(EBAY)
(EBAY)
Joe Billante - Vice President, Communications and Investor Relations.
Jamie Iannone - President and Chief Executive Officer
Steve Priest - Senior Vice President, Chief Financial Officer
Edward Yruma - Analyst
Colin Sebastian - Baird - Analyst
Deepak Mathivanan - Wolfe Research - Analyst
Ross Sandler - Barclays - Analyst
Doug Anmuth - JPMorgan - Analyst
Brian Fitzgerald - Wells Fargo - Analyst
Tom Champion - Piper Sandler - Analyst
Stephen Ju - Credit Suisse - Analyst
Dan Salmon - BMO Capital Markets - Analyst
Operator
Good day, and thank you for standing by, and welcome to the eBay Q3 2021 Earnings Call. [Operator Instructions] Please be advised that today's conference is being recorded.
[Operator Instructions] I would now like to hand the conference over to your speaker today, Joe Billante, VP, Communications and Investor Relations. Please go ahead.
Joe Billante - Vice President, Communications and Investor Relations.
Good afternoon. Thank you for joining us, and welcome to eBay's earnings release conference call for the third 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 a 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 and our earnings release from earlier today. You should not rely on any forward-looking statements. All information in this presentation is as of October 27, 2021, and we do not intend and undertake no duty to update this information.
With that, let me turn it over to Jamie.
Jamie Iannone - President and Chief Executive Officer
Thanks, Joe. Good afternoon, everyone, and thank you for joining us. Today, I'll begin the call with key highlights from the third quarter. Then I will share some updates on the progress we are making towards our strategic vision. At the end of my remarks, I will turn the call over to Steve, who will discuss our financial performance and outlook in greater detail.
Q3 was another strong quarter, driven by our team's relentless focus on sellers and buyers. I'm excited by the positive impact this is having on the underlying health of the business. The changes we are making to the marketplace are improving results today and are also putting us in a better position to deliver sustainable growth. We remain confident in our long-term vision to grow the core, become the seller platform of choice and cultivate lifelong trusted relationships with buyers.
Let me highlight a few achievements from the quarter that brought us one step closer to this vision.
Our business delivered better-than-expected revenue and earnings growth on the high end of our guidance. Our strategic playbook continues to improve customer satisfaction and build trust and is leading to faster GMV growth in our focus categories. The managed payments migration, which is nearly complete, is helping sellers and buyers by reducing friction, lowering cost and enabling new capabilities. Our advertising business continues to grow faster than marketplace volume, and our product innovation provides sellers new tools to help them scale their eBay businesses.
We are also making great strides in our ESG efforts. Recently, we received approval from the science-based targets initiative for our multiyear carbon emission reduction goals. And importantly, we announced that eBay will be 100% carbon neutral this year and will remain so going forward.
I'm pleased to report that all key business metrics either met or surpassed our expectations in Q3. Revenue overperformed growing 10%, driven by acceleration in the payments migration and Promoted Listings growth. We also delivered $0.90 of non-GAAP EPS, at the high end of expectations, while increasing technology investments.
GMV performed in line with expectations globally, declining 12% versus last year and increasing 9% compared to 2019. Excluding transitory macro impacts, we continue to see modestly positive underlying growth in the business.
Global active sellers remained unchanged at 19 million, and total active buyers were 154 million. Over the past year, we have focused on attracting and retaining high-value buyers by innovating in focused categories and targeting enthusiasts with upper funnel marketing. We have also discontinued legacy couponing that's skewed towards low-value buyers. These actions are resulting in a gradual evolution of our buyer base over time. Compared to the third quarter of 2019, high-value buyers are up 6%.
Another ongoing transformation of our marketplace is managed payments, which progressed quickly during the quarter. In Q3, we processed over 90% of on-platform GMV and remain on track to finish by the end of this year. I'm thrilled that we are close to migrating all of our global sellers to a next-gen product experience. While we are close to completing the transition, we are only at the beginning of realizing our full payments potential. Owning the entire seller and buyer journey unlocks opportunities to remove friction, improve trust and provide new capabilities to sellers and buyers. We are already starting down this path, and here are a few examples.
Last quarter, we effectively eliminated unpaid items on fixed-price transactions and have continued to reduce this issue for best offers. In the U.K., we are paying many sellers as quickly as next business day after buyer payment is confirmed. Based on community feedback, we reduced another pain point for trusted sellers by increasing protection against fraudulent returns by requiring photos and providing return shipping credits.
In addition, we continue to improve our stores experience to make eBay the seller platform of choice. We've been increasing our traffic to stores and providing more CRM capabilities to make managing their businesses on eBay easier than ever. Sellers are leveraging these new features to drive repeat purchases. For example, in only six months since launch, more than 2.5 million buyers have completed a repeat purchase from a store using our new seller funded coupons. To further build sellers brands, we are testing video integration on high-traffic pages to help them tell their unique and compelling stories to enthusiast buyers.
Our advertising revenue continues to outpace volume due to Promoted Listings, which drove over $207 million in revenue in Q3, up 9%. We also tested three new Promoted Listings products and are starting to offer these features to more sellers.
In September, we opened up Promoted Listings Express to more sellers in the U.S., U.K., Germany and Australia. This feature allows sellers to boost visibility of auction listings for a onetime fee regardless of whether the item is sold. Early adopters have seen substantial growth in impressions and clicks.
Last month, we invited eligible sellers to try Promoted Listings Advanced, enabling them to create campaigns on a cost-per-click basis with more budget control. In parallel, we launched a suite of tools to create campaigns, monitor performance and optimize returns. We are also providing training and webinars to drive trial and adoption. During Q3, we explored ways to syndicate ads off eBay through external Promoted Listings.
Through the eBay Partner Network, we are testing tools and incentives for affiliates to drive enthusiast buyers to existing promoted listing sellers. We are also experimenting with other forms of seller-funded marketing across various channels. Our new advertising products are in the early days, and we are excited about their long-term potential.
