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 eBay.com, 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 eBay.com.
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 eBay.com 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 eBay.com can do to get back on track? Share your thoughts in the comment box below.