Jamie Iannone
Chief Executive Officer at eBay
Thanks, John. Good afternoon, everyone, and thank you all for joining us today.
I'm incredibly proud of the progress we made in 2023 against our vision of reinventing the future of e-commerce for enthusiasts and our goal of returning eBay to long-term sustainable growth. Let's go over a few highlights from the full year.
First, despite significant macro pressure on discretionary spending across our major markets, we saw organic year-over-year GMV growth improved during each quarter of 2023, resulting in GMV growth down roughly 1% for the full year. Focus category GMV grew by nearly 4%, outpacing the remainder of our business by roughly seven points, and we exited 2023 at approaching 30% penetration. We stabilized our active and enthusiast buyer count as acquisition, reactivation and retention improved year-over-year.
Our revenue grew 3% organically to over $10 billion. driven by continued momentum in first-party advertising, expansion of our financial services offerings and the launch of eBay International Shipping.
And we made significant investments in tech talent and marketing to support our strategic pillars, including making meaningful strides towards establishing eBay as a leader in generative AI for e-commerce. These results have demonstrated that we have the right strategy which has put us on a path to building a stronger, more resilient company.
In service of that goal, last month, we announced significant organizational changes focused on removing layers and simplifying execution in order to better meet the needs of our customers. This involved the difficult but necessary decision to reduce our workforce by approximately 1,000 roles and begin to scale back our alternative workforce contracts. This restructuring better aligns our expenses with the growth of our business and I'm confident it will enable us to accelerate innovation while delivering long-term value for shareholders.
Now turning to the fourth quarter. We generated $18.6 billion of gross merchandise volume in Q4, nearly flat versus the prior year. Revenue grew 3% to $2.6 billion. Our non-GAAP operating margin was 26.7%, and we delivered $1.07 of non-GAAP earnings per share resulting in $4.24 of EPS for the full year. Our focus category strategy remained a significant driver of underlying growth during Q4.
We focused category GMV outpaced the remainder of our marketplace by approximately six points, growing roughly 4% for the third straight quarter. Our momentum in Motors Parts & Accessories, or P&A, continued in the quarter, as volume growth held steady in the mid-single digits.
Our eBay Guaranteed Fit programs have benefited buyer trust and retention across the U.S., U.K. and Germany, driving incremental GMV within P&A last year. During Q4, we began rolling out multi-warehouse shipping optimization to some of our largest U.S. P&A sellers that collectively manage millions of listings.
B2C sellers can activate these tools via eBay APIs, and this enables buyers to see more accurate estimated delivery dates when purchasing from sellers with multiple warehouses, which has driven a measurable uplift in conversion for early adopters.
In 2024, we plan to onboard sellers in other categories to utilize this technology and tighten delivery estimates across eBay more broadly. Our established position in P&A has led to more than 100 million vehicles being saved in the My Garage section of eBay by active customers. In addition to providing better fitment experiences, we are finding more ways to leverage this valuable data to drive utility for our customers.
For example, last quarter, we introduced predictive maintenance that offers AI-driven auto part recommendations based on a vehicle's mileage. Features like this help eBay stay top of mind for customers looking for auto parts at a great value.
The work we've done in the eBay Authenticity Guarantee program has also been a key driver of our focused category momentum and raising the level of trust on the marketplace. In Q4, we launched our eighth authentication center in Tokyo, Japan, our first center focused primarily on cross-border trade.
Our Tokyo center is currently authenticating luxury handbags and will expand to other highest categories over time. Japan is one of the largest and fastest-growing market for personal luxury goods in the world, enabling our global buyers to tap into a wealth of inventory from the world's most exclusive brands with complete confidence.
Earlier this month, we also expanded the Authenticity Guarantee Program to cover loose gemstones. This further extends our product coverage within fine jewelry with authentication from our existing partner, the Gemological Institute of America, a trusted authority for over nine decades. In addition to expanding focus categories, last year, we made a significant investment in Germany, our third largest country as measured by demand.
We adopted a similar approach to our vertical playbook to address the unique needs of German consumers. These changes included language enhancements and improvements to search, SEO and recommendations, shipping and return label improvements and a complete overhaul of the local pickup experience.
In January, we further improved local discovery in Germany by introducing a new MAP-based browsing experience, which services trending and recently listed items through an intuitive interface based on what's nearby and easy to pick up. Overall, our initiative in Germany has outperformed our initial expectations. We've observed C2C seller NPS and customer satisfaction both up 20 points or more versus our previous baselines. Our buyer NPS also increased by double digits as buyers who sell returned to positive growth following the initiative launch.
In addition, enhancements made to our QR code technology has helped reduce unpaid items by more than 50% for local pickups. And importantly, C2C volume in Germany returned to positive growth resulting in hundreds of millions of dollars of incremental GMV relative to our prior trajectory. These investments have made our business significantly more resilient to the challenging macro environment in Germany where overall e-commerce growth has been negative in recent quarters.
During 2023, we also laid the groundwork to accelerate our capabilities in artificial intelligence and further embed AI throughout the customer experience and our organization. After the first commercial large language models became available from companies like OpenAI and others last year, we immediately found ways to leverage generative AI technology to improve the eBay experience across selling, buying, advertising and marketing. Within a few months, we began fine-tuning open-source LLMs using eBay's proprietary commerce data on our own infrastructure.
These models include a smaller number of parameters and thus operated faster and more cost efficiently than commercial LLM when operating at scale. But we also found these fine-tuned LLM could perform as well or in some cases, better than commercial LLM across certain dimensions and use cases, such as generating listing descriptions. To support an even more ambitious AI roadmap for 2024, by the end of Q1, we expect to have doubled our GPU capacity versus the end of last year.