Moving to our focus categories. I'm pleased with the pace of innovation and the positive reaction from our sellers and buyers. Volume from these categories continues to outperform the rest of the marketplace, and we are increasing customer satisfaction by improving trust.
As you may recall, when we exited last quarter, we had applied our playbook to approximately 10% of global GMV. We remain on track to expand that to roughly 20% by the end of the year. Let me walk you through several examples.
Our sneakers business in the U.S. continues to grow at healthy double-digit rates. During Q3, we launched authentication in Germany, added 30 more brands to our catalog and improved SEO performance for top sneaker brands. We also leaned further into upper funnel marketing and sponsored key industry events to strengthen our reputation with enthusiasts.
Starting tomorrow, we will be trialing a new 3D image capability on select sneaker listings. Leveraging AI and machine learning, the experience will allow buyers to interact with a detailed 360-degree view of the actual item they are buying. We're excited about the potential of this new technology, particularly the ability to reinforce buyer confidence at the point of purchase.
Moving to luxury watches. This category is also growing at strong double-digit rates in the U.S. Buyers are finding more inventory on eBay than other marketplaces as many brands have decreased production, and preowned supply is limited on other platforms.
Since launching authentication in luxury handbags, growth has accelerated in this category and was positive in Q3, outperforming the total U.S. site by double digits. We are seeing the same high customer satisfaction as other authenticated categories.
As I've mentioned in the past, part of our strategy is to drive enthusiasts to new trusted experiences and then leverage those buyers across our vast supply in other categories. The average buyer who purchases sneakers and luxury watches spends approximately $2,000 and $8,000, respectively, in other categories. We are seeing the exact same behavior in our latest focus category.
Buyers of authenticated handbags are spending over $5,000 outside of handbags. This cross-category benefit for sellers and buyers is a unique advantage for eBay. One of the reasons our growth has improved in luxury categories is the improvement in buyer and seller trust. We recently celebrated the one-year anniversary of authenticity guarantee, having now processed over 1.4 million items across multiple categories. Customer satisfaction has consistently exceeded 90%, and we are operating in five countries with a mix of in-house and third-party resources.
Another focus category that is driving growth in the U.S. is trading cards, which is growing significantly faster than the total marketplace. In late July, we launched new features, including price guides and collections, which allow trading card enthusiasts to view, manage and track the value of their portfolios. To date, close to 4 million cards have been added to customer collections. In addition, close to 250,000 buyers have used eBay's newly launched price guide to visualize the changing value of their favorite trading cards. These features cater to the needs of high-value enthusiasts and are increasing engagement and trust in eBay.
The next focus category we're applying the innovation playbook to is motors, parts and accessories. Among the changes we are making is to take our entire parts inventory and add it to the eBay Motors app, creating a one-stop shop for vehicles and parts enthusiasts. We are excited by the potential of bringing together one of the world's largest vehicle selections with hundreds of millions of parts in one customized experience. We're exploring further changes to parts and accessories that leverage our strong market position to capture more untapped growth.
ESG remains critical to our business health and to our customers, and I'm pleased to announce that we have reached some significant milestones in our journey toward establishing eBay as the leading sustainability company in e-commerce.
Just two weeks ago, we announced that our emission reduction goals were approved by the Science Based Targets initiative. We will reduce Scope 1 and 2 carbon emissions by 90% by 2030. This is the most ambitious designation available and aligned with the Paris agreement.
Additionally, we will reduce value chain emissions from downstream transportation by 20% in the same time frame. To reduce emissions from good shift using our platform, we will partner with our logistics providers to encourage low-carbon alternatives. I'm also proud that eBay will be carbon neutral for our offices and data centers in 2021. We expect to maintain this going forward as we continue efforts to reduce our overall carbon footprint.
At eBay, one of our core values is to be for everyone. As part of this focus, supporting our seller community is critically important. Earlier this month, we issued a new report on equitable entrepreneurship, which detailed how selling on eBay helped women during the pandemic. We found that 82% of women who are new to eBay or increased their selling did so because of job loss, reduction of income, illness, loss of childcare or some other hardship. This vast majority of women surveyed says the ability to sell on eBay was a benefit during the pandemic, citing the need to earn additional income for themselves or drive revenue for their businesses. I'm proud that our platform can provide flexibility and opportunity to so many during tough times so that they can earn extra income through selling in our marketplace.
I'm also inspired by the continuous generosity of sellers and buyers on eBay. During Q3, approximately $35 million was raised through eBay for Charity, up 11%. Additionally, thousands of global employees helped select small businesses to receive grants totaling $3 million from the eBay Foundation. These grants are focused on serving underrepresented entrepreneurs and are used to provide training, coaching and mentorship needed to help their businesses thrive.
In closing, as I mentioned at the start of the call, Q3 was yet another strong quarter. We continue to make progress on our multiyear journey, and it's clear that our strategy is working. Enthusiasts are responding to innovation in our focus categories and are increasingly putting their trust in eBay.
Managed payments is on track to complete the migration this year and is driving friction out of the experience while opening up new capabilities for sellers and buyers.
Our advertising business is innovating by providing a portfolio of tools our sellers can leverage to build and grow their businesses on eBay. And we're accomplishing all of this while setting and achieving ambitious climate goals and providing a platform where economic opportunity is available to all.
I want to thank our passionate employees who have tirelessly worked to bring our vision and purpose to life. Their dedication to serving sellers and buyers is inspiring. Their relentless execution is driving innovation and making eBay a better marketplace, and I couldn't be prouder to lead this team.
With that, I'll turn the call over to Steve to provide more details on our financial performance. Steve, over to you.
