong, meaning our buyer experience is performing well, and the return that the sellers are getting on that spend is productive and much more productive than they would get on other platforms. In terms of eBay Open, I think we had a lot of really positive feedback about the unpaid item noise.
I've known sellers forever get frustrated when that happens to them, especially for a new seller. and so, they're really excited that we're tackling that as part of managed payments. I'd say they're really excited by what we're doing in stores and coupons because they want to build their brand on eBay. They want to drive repeat business.
And so, I think they're really excited by that. I'd say the other form that was really well attended and -- and had a lot of excitement was the trading cards forum. The launch of computer vision, where we're driving 80% of the scans is really identifying what the product is and it's simplifying the listing flow. We launched this new my collections, which is a really popular feature for people because they can show up their collections. And we launched a price guide feature which -- eBay has this treasure trove of data in the 25 years of history, nobody has the data that we have. It's a really great asset for us.
So, I'd say that area and those sellers that joined in particular, we're really excited by the innovation that we're making. I love those forums because this platform gets better by listening to our sellers and hearing their feedback. And they give us lots of ideas of things to continue to work on in the tech lead reimagination. So, a great interaction, despite being virtual, they all can't wait to be in person again, like we can, but it was a really good session.
Thanks, Jamie.
That concludes today's conference call. Thank you for participating. You may now disconnect. Goodbye.