Importantly, this investment falls within our historical capex budget range of 4% to 5% of revenue. This added GPU capacity, combined with our existing infrastructure, allows us to develop LLMs from scratch pre-trained using eBay's nearly three decades worth of e-commerce data. While we'll continue to take a hybrid approach, leveraging both commercial and open-source LMs, we expect more generative AI services to be powered by internal LLM in 2024, helping make buying and selling on eBay simpler, faster and more magical.
In terms of customer-facing features, we continue to iterate on our magical listing experience that has already been used by millions of sellers, which we believe makes it one of the most widely used Gen AI features in e-commerce to date. Generative AI descriptions have rolled out to 100% of users in our top 5 markets.
Adoption trends remain healthy. Customer satisfaction continues to be at high levels as we've expanded outside of English-speaking countries and content acceptance rates remain above 90% through the full rollout. The next phase of our magical listing experience is currently being tested by up to 5% of C2C sellers on an opt-in basis.
This experience is even more seamless as it leverages our image recognition technology and generative AI to prefill or suggest product titles, categories and other item aspects using photos alone.
We are excited to make this experience available to more sellers in Q1 as early feedback from beta users has been incredibly encouraging. I'm also pleased to see the potential benefits our AI tools can have on the billions of listing images across our marketplace as high-quality products photos can have a significant impact on conversion on eBay.
Last quarter, we completed the global rollout of our revamped background removal tool in our listing flows, which leverages AI to effortlessly remove background noise from their product images. This tool has enabled sellers to create cleaner, more professional product images and it has received rave reviews from our customers.
Building on top of this, we're now leveraging generative AI to make sellers product images even more compelling using our new background swap tool. This feature allows sellers to show their products alongside a wide variety of AI-generated backgrounds.
For example, you can display a pair of Air Jordan sneakers on a hardwood basketball court or showcase your preowned hiking boots a top of Pictures Mountain Summit. We are currently testing this feature in beta with 1% of sellers on iOS devices, and I'm excited to see more sellers leveraging these tools to enhance their product images and drive conversion.
Now turning to our advertising business, which delivered another strong quarter. Total advertising revenue grew 20% to $393 million, while first-party ads outpaced volume by 30 points. For the full year, we generated over $1.4 billion of total advertising revenue, up roughly 25% for the year and more than double our ad revenue in 2019.
The over 2.9 million sellers adopted a single ad product during Q4, and we currently have over 900 million live promoted listings. Our standard cost per acquisition product remained the largest contributor to year-over-year ads growth in Q4. But notably, Promoted Listings advanced, our cost per click unit was the largest contributor to sequential advertising growth.
Our CPC revenue and overall advertiser count benefited from the launch of rule-based campaigns in Q4, which allows sellers to automatically promote new listings based on rules that set for inclusion, such as price range, category, brand or condition. Additionally, during Q4, we launched a top-picks carousel for search. which provides a curated set of promoted listings ads comprised of hyper-relevant top-selling items from our highest ranked sellers. Thus far, buyers have been highly engaged with these ads providing added velocity for our sellers.
Next, I'd like to share a few milestones around our sustainability efforts last year, starting with eCommerce. eCommerce continues to provide significant value for sellers and buyers during these uncertain times. In 2023, our marketplace generated nearly $4.9 billion in positive economic impact due to sale of pre-loved and refurbished goods. This activity helped avoid approximately 1.6 million metric tons of carbon emissions that would typically be used in producing new goods and kept nearly 70,000 metric tons of waste from going into landfills.
Additionally, eBay remains committed to enabling more green energy on the U.S. electricity grid. As part of these ambitions, we have entered into agreements for three offsite renewable energy projects over the past four years. Our portion of the latest project is now fully operational, and the green energy produced will be roughly equivalent to the annual energy usage at our data center in Salt Lake City. Combined with our other two projects, this green energy covers over 40% of our global electricity consumption.
And I'm incredibly proud that we source over 90% of our energy consumption for eBay controlled offices and data centers from renewable sources overall, and we remain on track to reaching our 100% renewable target by 2025.
Now let's turn to impact. I'm always amazed by the tremendous generosity of the eBay community. eBay for Charity enables sellers and buyers to raise more than $43 million in Q4 and nearly $162 million for the full year. The eBay Foundation granted more than $19 million in 2023 to support historically excluded entrepreneurs and through our employee gift-matching program. I'm honored to be a purpose-driven company that supports communities around the world.
For the fifth year in a row, eBay was included in the Dow Jones Sustainability World and North American indices. eBay was also included once again in Just Capital and CNBC's list of America's most just companies which measures corporate performance and efforts in areas such as climate change, DE&I and employee wellness. I'd like to take this opportunity to thank our employees for their incredible work and bringing our strategy to life and their tireless support in our community worldwide amid ongoing challenges in the global economy.
In closing, while we continue to navigate a dynamic operating environment, I'm incredibly optimistic about our roadmap for 2024. Our teams are better organized for speed, allowing us to be nimble and make critical decisions more quickly. The foundational AI capabilities we developed last year make us well positioned to unlock the power of our data assets, fundamentally change the customer experience on eBay, and drive efficiency across the company in 2024.
We will continue to invest in new and existing focus categories while also improving country-specific experiences like we did in Germany last year. We expect continued momentum in first-party advertising, despite lapping outstanding growth in the prior year, while we grow our financial service offerings for customers. And from a financial standpoint, we are in a strong position to expand margins, drive robust earnings growth and deliver healthy capital returns to shareholders in 2024, while still investing in high ROI initiatives to keep us on the path towards sustainable GMV growth.
With that, I'll turn the call over to Steve to provide more details on our financial performance. Steve, over to you.