Steve Priest - Senior Vice President, Chief Financial Officer
Thank you, Jamie, and thank you all for joining us today. I'll begin with our Q3 financial highlights on Slide 4 of our presentation. We delivered another strong quarter. Our results met or exceeded expectations across all key metrics, while our year-over-year comparisons reflect the extraordinary growth we experienced last year as a result of the pandemic. These results were underpinned by continued execution against our strategic pillars, including contributions from payments, Promoted Listings and focus categories.
Revenue grew 10% year-over-year on an FX-neutral basis. The transaction revenue grew by double digits for the sixth consecutive quarter, primarily due to contributions from managed payments.
Non-GAAP EPS was $0.90 per share, and our operating margin was 31.7%. We generated $502 million of free cash flow and returned approximately $2.4 billion to shareholders through share repurchases and cash dividends during Q3. Given the underlying growth in our business and strong free cash flow generation, I'm pleased to announce we've raised our share buyback target for 2021 from $5 billion to $7 billion.
Our pending portfolio transactions remain on track to close within previously communicated time lines. We anticipate the sale of Adevinta shares to Permira will close during Q4, while the Korea deal, which will close early next year or potentially by the end of 2021.
Turning to active buyers on Slide 5. We exited Q3 with 154 million active buyers on a trailing 12-month basis, representing a 5% decrease year-over-year. This decline was primarily driven by low-value buyers, a group that makes up more than half of our buyer base but only 5% of GMV. As Jamie mentioned, this ongoing trend is a result of our strategy to prioritize attracting and retaining high-value buyers. We are confident in this approach, but we recognize the reduction in low-value buyers could pressure our rolling 12-month active buy account in the coming quarters. Compared with Q3 of 2019, a low-value buyers are down 7%, while high-value buyers were up 6%.
Moving to GMV on Slide 6. In Q3, we delivered $19.5 billion of GMV, down 10% year-over-year on a spot basis and down 12% on an FX-neutral basis, in line with our expectations. The macro benefits to our business from mobility was significantly diminished in Q3 as restrictions faded across the globe, where we continue to see modestly positive underlying growth in our business. Compared with Q3 of 2019, GMV grew 9% on an FX-neutral basis. Consistent with prior quarters, our performance by market varied based on a number of factors, including relative mobility and country-specific macroeconomic trends.
Internationally, GMV was roughly flat versus Q3 of 2019 on an FX-neutral basis. A number of factors influenced the growth differential between the U.S. and our international markets during the quarter. Mobility is back to pre-COVID levels in many of our largest international markets, diminishing the volume tailwinds we benefited from in prior quarters. Changing consumer behavior, including an uptick in leisure activities and travel, also may have impacted e-commerce growth internationally.
Additionally, category mix varies in our international markets, which have lower exposure to certain fast-growing verticals like collectibles, but higher concentration of items from cross-border trade that are more difficult to source amid the ongoing supply chain disruptions.
Finally, our focus category rollouts are more nascent in our international markets. However, as our innovation playbook expands to more categories and countries, we are confident our international growth trajectory will improve.
In the U.S., GMV grew 22% versus Q3 of 2019. Growth in our domestic marketplace was driven by strong execution against our strategic pillars, more product rollouts within focus categories and steady growth within e-commerce.
Residential mobility improved in the U.S. but continues to trial the European markets, while leisure activities and travel increased in line with normal seasonal trends. Other external factors may be benefiting our U.S. business relative to international markets, including the lingering impact of government stimulus and scarcity benefits and supply chain disruptions. The precise impact of these effects is unclear, but they are likely a net positive contributor to U.S. growth in the near term. In aggregate, there are numerous puts and takes between regions, but we remain encouraged by the modestly positive underlying growth in our business.
Turning to revenue on Slide 7. Net revenue for Q3 was $2.5 billion, up 10% year-over-year on an FX-neutral basis and 11% on a spot basis. We delivered $2.4 billion of transaction revenue, also up 11% on an FX-neutral basis. Growth was primarily driven by managed payments, which contributed roughly 20 points of incremental revenue growth during the third quarter. The payments ramp drove an 80 basis point sequential increase in our take rate, which surpassed 12% in Q3.
Moving forward, we expect our sequential take rate increases to moderate as the managed payments rollout is nearly complete.
Within our advertising business, Promoted Listings grew 9% year-over-year, outpacing volume by 21 points. Early adopters of the new Promoted Listings products are seeing significant increases in performance, giving us confidence in the long-term potential for advertising revenue.
Marketing services and other revenue declined 7% year-over-year to $151 million, driven by the impact of sold item declines and shipping programs and headwinds within third-party advertising. We continue to purposely reduce third-party advertising in favor of Promoted Listings, which delivers superior performance and offer a better experience for both sellers and buyers.
Moving to expenses on Slide 8. In Q3, we delivered non-GAAP operating margin of approximately 31.7%. This represents the 2.7 point year-over-year decrease primarily driven by lower volume. Our cost of revenue has scaled in line with payments growth due to variable processing costs. This dynamic has pressured gross margins during our transition to managed payments. However, once the transition is complete, we expect gross margins to be more stable. Moreover, the incremental revenue from payments drive significant leverage in our fixed expenses, most notably sales and marketing and G&A.
Sales and marketing fell by nearly 4 points as a percentage of revenue year-over-year in Q3. In addition to leverage from payments revenue, sales and marketing was lower due to reduction in coupons and rewards programs that were previously targeted towards low-value buyers.
Product development increased 21% year-over-year as we continue to accelerate product innovation and support our longer-term strategic initiatives within payments, advertising and focus categories. Transaction losses rose as a percentage of revenue by nearly 2 points versus last year due to higher consumer protection losses from the payments transition and the lapping of onetime benefits in the prior year, which were partially offset by the benefits of fee netting.
Turning to EPS on Slide 9. We delivered $0.90 of non-GAAP EPS in Q3, up 9% year-over-year as ramping contributions from payments and the net benefit of share repurchases more than offset the lapping of COVID-driven volumes a year ago. GAAP EPS for the quarter was $0.43, roughly 50% lower than last year. The delta was primarily driven by a fair value adjustment on our Adevinta shares, partly offset by gains from other investments.
