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EBay Expanding Its International Footprint

Posted on Friday, May 6th 2011

According to a Forrester market report for 2010, worldwide online retail sales last year were worth $439 billion and accounted for 5% of all retail sales. Online retail sales are expected to grow to $536 billion by 2012 and will account for 12% of overall sales. The report estimates the U.S. market to grow to $279 billion in 2015 from $179 billion in 2010 and the Western European market to grow 11% to $156 billion in 2014 from $93 billion in 2009. Within Asia-Pacific, Japan’s market was estimated to be worth $45 billion in online retail sales in 2010, and China was estimated to reach $49bn in 2010 with a growth rate double of that of Europe. It is little surprise that online retailer, eBay, is focusing on international expansion.

eBay’s Financials
eBay’s (NASDAQ:EBAY) Q1 revenues grew 16% to $2.5 billion, meeting the market’s expectations. Marketplace revenues increased 12% to $1.55 billion with gross merchandise volume excluding vehicles growing 8% to $14.5 billion. PayPal remained the growth driver with revenues increasing 23% over the year to $0.99 billion. The number of PayPal’s registered users grew 16% to 97.7 million and total payment volume grew 28% to $27.4 billion. PayPal’s user base is now bigger than the eBay user base of 95.9 million. For the quarter the company reported an EPS of $0.47, which was a cent ahead of the Street’s expected earnings.

eBay projects current quarter revenues of $2.55 billion to $2.65 billion with EPS of $0.45 to $0.46. Analysts were expecting revenues of $2.52 billion with EPS of $0.46.

eBay’s Acquisition Spree
eBay has been on an acquisition spree and continued to add significant assets to their portfolio. Last week it acquired Fig Card, a Boston-based mobile payments solutions provider. Fig Card is known to have developed a low-cost solution for businesses to accept mobile payments. The acquisition will help eBay enable mobile payments for their PayPal account holders.

Earlier last month, eBay acquired Where, a mobile advertising provider that creates apps that provide listings, recommendations and offers for local businesses. Where was founded in 2004 and has access to 120,000 businesses and more than 50 million mobile phone users. eBay will integrate PayPal’s platform with Where to enable users to buy the deal directly through PayPal accounts. Market rumors peg the acquisition at $135 million. eBay will be looking to address the growing daily-deals market and address their mobile commerce expansion plans through the acquisition.

Earlier this year, eBay acquired stakes in GittiGidiyor and Peacesoft Solutions as part of their international expansion plans. GittiGidiyor is a Turkish online marketplace, which focuses on fashion and consumer electronics. It has a registered user base of 6.4 million. eBay increased its stake from 10% earlier to 93% in the company. As of last year, Turkey had an Internet population of 35 million users and recorded 45% penetration. The country is the world’s 12th-largest Internet market, and the acquisition will help eBay address this market.

Moving to Asia,  eBay purchased a 20% stake in Peacesoft Solutions, a Vietnamese online retailer, for an estimated $2 million. Peacesoft will manage eBay’s business in the country through a co-branded auction site The Vietnamese Ministry of Information and Communications estimates 31% Internet penetration in the country with nearly 27 million users. The ministry predicts e-commerce in the country to grow fivefold by 2015.

At $2.4 billion, GSI Commerce was eBay’s biggest acquisition this year, and the biggest since its $2.6 billion Skype acquisition. GSI Commerce is an ecommerce and interactive marketing services provider with over 180 customers including the Toys ‘R Us and Ralph Lauren. GSI Commerce owned 70% stake in Rue La La and ShopRunner, a members-only shopping service and had a licensed sports merchandise business. eBay has divested these businesses as it does not see them fitting into the company’s long-term strategy. eBay is expected to treat GSI as another business segment and leverage GSI’s expertise in fulfillment for third-party sellers to compete with players like Amazon, and it will be able to offer and PayPal/Bill Me Later to GSI’s customers. Last year, GSI Commerce had earned revenues of $1.36 billion with a loss of $36.5 million.

eBay’s stock is trading at $32.68 with a market capitalization of $42.41 billion. It touched a 52-week high of $35.35 in February of this year.

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