eBay Bids for Respect

You've probably heard this one before.

eBay's (Nasdaq: EBAY  ) quarterly report wasn't all that different from the numbers that the dot-com conglomerate spat out three months ago. Its PayPal and Skype subsidiaries posted double-digit revenue growth. Its flagship marketplace business delivered a double-digit decline.

In both periods, the end result of two well-performing businesses tugging at a larger albatross of a business is a single-digit decline in the top line. However, if we whip out the lead stencils for a little tracing experiment, you'll catch on to a little sequential improvement.

Year-Over-Year Revenue Growth:

Division

Q1 2009

Q2 2009

PayPal

11%

11%

Marketplaces

(18%)

(14%)

Skype

21%

25%

Net Revenue

(7%)

(4%)

Growth at Skype accelerated. The deterioration in eBay's marketplace arm lessened. The downer is that the relative improvement didn't pan out on the bottom line. Non-GAAP earnings on a per-share basis slipped by 7% three months ago. Adjusted earnings took a 14% tumble this time around. Mr. Market's upbeat takeaway, though, is that analysts expected less out of eBay back in April and here in July.

This doesn't mean that eBay is back. It clearly still has a way to go. If you think that a 14% year-over-year decline in eBay's bread-and-butter marketplaces is bad, consider how bad things must be at eBay.com itself. Several sites lumped into the marketplace category -- StubHub, the Kijiji free online classifieds site, and fixed-price listings on eBay -- grew faster than the e-commerce market did during the quarter.

It also helps that 57% of eBay's marketplace revenue came from outside the United States. Foreign specialists such as Latin America's Mercado Libre (Nasdaq: MELI  ) and eBay's recently acquired Gmarket in South Korea are having no problem growing their platforms. China's leading search engine, Baidu.com (Nasdaq: BIDU  ) , also entered the consumer-to-consumer niche last year.

Does eBay still have problems with disgruntled power sellers who have set up shop elsewhere? You bet. The company ticked them off just as paid-search specialists including Google (Nasdaq: GOOG  ) and Yahoo! (Nasdaq: YHOO  ) made it too easy to drum up leads, and smaller sites popped up with friendlier terms.

eBay's response has been to make up those losses elsewhere. It's rolling out a buyer loyalty program and trying to lure in casual sellers, waiving listing fees on the first five items put on the eBay block by infrequent sellers in any 30 days.

The company has a long way to go before we can begin calling this a turnaround. You actually have to bottom out first. However, it's comforting to see that analysts have overshot on the pessimism lately. All the same, I'm staying far away from the "buy it now" button until the improvement arrives.

More items in the eBay bid basket:

Baidu, Google, and Mercado Libre are Motley Fool Rule Breakers selections. eBay is a Motley Fool Stock Advisor selection. eBay is a Motley Fool Inside Value recommendation. Try any of our Foolish newsletter services free for 30 days.

Longtime Fool contributor Rick Munarriz is a satisfied eBay user, with 177 positive feedbacks to show for it. He owns no shares in any of the companies in this story and is also a member of the Rule Breakers analytical team, seeking out the next great growth stock early in its defiance. The Fool has a disclosure policy.


Read/Post Comments (4) | Recommend This Article (3)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On July 24, 2009, at 9:48 AM, lostlizardtc wrote:

    "It's rolling out a buyer loyalty program and trying to lure in casual sellers, waiving listing fees on the first five items put on the eBay block by infrequent sellers in any 30 days."

    Ha! This "loyalty ploy" is a sham! It is devised to elicit higher overall fees from anyone but a low dollar seller--i.e. at about $30 eBay, not the seller, profits. If eBay would ever deliver an honest promotion, perhaps its sellers would see more value in the company.

    eBay has disgruntled all of its sellers--large and small. It will pull in new sellers who will simply take a while to understand the environment.

    What has eBay done well? It's spawned the proliferation of numerous new options in e-commerce. Now if those options could just gain eBay-like name recognition. I thank eBay for my steadily increasing business on Amazon and iOffer.

  • Report this Comment On July 24, 2009, at 1:21 PM, NYMArts wrote:

    That foreign markets matter more to Ebay than American families is a Sad Commentary on U.S. state of affairs.

    Americans are now enslaved.

    Our "own" government is complicit.

    This must change relatively soon.

  • Report this Comment On July 24, 2009, at 2:08 PM, MichaelHolcomb wrote:

    eBay can bid for all the respect they want... it won't work.

    Donahoe and company have created more dedicated business enemies than anyone in history.

    I despise this arrogant bastard.

    eBay is Dead.

  • Report this Comment On July 24, 2009, at 10:18 PM, DONSCYCLEWARE wrote:

    Sadly eBay has not only antagonized Power Sellers but plenty of small sellers as well. The latest push will attract new sellers, eBay will infuriate them then they will stop buying as well as selling at that venue.

    Incidentally, eBay's new and unimproved policy to allow the first five listings free was simply a disguised fee increase for sellers. The only way you come out ahead on the deal is if the items do not sell. Apparently eBay management thinks we can't perform simple math.

    eBay' growth outside of the United States simply means that they will now be antagonizing sellers on a global basis.

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