Switching to free cash flow on Slide 10. We delivered another strong quarter of cash generation in Q3 with $502 million of free cash flow, a 4% decline year-over-year. The decline was driven by the timing of working capital and CapEx spend, partly offset by operational efficiencies and the timing of 2020 cash taxes.
As a reminder, the managed payments transition has yielded meaningful working capital benefits. Through three quarters of 2021, this benefit amounted to approximately $300 million.
Moving to capital allocation on Slide 11. We ended the quarter with cash and nonequity investments of $5.1 billion and gross debt of $9.1 billion. During the third quarter, we returned approximately $2.4 billion to our shareholders through stock repurchase and dividends. We repurchased approximately 31 million shares to $2.3 billion at an average share price of $72.52. We also paid a quarterly dividend of $116 million in September.
Given our fortress balance sheet and strong underlying free cash flow, we are updating our share buyback plan for 2021 from $5 billion to $7 billion, which implies approximately $3 billion of repurchases during the fourth quarter.
Overall, our capital allocation objectives remain unchanged. We'll preserve financial flexibility to execute on strategy and drive long-term value creation. We aim to drive organic growth in our business, and we'll look for opportunities to supplement that growth with disciplined acquisitions and investments. We will optimize our financial flexibility, access to debt and cost of capital, and we'll continue to deliver meaningful returns to shareholders through share repurchases and dividends.
Moving to investments on Slide 12. As a reminder, we received 540 million shares in Adevinta from our Classifieds sale, which closed during June of this year, representing an equity ownership stake of approximately 44%. As a regulatory condition of the Classifieds sale, we committed to reduce our ownership stake in Adevinta to 33% or less over the 18 months following the close of the deal. In July, we agreed to sell approximately 135 million shares to Permira for roughly $2.4 billion. We believe the Permira share sale remains on track to close during Q4, and the 405 million shares that we would retain were worth close to $7 billion at the end of September.
Turning to Adient. The warrants we acquired in connection with our strategic partnership during the second quarter of 2018 were valued at $1.4 billion at the end of Q3, an increase of over $300 million quarter-over-quarter. You will find more information on the Adyen warrant in our 10-Q. Our stake in Kakao Bank has appreciated in value following the company's IPO in August. At the end of Q3, our investment was worth approximately $800 million.
Finally, in June, we announced plans to sell over 80% of our Korea business to eMark for approximately $3 billion. Upon deal close, we will retain an interest of just under 20% of eBay Career, which carried an implied value of roughly $800 million at the time of the announcement. We believe the deal remains on track to close by early 2022 with a possibility of closing before the year end. We remain excited about our portfolio of global investments, the potential optionality they provide and the significant value they collectively represent for eBay shareholders.
Turning to guidance on Slide 13. For the fourth quarter, we are projecting revenue between $2.57 billion and $2.62 billion, representing growth of 3% to 5% on an FX-neutral basis and approximately 4% to 6% on a spot basis.
Our pay rate has risen notably in recent quarters due to contributions from payments and advertising. Although we expect advertising to continue growing faster than volume, we expect the impact from payments on our take rate to moderate as we are nearing completion of our managed payments transition.
We are raising our 2021 full year outlook for payments revenue from $1.8 billion to $2 billion. Our revenue guidance implies GMV is down low teens on an FX-neutral basis versus last year and up mid- to high single digits compared to Q4 of 2019. Our GMV guidance assumes steady execution against our strategic pillars and continued innovation within focused categories. Our outlook also assumes minimal benefits from macro factors like mobility, stimulus and supply chain impacts. However, we note the macro environment remains dynamic and difficult to predict, with varied impacts from country to country.
We expect non-GAAP EPS of $0.97 to $1.01 per share in Q4, representing a 14% to 19% year-over-year growth. We plan to continue investing in product and technology to deliver better category experiences and improved customer satisfaction. We anticipate our non-GAAP tax rate to between 18% and 19% due to recent outperformance of our U.S. business. We expect our GAAP EPS in the range of $0.72 to $0.76 per share in Q4.
In closing, we delivered strong results in Q3 that met or exceeded their expectations across all key metrics. We continue to execute our strategic vision and grow our core marketplace while maintaining the balance and discipline that will enable us to generate tremendous value for our shareholders for years to come.
Managed payments is on track to deliver $2 billion in revenue this year. and our transition is on track for completion by year-end. However, we believe our payments journey is just beginning as this milestone unlocks new opportunities to reduce friction in the marketplace and provide additional financial services.
Advertising revenue continues to outpace volume, the sellers increasingly leverage our expanded product portfolio to amplify the exposure of their listings. We observed impressive momentum with our focus categories, which are meaningfully outpacing overall volume growth. We are confident we can continue expanding this innovation playbook to more categories and countries in the quarters ahead.
Our balanced approach to capital allocation has enabled us to reinvest in our business, generating consistently strong free cash flow and deliver attractive returns for shareholders through share repurchases and dividends.
As proud as I am of our numerous business accomplishments, what makes them even more impactful to me is knowing we are achieving these milestones while building sustainable, exclusive and circular economy platform for all.
Once again, I'd like to take this opportunity to thank our teams across eBay for their incredible work over the last quarter and their support for our amazing sellers and buyers in the eBay community.
One final note, we are in the midst of a multiyear journey to deliver a tech-led reimagination of eBay. As the impact from macro factors stabilizes, we are reviewing our internal goals for 2022 and beyond. We anticipate showing our longer-term goals and aspirations at an investor event early next year.
With that, Jamie and I will now take your questions. Operator, over to you.
Operator
[Operator Instructions] We have our first question coming from the line of Edward Yruma with KeyBanc Capital Markets. Your line is open.
