Stronger Mobile Strategy Scoring For eBay

According to comScore, e-commerce spending excluding travel grew 12% over the year in the first quarter to $38 billion. Growth continued this quarter, e-commerce spending for May coming in at $12.3 billion, recording growth of 12% over the year. E-commerce player eBay’s quarterly results reflect the industry’s sentiment.

eBay’s Financials
eBay’s (NASDAQ:EBAY) Q2 revenues grew 25% to $2.76 billion, ahead of the Street’s expectations of $2.61 billion. PayPal continued to be the growth driver as the number of registered users increased 15% to more than 100 million. Net total payment volume for the site grew 34% over the year. Revenue from PayPal grew 31% over the year to $1.07 billion, and it now accounts for 39% of eBay’s revenue. Marketplace revenue grew 19% over the year to $1.66 billion. Gross merchandise volume grew 17% over the year to $14.7 billion. EPS for the quarter of $0.48 was ahead of the market’s expectations of $0.46.

For the current quarter, eBay projects revenue of $2.85 billion to $2.95 billion with EPS of $0.46-$0.47. The market was expecting revenues of $2.71 billion with EPS of $0.48. eBay projected revenue for the year to be $11.3 billion-$11.6 billion with EPS of $1.97-$2.00, compared with the Street’s target of EPS of $1.97 on revenues of $10.94 billion.

eBay’s Mobile Focus
eBay is focusing on growth through the mobile segment. They expect PayPal’s payment volume from mobile phones to grow to more than $3 billion this year compared with $0.75 billion reported last year. PayPal is already seeing mobile transaction volumes of up to $10 billion a day.

To strengthen their presence in the mobile space, eBay recently acquired mobile payment platform services provider, Zong, for $240 million. Zong’s services allow users to charge online purchases to their wireless carrier bills and the company has a customer list that includes social gaming and virtual worlds companies like Zynga. Zong also has significant international reach with access to more than 250 mobile network operators reaching 3.2 billion users in 21 languages, across 45 countries. Zong’s acquisition will help PayPal with their mobile and international growth strategy and give them inroads into the virtual goods market.

eBay Improves Core Business
eBay has been working at improving the user experience on their website and recently added much-needed features such as removal of duplicate item listings and adding products that can be bought locally to user search results. They are also developing an eBay Shopping Cart. This will be a digital shopping cart that will work with many online retailers and will let customers purchase several items in an online cart and buy them through a single payment.

Additionally, they are leveraging the GSI acquisition to provide fulfillment services to sellers. Through the acquisition, eBay has retained seven of the nine fulfillment centers GSI had in the United States, Canada and the U.K. eBay hopes to lure large sellers to eBay through their fulfillment services. According to their estimates, the large seller segment opportunity is worth $160 billion, compared to the SMB seller opportunity of $36 billion. The service is expected to begin later this year.

eBay’s stock is trading at $34.25 with a market capitalization of $43.87 billion. It touched a 52-week high of $35.35 in February of this year.