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PayPal Bails Out eBay, Again

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Any minute now, eBay (Nasdaq: EBAY  ) is going to rename itself PayPal Inc. For yet another quarter, the dot-com giant has been saved by its fast-growing online payment platform.

The blended results are decent. Revenue climbed 10% to $2.2 billion if you eliminate Skype from the equation. Similarly adjusted, earnings climbed 14% to $0.40 a share. The results clocked in just ahead of Wall Street expectations, though they basically represent PayPal performing double duty.

PayPal remains the best -- and perhaps only -- reason to buy into eBay these days. There's a reason why CEO John Donahoe labeled performance "great" while stretching to give eBay a mere "stable" tag. PayPal's revenue soared 22% during the period, fueled by a 26% spike in payment volume.

It's a different story at, as marketplace revenue barely kept up in its footrace against inflation. Revenue climbed 3%, and one would imagine that some of marketplace's components such as StubHub and South Korea's Gmarket helped lift up

There's a problematic growth deceleration trend here. Year-over-year revenue growth at eBay's marketplace arm has grown 17%, 13%, 12%, and now 3% during the past four quarters, respectively. A reversal during the current quarter won't be easy, since it will be pitted against last year's 17% advance.

It's not as if eBay can buy its way out of this, even though it closed out the quarter with $6.1 billion in cash and non-equity investments. Marketplaces and auction sites are moving toward free -- or nearly free -- models domestically. It can find growth abroad. Maybe it can take a larger position in Latin American dynamo MercadoLibre (Nasdaq: MELI  ) . Maybe it can buy MercadoLibre entirely. Maybe it can buy Yahoo!'s (Nasdaq: YHOO  ) stake in Taobao's parent in China.

Other buying opportunities exist in broadening its reach. It can venture out of the consumer space through surplus auctioneer Liquidity Services (Nasdaq: LQDT  ) or dig deeper into the automotive market through Copart (Nasdaq: CPRT  ) or U.S. Auto Parts Network (Nasdaq: PRTS  ) .

Either way, the clock is ticking if eBay can't reverse the decelerating growth at organically. Sure, the market likes the report because it's a beat on the bottom line, but what will eBay do when PayPal ultimately slips?

The market's happy with you, eBay, but I expect better.

Is there anything that can do to get back on track? Share your thoughts in the comment box below.

Copart and MercadoLibre are Motley Fool Rule Breakers selections. Copart, eBay, and Liquidity Services are Motley Fool Stock Advisor picks. Motley Fool Options has recommended a bull call spread position on eBay. Try any of our Foolish newsletter services free for 30 days. True to its name, The Motley Fool is made up of a motley assortment of writers and analysts, each with a unique perspective; sometimes we agree, sometimes we disagree, but we all believe in the power of learning from each other through our Foolish community.

Longtime Fool contributor Rick Munarriz is a satisfied eBay user with 178 positive feedbacks to show for it. He does not own shares in any of the companies in this story. He 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 (1) | Recommend This Article (2)

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  • Report this Comment On October 27, 2010, at 2:13 PM, rayjimmy12th wrote:

    These are just a few of the 221 comments left regarding eBay customer support on a tiny little eBAy blog! This is a pretty good stat sample of how eBay customers and sellers feel about eBay right now.

    Ebay is imploding as the officers of the company take profits, sell stock and pillage the company. PayPal is driven by eBay sellers and customers and there are more and more viable alternatives to PayPal. Better keep a VERY close watch on the officers stock holdings or you will get burned on this plunging company of smoke and mirrors.

    A complete change of officers to people that value their customers could turn eBay around overnight. Better get with it Ebay board members. You have a good foundation but your house is full of inbred termites instead of officers of your company.

    Here are the comments:

    forget customer support. Ebay is imploding. They online chat feature is a long wait, no matter what the timer states, and ther is little or no chance you will get your problem resolved. The customer reps will just draw out the session until you give up. There is no other way to say this, but Ebay is self destructing.