Edward Yruma - Analyst
Hey. Good afternoon, guys, and thanks for taking the question. I really wanted to click down a little bit on some of the categories that you're reimagining and some of the success you're noting there. Just help us understand maybe the new customers you're growing into the platform. I know you've identified some dollar amount, but just to clarify, are those new customers? Or is that customers that are participating in those categories? And then as a follow-up, what are the marketing plans to encourage new customer growth in these categories that you reimagined? Thank you.
Jamie Iannone - President and Chief Executive Officer
Yes. So I'll take that. So first, on the categories, it really is about both leading into the high-value buyers that are on the platform as well as attracting new buyers in. So if you look at what we're doing in watches and sneakers or this quarter, we announced we're authenticating handbags over $500, it is catering to both. One of the great benefits of eBay is the cross-category nature of shopping. So if we acquire a buyer into a handbag, who buys a handbag over $500, they actually end up spending $5,000 in other categories outside of handbags on the site. So when we think about acquisition, it's not just acquiring it for that category, it's acquiring it more broadly for eBay. That's one of our significant benefits.
Excited because we've expanded categories this quarter. We brought our sneakers authentication program to Germany. We brought watches to the U.K. business, and we launched handbags in the U.S. in terms of that product. From Certified Refurbished, we added new brands, Samsung, KitchenAid Dyson and expanded number of products there, and that's exciting coming into holiday.
On your question on marketing, we've really shifted our marketing. I think traditionally, we've been a mostly lower funnel with some broad-based campaigns on upper funnel really driving into how do we acquire high-value buyers and high-value enthusiasts in specific verticals. So what that means is a whole lot more of upper-funnel marketing, partnerships, leaning in with social media influencers in certain categories and basically going much more broad with our marketing plans to find those buyers where they are.
And I guess the last thing I'd say is we're really focused on the first 90-day experience on eBay. Many times in my career, I've done this, where you really get focused on how do you introduce them to the brand, bring them up the life cycle, make sure that they turn into the high-value buyers that we want to do, and that's going to be a continued focus for us over the coming quarters.
Edward Yruma - Analyst
Great. Thanks so much.
Operator
We have our next question coming from the line of Colin Sebastian with Baird. Your line is open.
Colin Sebastian - Baird - Analyst
Jamie, maybe first on the core marketplace improvements. You obviously focused a lot on category-specific changes, and that's working well. How much effort is there in platform-wide enhancements? And if there are any sort of specific initiatives there, what will be the timing for those? And then, Steve, maybe with respect to the Q4 outlook, just looking at the sequential ramp versus typical seasonality, it's certainly a little light of historical patterns even when eBay could be a net beneficiary from supply chain issues. I know you like factoring that into the outlook, but maybe some additional color there would be helpful. Thanks.
Jamie Iannone - President and Chief Executive Officer
Yes. So thanks for the question, Colin. So we do talk a lot about the vertical expansion and focus category work that we're doing, and we're excited for what's happening there. if you actually step back and look at it, the vast majority of our resources are actually going to site-wide initiatives across the board. And I'd point to a couple. One is, obviously, our ad business and a lot of investment there across the board, especially with the three new products that were at the beginning of launching. Obviously, payments huge initiative. But other areas that we haven't talked a lot about are like eBay stores. So working on a next-gen experience in eBay stores, incorporating video so allowing sellers to kind of tell their story from that perspective.
So the more CRM tool capabilities so that sellers can be more involved in how we bring buyers back to the platform and drive that repeat business. So the stat, I just mentioned earlier about we launched it six months ago, but now sellers are funding the coupons to drive buyers back to the site from passed buyers or interested buyers. And that's a huge benefit for sellers and a huge benefit for eBay because we're involving them and driving them and already 2.5 million buyers have used that in that time period.
So we're also testing a new selling experience. If you're on the site, you'll see that there's a beta out there of a new way to sell. So most of the vast majority of investments are going to horizontal. But what I like is it's a complement because some of those horizontal lean into some of the vertical work that we're doing in the vertical work, and we're able to use in a number of categories across the site. So the two also play together well.
Steve, I'll let you take the second part of the question.
Steve Priest - Senior Vice President, Chief Financial Officer
Yes. Thank you, Jamie. Colin, I will say we're expecting a steady contribution from the strategic initiatives that Jamie has continued to lay out with the innovation that we're driving across the platform, not only in the focus categories, but also the momentum, so payments analysis going forward. On a year-over-two basis, I mean, if you think about and stand back year-over-year, we're obviously lapping the pandemic. On a year-over-two basis, we're seeing mid- to high single-digit growth compared to Q4 2019.
I think there's a few puts and takes, Colin. First of all, our holiday perspective around Q4 is embedded in the guide. From a headwind perspective, in the prepared comments we had, we talked about supply chain pressure for cross-border trade that we see on one side. But in terms of tail wind, obviously eBay is well-known for unique and scarce items, which we expect some supports through the holiday period. So a few puts and takes but overall, I'm pleased of what we believe will be continued modestly positive growth and driving growth on the platform as a result of the initiatives that we're driving forward.
Colin Sebastian - Baird - Analyst
Okay. Thank you.
Operator
Thank you. We have our next question coming from the line of Deepak Mathivanan with Wolfe Research. Your line is open.
Deepak Mathivanan - Wolfe Research - Analyst
Great. Thanks for taking the question. Just two quick ones. First, can you elaborate on the new Promoted Listings offerings? I mean, should we expect these offerings to drive adoption among a broader range of sellers? And maybe related to that, can you provide an update on where you currently are in terms of penetration among the seller base for promoted offerings? And then a second question, I realize this might be a little bit early, but how should we think about the buybacks for next year? It feels like you have plenty of capacity, but wondering if there is a formula you're thinking about to do it in a more programmatic way after the $7 billion this year. Thank you.
