The California-based e-commerce giant eBay could reap some huge benefits if it can find out a way to effectively use artificial intelligence, according to analysts.
At the Code Conference earlier this month, eBay CEO Devin Wenig revealed that the company started getting very serious about using AI last year, noting that e-commerce is essentially a data business and that AI may be more important for eBay than its peers due to the “breadth of [its] inventory.”
Wenig further explained that eBay plans to formulate a strategy focused on using data to predict what consumers might want and offering a wide selection of products.
In fact, eBay aims to use algorithms over the next three to four years to better understand consumer intent and create an ecosystem involving social networks and messaging applications to allow for better targeting, R.W. Baird analyst Colin Sebastian wrote in a note earlier this month.
“They have the most data. Their data is very actionable,” Wedbush Securities analyst Gil Luria said of eBay.
eBay may be better-positioned than rivals to take advantage of AI as focus shifts to data around consumer and merchant information, as well as interactions between the two groups.
“You can figure out what the connection is between a certain search on eBay and the outcome for that consumer – in terms of what they ended up buying, what they looked at, how happy they were,” Luria said, adding that AI is able to generate new insight about the dynamic of merchants and consumers and has the potential to lift eBay long-term.
At the same time, AI is still in its early days with fairly limited applications and uses as behemoths such as Google , Facebook and Amazon figure out how to use it.
AI would certainly help eBay, particularly in improving user experience, agreed Morningstar analyst RJ Hottovy. He acknowledged, however, that it’s too early to tell how much of an impact it will actually have on the company.
“Adopting certain artificial intelligence can only help,” he said, adding that eBay will have more relevant offerings in its hands.
But for eBay, the bigger question remains how it will differentiate itself in the increasingly competitive e-commerce space, especially as it continues to try to transform itself without PayPal, said Hottovy. In the wake of the break-up that resulted from pressure by Carl Icahn, eBay gave itself a two-year horizon for slower growth and testing the market.
While the company has made improvements to its core site and continues to see its StubHub and Classified businesses grow, Amazon continues to eat away at eBay’s share of the e-commerce market by bringing more and more smaller, individual sellers to its platform.
EBay also competes against Etsy and general classified sites such as Craigslist (EBay once held a minority stake in Craigslist, but sold it back to the online classifieds company last June).
Meanwhile, eBay saw mid-single-digit range growth in volumes last month – largely in line with March and April’s monthly trends.
“However, we note that eBay’s growth overall still lags broader e-commerce trends (low-teens growth) as investments in structured data and seller policies have yet to drive accelerating volumes, a more likely outcome in 2H-16,” he noted.
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