    Anonymous 10/27/10 10:08AM

    I have been on hold both on the phone and via chat for over an hour! Incredible. The customer support number for ebay I had saved on my phone is no longer a working number. Ebay does not want to deal with their customers (buyers/sellers). It should not be so difficult to contact a company that is supposed to working with you on these transactions that they take a high percentage / fee from. I'm getting so fed up with ebay, someone needs to create another marketplace to keep ebay back in the shadows. We need more human contact communication and less BS.

    888888j 10/25/10 7:56PM

    How can eBay continue to exist with such poor support service? It seems impossible to reach anything with a pulse about a question or problem! I give up on the quest . . and on eBay!

    bccrutch 10/25/10 3:37PM

    I tried these numbers above a few weeks ago and they worked, but ebay must have realized it, because now I can't talk to anyone. I've also written two e-mails in the past two months and no one has responded to me. They owe me $50 from items I've sold and won't pay me because they've put my account "on vacation". I have no idea what that means. It said I had to update my information, and I did that, but now, two months and two very detailed e-mails later I still haven't received the money for my items! They are the worst!!!!

    LaurenK 10/25/10 12:47PM

    Customer Service at ebay is nonexist. spent most of my day running around in circles and getting nowhere. Ebay live chat is a joke as I was put on hold and told that I was next in line, just wait a few seconds. I waited forever without any help or any response. I am trying to get help witha listing, I paid for a "Buy it Now" option on my listing. I received an ebay confirmation email stating that this option was selected and then it disappears from my listing. I've had buyers wanting to know if I had the "Buy it Now " option and I did have it but it was somehow taken off!! I can't talk to anyone to find out what has happened. Poor! Poor! or No Customer Support!!!

    dennis4288 10/24/10 3:08PM

    Customer Service Is NON-existant! I've gone in a circle for almost two hours on their website. Can't find a working phone number. I've been scammed by a seller and can't get past ebays block. There is no live support that I can find! This is terrible!!!!

    Anonymous 10/24/10 9:11AM

    hey! that comment of cancelling you account works...type that into the help line and youll be pushed to the front.

    labluesuit 10/22/10 3:13PM

    I've been away from eBay since April, what's happened? I could always use the number they gave me or email them to get problems taken care of quickly. I've tried for 4 days to talk to just one human with the knowledge that is useful for my issues. To get a phone number, I spent many hours with the stupid "Contact Us" feature. I feel like I've been on a merry-go-round. When I finally got a number with a pin, I waited a total of several hours with numerous attempts trying to be one of the lucky ones to get thru. Guess what I was treated to as my waiting on the phone music, the merry-go-round tune that is played by every one in existence. I've gotten thru twice to their (India) office & spoken to a girl named "Kyle" & a right out of Bollywood guy named "Andy". When I asked them questions, they had to read about what a listing is, what bidding is, what's this or that & all the basics we learned in eBay 101. I know all the simple answers myself, what I'm asking about will only be answered by a Genuine eBay person & forgive me, but one from the U.S. Where did they all go? There are millions of Americans that need jobs so why the outsourcing? Let eBay India answer India or Pakistan's sellers' questions. Are our US personal now being outsourced to foreign eBay's? Has no one in charge realized that in order to get their profits back up, ours too, than they need to take care of the sellers & buyers. Who's running the show? Petition time? Does anyone have any contact at USA Today where we could have a bigger forum to reach the other frustrated & angry eBay community? Then, either eBay listens or we start our own selling website!

    tp 10/21/10 10:47PM

    I have been trying to contact eBay for the past 25 days about a problem with my account. I have followed their on-line prompts, Again, Again, and Again. but have not been able to talk to a single by phone. No Customer Service person.

    No Technical Support person.

    Nobody. Nobody. Nobody.

    Nothing. Nothing. Nothing.

    I have dried everything.

    I have tried everything.

    I have tried everything,

    including my search engine (Bing), as in eBay Customer Support, or eBay technical Support.

    2010-wingman 10/21/10 2:31PM

    when I got mad enough at being jerked around on the contact site I entered in the question box, "How do I cancel my accts. I've had it with you people"-- Immediately a box opened up on the right with a phone no. and pin no., and an option to "live chat". Apparently when threatened with loss of revenue they are willing to give you a phone no. Try it, it works, all the other phone no.s are usless.

    the "Bandit" 10/21/10 10:53AM

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