Jamie Iannone - President and Chief Executive Officer
Yes. So on the new Promoted Listings offerings, let me just kind of explain this in detail. So the first one, which is Express is really to give us a Promoted Listings product against auctions so since we launched this product five years ago, it's really only applied to fixed price. And so this opens up, while a smaller format of the site, a format that has not been open to advertising before. Promoted Listings Express is a CPC-based product, gives sellers the opportunity to drive more velocity, goes after a different type of marketing budget for that perspective and gives us the opportunity to work with a secondary and supplementary advertising format. And the third is off-eBay advertising. And that's using the vast marketing reach that eBay does today, partnering with our sellers to drive advertising as part of that off-eBay outreach to bring existing buyers and new buyers back to the platform.
What I would say to you is that it's early days on these three products. If you look back, we start our ad business five years ago and we've grown to a $1 billion now over five years. And so we're at the point now where we're testing, we're learning. We've got invited sellers into the program. And just like it took us time to build up the CPA-based program, I think it will take us time here to build up the advertising program.
In terms of penetration, we still have a lot of opportunity left, both in terms of the sellers and listings. I believe the last that we shared was that only 400 million of the listings have advertising associated with them. So there's a lot of opportunity for additional penetration.
I'll let Steve take the second question about how we're thinking about the future.
Steve Priest - Senior Vice President, Chief Financial Officer
Hi, Deepak. So I'm not going to go ahead myself for 2022. We haven't put the guidance out there, but I'll give us a little bit of color in terms of where we are. So as we've previously said, reinvestments in the business is our first priority, whether that's build, buy or partner. Having said that, beyond that, any excess cash that we do have continued to drive returns, we will continue with a disciplined return of capital to shareholders. And this is no different than the past. You had a strong and consistent history of actually doing capital return. And in 2021 has been no exception. So think about as going from $2 billion at the start of the year, listing up to $5 billion and most recently on this call talking about $7 billion. So I think when I stand back and about eBay as a whole, the balance that we have and the benefits of the franchise is we often have the ability to do both in terms of reinvesting in the business and doing capital returns to our shareholders. So you should expect that philosophy as we go forward.
Deepak Mathivanan - Wolfe Research - Analyst
Got it. Okay. Thank you very much.
Operator
We have our next question coming from the line of Ross Sandler with Barclays. Your line is open.
Ross Sandler - Barclays - Analyst
Hey, guys. Two questions, one on just U.S. versus international. So it seems like a big reason why your U.S. GMV is way above 3Q '19. I think you said it was like 23 or something like that compared to international is a little bit on the IST comp, but also from these focus category initiatives. So what's holding back the same type of uptick for international? Is it structural? Or is it just a timing thing that we should see a ramp up after you kind of roll those out after starting in the U.S.?
And then the second question is on how big is eBay Motors these days? I know it's a big category historically. And just can you talk about a little bit about the opportunity there in terms of making that one focus category and merging the parts and the motors.
Jamie Iannone - President and Chief Executive Officer
Yes. So let me start with the U.S. versus international. First off, let me say, I'm really pleased with the momentum we're seeing in the overall business. We're growing at 9% year-over-two-year basis based on the strategic vision we have. Clearly, different dynamics across the market. So in Q3, our international business was impacted by mobility returning to really pre-COVID levels, coupled with an unprecedented snapback in travel and leisure activities in Europe. In addition, as Steve mentioned a little bit earlier, our international cross-border trade sellers were also pressured by supply chain disruptions. That tends to be more in our international segment from a cross-border perspective than in our U.S. segment.
On the other hand, in the U.S., we've seen strong growth driven by momentum in our core business. To your question on the focus categories, it's not a structural change. We actually think the work we're doing applies across the whole globe. It's really a timing thing. So in most of these areas, we actually roll them out in the U.S., get them perfected here and then expand them internationally.
So for example, sneakers is just now launching this quarter in Germany. We launched watches in the U.S. We just started that expansion in the U.K. this quarter. Handbags, we just launched in the U.S. and that hasn't expanded yet. So it's really a timing thing, but we think the playbook that we have is relevant in every single market that we have. Probably with the exception of trading cards and collectibles, that's just so much stronger in the U.S. than it is internationally. But that's a huge U.S. benefit and a lot of the pieces that we're doing there are a key focus for that. But overall, I feel great about the health of the business and our ability to expand those focus categories internationally.
On your second question on P&A, we haven't disclosed the size of the business, but I will say that if you just step back and look at the market, we're in a leading position in P&A, especially in U.K. and in Germany. It's a very strong category and a very strong franchise there. And it's a key part of our path that we talked about last quarter of going from 10% of the site to 20% of the site. It's a strong category for eBay because of the vastness of parts and accessories that we have. We actually do a fairly good job with Fitment. I talked last quarter about the My Garage feature and how we've expanded that internationally, which helps with Fitment. We also recently announced a motorcycle parts finder in that business, and it tends to help and be benefited also from a cross-border trade.
To give you a sense of the scale, we've got hundreds of millions of listings in our parts business. And what I'm excited by is one of the first evolutions that we did was take all of that inventory and make it available on our Motors app, which is a dedicated separate app for vehicle enthusiasts, and now you've got vehicles and parts and accessories in a one-stop shop from that perspective. So you'll continue to hear further updates from us about that category. It's our next big category of focus and one where we're coming into it from a position of strength.
Operator
Thank you. We have our next question coming from the line of Doug Anmuth with JPMorgan. Your line is open.
Doug Anmuth - JPMorgan - Analyst
Thanks for taking the questions. Two on payments, you've removed a lot of the friction already now that you have 90-plus percent of sellers migrate on to managed payments. Just what's next in terms of improving the experience going forward? And then just curious if you have any preliminary thoughts on some of the managed payments numbers in '22 in terms of revenue and operating income. Thanks.
