eBay Bids Adieu to PayPal

Last week, eBay (Nasdaq: EBAY) announced their last quarterly results with PayPal by their side. Today PayPal began trading independent of eBay, leaving eBay to compete with the likes of Amazon who are posting a stiff competition. Last year, the global e-commerce market grew 22% over the year. eBay announced a comparatively modest 6.4% growth while Amazon reported a stellar 19% growth.

eBay’s Financials

eBay’s second quarter revenues grew to $4.64 billion, ahead of the market’s projections of $4.48 billion. EPS grew 9% to $0.76, also ahead of the Street’s estimated $0.72 for the quarter.

By segment, PayPal’s revenues grew 19% to $2.3 billion. Marketplace revenues were down 3% over the year to $2.1 billion. Marketplace revenues were hurt by foreign currency fluctuations, excluding which, they would have grown 5% over the year.

For the quarter, PayPal’s net total payment volume improved 20% to $66 billion, with Merchant Services volume growing 27% and on-eBay volume reporting a decline of 1%. PayPal grew new active accounts 11% to 169 million and they processed 1.1 billion transactions during the quarter. In other metrics, transactions per active account improved to 24 per year, compared with 21 a year ago, and monetization per active account grew to $50 per year.

Today was a big day for PayPal which began trading independent of eBay. Traditionally, they have been the stronger arm of eBay and have delivered strong results consistently. But now, they will have to deal with the limelight on their own. The online payment market is getting crowded with biggies like Google Wallet and Apple Play in the foray. To get a bigger share, PayPal recently entered into the global remittance market with the $890 million acquisition of Xoom Corporation.

Meanwhile, eBay Marketplaces GMV fell 2% over the year due to exchange impact. In the US, GMV increased 2% while International GMV grew 8% on a constant currency basis and fell 5% on the basis of currency adjustments.

eBay expects its current year revenues to grow 3%-5% over the year and they are projecting to end the year with an EPS of $1.72-$1.77.

eBay’s Marketplace Focus

During the quarter, eBay sold their Enterprise segment to private equity companies for $925 million. The price involves a write off of $786 million for eBay. The Enterprise segment reported revenues of $300 million for the quarter. eBay had set up this business with the acquisition of GSI Commerce in 2011 for $2.4 billion. The segment had helped eBay develop e-commerce platforms for other brick and mortar stores. Of late, their business was in the news because their biggest client Toys-R-Us announced plans to bring their e-commerce operations in house by 2015. Post the sale, eBay will be able to increase their focus on the marketplace segment.

eBay’s marketplace offering is still recovering from the change in Google’s algorithm and the data breach last year which made them ask their users to change passwords. Since then, eBay has been focused on improving their marketplace offerings to help improve customer engagement.

As part of their SEO efforts, they are asking their sellers to include detailed product identifiers on product listings. The move appears to be helping search results. They are also using the social media to attract more traffic. They had already initiated eBay ads on Facebook and Pinterest and are now increasing focus on other networks including Tumblr, Instagram, Snapchat, and Twitter’s Periscope. eBay hopes these moves will help them compete better with Amazon.

They are also developing a better mobile experience and will be launching new apps during this year that will be based on their experience from the iPad app. The mobile apps are expected to improve customer engagement by focusing on discovery-based experience, simplifying the customer transaction, and providing for a consistent view across all platforms.

eBay’s stock is trading at $29.29 with a market capitalization of $35.6 billion. PayPal, meanwhile is trading strong at $40.99 with a market capitalization of $50 billion.