After spinning off PayPal Holdings Inc. (NASDAQ:PYPL) in July of 2015, online marketplace and e-commerce giant eBay, Inc. (NASDAQ:EBAY) faced the burden of proving to investors that it was capable of creating new paths to revenue growth. In 2016, the company can credibly claim to have done just that.

Much of eBay's recent momentum can be credited to its expansion of online ticket marketplace StubHub. Image source: Getty Images.

Since the spinoff, eBay has improved its Gross Merchandise Volume (GMV), and ultimately net revenue, by shifting resources to its StubHub online ticketing business as well as its Classifieds platform. In the third quarter of 2016, for example, StubHub's revenue leaped by 32% on a currency-neutral basis. Similarly, Classifieds expanded its top line by 14%. The overall revenue for eBay's legacy Marketplaces business, by contrast, only improved by 5% on a currency-neutral basis.

Will 2017 turn out to be eBay's best year yet? It's possible, if the company can keep up its pattern of smaller, bolt-on acquisitions coupled with internal technology investment. Last year, StubHub acquired Spanish ticket marketplace Ticketbis for $165 million, pushing its geographical reach into Europe, Latin America, and Asia. It also acquired, for an undisclosed amount, Ticket Utils, an online exchange for ticket brokers.

Allocating assets, people, and attention to smaller, nimbler segments highlights the magnitude of management's task. Marketplace still towers over the corporate profit and loss statement, having recorded total Q3 2016 revenue of $1.78 billion, compared with $460 million for StubHub, Classifieds, and miscellaneous other corporate revenue. Still, eBay is making tangible progress: Non-Marketplace segments made up nearly 26% of total revenue in Q3 2016, versus roughly 18% in the comparable prior-year quarter. 

An evolving approach to the legacy business

Of course, just because the Marketplace growth curve has slowed as the segment has matured doesn't mean it's become an afterthought in management's strategic plans. In recent years, eBay has shifted away from an over-reliance on promotions to boost revenue, a practice it generally refers to as "subsidizing" gross merchandise volume. The following quote from CEO Devin Wenig during the company's most recent earnings conference call provides an interesting insight:

It's not hard to generate GMV with a balance sheet. Subsidizing goods isn't hard. We're pretty disciplined about it. We only do it as a means to acquire customers and to grow the flywheel.

We are totally focused on things that create sustainability and differentiation in the business. The brand does that, the product does that. That's how eBay gets healthy over time and that's where we are spending all of our time and effort.

This point provides perspective for long-term shareholders. The implication is that with its ample cash reserves, eBay could easily sacrifice margin in the near term and drive up GMV, lifting revenue and possibly its stock price as well.

But a sustainable approach to revenue generation is one that will incentivize recurring visits from eBay's 165 million active global buyers. The most promising investments in merchandise sales, which may yield greater revenue in 2017, include ongoing page design improvement to lift conversion and the use of artificial intelligence, or AI.

eBay executives have been talking up the potential of AI for some time, but in recent months, the use cases are clearer and more tangible for the average shareholder to grasp. In October, the company launched "eBay Collective," a curated shopping destination for high-end art, antiques, and furniture.

The site uses image recognition provided by eBay's recent acquisition of visual search technology specialist Corrigon Ltd. When a visitor hovers over a product image, Corrigon's software links it to closely matching available inventory provided by invited dealers and galleries.

eBay has enlisted Architectural Digest magazine to provide content for eBay Collective, which it hopes will create a more authoritative as well as sophisticated shopping experience. eBay Collective follows the introduction this year of the upscale "eBay Wine" site, which lists thousands of bottles from a global selection of wine sellers, and similarly strives to project an image of product curation. 

Providing boutique transaction environments may be antithetical to the original, all-encompassing "marketplace" selling metaphor. Yet these sites allow eBay to control its merchandising and focus on as high-end (and high margin) a sale as it can conceive. If the organization can continue its dual focus on scaling smaller segments, while creating multiple new windows with which to view its global goods, 2017 may indeed prove to be eBay's best year yet.