Jamie Iannone - President and Chief Executive Officer
Yes. So first, on the friction, the whole idea of bringing commerce and payments together gives us great opportunities to remove friction. So on the selling side, people now only have to set up for a single account and get selling, all of their claims are managed in one place, tons of benefits from there. One of the ones that I'm really excited by is that since I worked at eBay the last time starting in 2001, unpaid items have been on this platform forever. And so now we've eliminated it in fixed price virtually. We're doing so in best offer. And so sellers won't have to face that issue and it takes friction out of the platform.
On the buyers side, it allows us to open up new opportunities for different forms of payments. So clearly, we've already integrated Apple Pay and Google Pay, but we launched a partnership with Afterpay in our Australia business for buy now, pay later. Afterpay is a very strong brand in that market, and that's bringing us new customers. It's already at 10% of our business there. And we're continuing to look at new opportunities for forms of payment for our buyers.
Secondarily is on the seller financing side. We launched a partnership in the U.K. with YouLend and opening up more opportunities for sellers now that we're processing such a large volume of payments through the business. So like I said in the call, the way I look at it is the migration is complete, but we're just getting started in terms of the opportunity of what we can do with commerce and payments together in a single flow and single experience.
Steve Priest - Senior Vice President, Chief Financial Officer
Doug, with regard to your question on payments rollout 2022, too early to talk about 2022. We're not going to guide that at this point. But I did want to reiterate how delighted we are with the progress we've made with over 90% of the platform volume with over 18 million sellers going to the platform now. We laid out some goals going back a couple of years with regards to $2 billion of incremental revenue and $500 million of OI. We're well on track, Margin is in line. So we're very, very happy with where we are.
Doug Anmuth - JPMorgan - Analyst
Great. Thank you, both.
Steve Priest - Senior Vice President, Chief Financial Officer
Thank you, sir.
Operator
We have our next question coming from the line of Brian Fitzgerald with Wells Fargo. Your line is open.
Brian Fitzgerald - Wells Fargo - Analyst
A couple of quick questions. Any impact on auction bid density from the loss of low-quality buyers or any impacts that may have on the marketplace beyond their just percentage of GMV? And then you recently during the summer started showing buyers, all shipping services offered by sellers, allows them to select carriers and shipping costs and estimated deliveries. It's still early days, but can you talk about what impacts that's happening, if any, on conversion rates?
Jamie Iannone - President and Chief Executive Officer
Yes. So on the first question, on auction bid density, no, we're not seeing any impact from that. Frankly, that format has actually been really strong because of the strength we're seeing in collectibles where it tends to be a more used format. And I'm excited that we're starting to launch express because that will give our auction sellers the ability to drive some more visibility for them and then to have a tool that they haven't been able to use before.
In terms of the shipping services, this has been a constant march for us. Last year, we expanded in the U.S. to have USPS, UPS and FedEx in there and did the same thing with Royal Mail and Australia Post to greatly exceed the amount of tracking.
On the specific shipping test that's going on now, it's kind of too early to tell. What I would say in general is how to think about this, Brian, is I'm trying to get the whole company focused on how do we make things as simple and as easy to do on the platform. So what we're doing with our new seller flows, with computer vision and trading cards is how do we take all the work out of the listing process. We're trying to do the same type of thing with our sellers and the stores product and making it really easy to get that set up on the platform. And shipping is one of those areas where there's an opportunity to take a lot of the friction out.
So the new partnerships that we've created, the integrated tracking, the smoother returns process is all part of this evolution of just make the whole platform so much easier to use. And so we'll keep you posted on how these tests roll out, but I'm happy with the progress so far.
Brian Fitzgerald - Wells Fargo - Analyst
Thanks, Jamie. Appreciate it.
Operator
We have our next question coming from the line of Tom Champion with Piper Sandler. Your line is open.
Tom Champion - Piper Sandler - Analyst
Good afternoon. Thanks very much. Jamie, I'm wondering if you could talk a little bit about bidadoo. Hopefully, I'm pronouncing it right. It looked like you made an investment, but it seems like kind of a B2B or commercial product. How does this fit strategically? And then I noticed the C2C GMV was down 13%. I think that was a little below GMV overall. This usually outperforms and just curious what might have driven the result there.
And Steve, maybe just a quick one for you. Buybacks $7 billion looks like $3 billion in repurchases this quarter, increased from $5 billion in repurchases last quarter. I'm just curious if the increase in the buyback reflects greater confidence in the fundamentals. Any thoughts on that would be helpful. Thank you.
Jamie Iannone - President and Chief Executive Officer
Yes. So on the first one, look, I've been talking since last July about a game-changing level of trust on the platform, and we've been doing that kind of category by category. So the authentication that we've been doing in the luxury categories really takes trust off the table these two-year warranties that we put in place for Certified Refurbished does the same thing. And eBay actually has a good sized business and industrial business in capital equipment, and bidadoo allows us to put a whole different level of trust in there. They're a long-time seller and partner on eBay and the capabilities that they will bring to that category will help bring a new level of trust and just help buyers and sellers in that category move forward. So that's what I would say on bid a deal.
On the C2C, that's really just the lapping of the COVID dynamics that we saw from last year in terms of the number of sellers that came on during that time period and just some of the macro dynamics. What I'd tell you is I'm really happy with the progress and continue to be a huge focus for us is on our C2C selling experience, bringing them on to the platform, making it extremely easy, making that payment sign-up process really simple. And so that's going to continue to be something that we're going to focus on quarter after quarter because as I mentioned in the past, we - when we talk about high-value buyers, that includes buyers who sell. So by nature, it helps drive them up their buyer cohort curves as well as bringing that unique inventory. So we're going to continue to push forward there.
And then, Steve, do you want to take the last one?
Steve Priest - Senior Vice President, Chief Financial Officer
Yes. Thanks, Jamie. Tom, I think it's been interesting being at the company about four months now. And I think the one thing I would say is just what's really struck me is the durability of the financial model with best-in-class margins, really significant value in the underlying platform and a fortress balance sheet.
If you take that and you pair it with the strategy that Jamie has laid out and the momentum that we're going forward with, I think the eBay franchise is pretty misunderstood. And one of the things that we need to do a better job is just really ensuring that the investor community understand a little better. And again, your point is well made. The momentum we've shown on the buyback and capital allocation. as you progress through 2021 from the 2 billion to the 5 billion and now the 7 billion is really a sort of a reflection of that in terms of our thought process around balanced and disciplined capital allocation. and getting that balance right between reinvestments in the business to stimulate growth and providing the robust returns to our shareholders.
Tom Champion - Piper Sandler - Analyst
Thank you.
Operator
We have our next question coming from the line of Stephen Ju with Credit Suisse. Your line is open.
Stephen Ju - Credit Suisse - Analyst
Okay. Thank you so much. So Jamie, I think in your prepared remarks, you talked about what sounded like a 3D modeling technology you're using in the sneakers category. So how easy or difficult is this to do? And presumably, hopefully, this is driving higher conversion rates where this is rolled out as you're presenting more information to the buyer. So can you talk about which other categories this actually might be rolled out to?
And I guess as a follow-up to the earlier C2C question, as you get more and more buyers to become sellers over time, are you seeing pretty consistent behavior with the newest batch of converted users versus the earlier cohorts? Thanks.
Jamie Iannone - President and Chief Executive Officer
Yes. So on your first question, it's a very early test in pilot that we're doing. But the idea is we want buyers to be able to see in real detail the actual item that they're going to be. And so you're going to see us launching a couple of sneakers in the coming weeks using this. And it's a very early pilot that we're doing with select sellers. But it's all about building trust on the platform. I bought a $4,000 OBO on the platform last year, and it was great. I could see a lot of images, but the opportunity to really get in there in 3D and see what a pre-loved product looks like is an interesting opportunity.
So like I said, it's early, you'll start to see some products that we have using that technology. But I'm what I'm excited by is like the innovation and computer vision, we're using our AI resources and computer vision resources here to do some interesting things that, over time, I think will really change the buying experience on eBay.
To your question on C2C, it looks pretty similar to historical behaviors and consistent in terms of them coming on to the platform, continuing to list and then turning into buyers. What I'd say is the other thing is that a lot of our business sellers actually started out as C2C sellers. So it's another reason we lean in there.
I was visiting with a seller up in Seattle, and he started many years ago. He had an extra set of tires sold them on eBay and then just start to sum a couple more things than tires, now several times now runs a huge lug nuts business as a business seller with a warehouse and lots of employees. So that's the other kind of key focus for us on C2C is that's how a lot of our B2C sellers actually got their start in the platform.
Joe Billante - Vice President, Communications and Investor Relations.
Operator, I think we've got time for one more.
Operator
Thank you. We have our next question coming from the line of Dan Salmon with BMO Capital Markets. Your line is open.
Dan Salmon - BMO Capital Markets - Analyst
Great. Thanks. Good afternoon, guys. Thanks for slipping me in. First, Jamie, can you just expand a little bit on the affiliate program that you cited as one of the three new initiatives for Promoted Listings the opportunity to take it off platform? What are you hoping we're probably hoping to solve for your sellers with that? And if you could add some color on how significant you think that opportunity could be relative to the $1 billion run rate that you're the on-site Promoted Listings business?
And then just second for Steve, to what extent, I guess, put simply, will you go to exit low-value buyers? You said you expect the metric to remain under pressure, and the strategy certainly seems sound. But is your goal here to ultimately exit all of those low-value buyers? I'm just hoping you can add some context for the scope of the strategy. Thank you.
Jamie Iannone - President and Chief Executive Officer
Yes. So on the first one, the off-eBay advertising product, let me separate that from the affiliate advertising we do. So an affiliate can actually come on to the platform and be an affiliate. But the two definitely work hand-in-hand together. The whole vision there is really connecting enthusiasts to sellers. So being out on the platforms where those enthusiasts are and letting our sellers partake in that advertising by putting really interesting items in front of those enthusiasts of driving that marketing because eBay has been doing this marketing, and when we do it in cooperation with our sellers, it gives us a really broad reach.
For sellers, it gives them another tool as well to take all the great inventory that they have on eBay and put it out in front of sellers in various communities, in different places in search, et cetera, to really drive that traffic to their business on eBay.
I'll let Steve take the second one, and maybe I'll add on a bit.
Steve Priest - Senior Vice President, Chief Financial Officer
Dan, no, it's not about exit. It's about focus. And I think we're constantly thinking about acquisition of buyers and growth on the platform. And really, it's about really changing our strategy and our focus.
And I sort of just want to reiterate about the value that various buyers bring. So if I think about our top 20 high-value buyers or 20% of our buyers and deliver 75% of our GMV, and those buyers are making six different prices, six different times a year and over $800 and that buyers itself, whereas the low-value buyers were about 50% of our buyers and generate about 5% of our GMV. So you can obviously see why we're focused on that strategy as we continue to evolve the platform, focused on the enthusiasts, focused on cross-category selling, but it's very, very important that we continue to have a pipeline as we evolve the business and grow it going forward.
Jamie Iannone - President and Chief Executive Officer
It actually ties in well with your first question, Dan, about the advertising product is how do we make sure we're in those places where we actually get a fire those high-value enthusiasts and putting our focus and intention, not just around the number of buyers that we have on the platform, but much more focused on how we're turning buyers into high-value enthusiasts and how we're altering our marketing plans so that we're out there actually acquiring them onto the platform because that's what drives the real health of the business is the growth of - the growth of those high-value buyers and how we're doing and connecting those enthusiasts. So good question because the two really tie together.
Dan Salmon - BMO Capital Markets - Analyst
Great. That was very helpful. Thanks.
Operator