| Profit Climbs for eBay, but Auction Growth Is Slowing
SAN FRANCISCO — Even eBay, the online marketplace that built its reputation as a place for bargain hunters, is vulnerable to the slumping economy.
Gross merchandise volume, the total sum of all transactions on the eBay marketplace, grew only 8 percent from the year-ago quarter, the company reported Wednesday, a steep decline compared with the robust double-digit growth in previous quarters.
To Wall Street, that was more proof that consumers are staying away from eBay.com, at least for big-ticket items like used cars that are common on the site. Shares of eBay rose $1.21 to $28.10 in regular trading. After the market’s close, eBay released its financial results and shares fell to nearly $26 in after-hours trading.
“In an environment where consumers have become price-sensitive, eBay is at a disadvantage because their product mix tends toward more expensive items,” said John Aiken, an analyst at Majestic Research. “This is just another nail in the coffin that the eBay model has a buyer-side problem which has yet to be fixed.”
Despite the lower transaction volume, net income in the second quarter rose 20 percent to $568 million, or 43 cents a share, compared with the year-ago quarter. The company said revenue climbed to $2.2 billion, also up 20 percent from a year ago, fueled primarily by growth in advertising, global classifieds and the payment service PayPal.
EBay’s performance slightly exceeded the expectations of Wall Street analysts. They had anticipated earnings of 42 cents a share on revenue of $2.17 billion, according to a survey of analysts by Thomson Financial. EBay also modestly increased its earnings projections for the year.
“This was a strong quarter and we are very pleased with the performance of the portfolio, particularly with the growth generated by PayPal,” eBay’s chief executive, John Donahoe, said in a statement. “We remain confident in our strategies to improve the customer experience as we manage in an uncertain economic climate.”
EBay has been trying to shift away from its dependence on a stagnant auctions business and improve the overall buying experience.
Mr. Donahoe succeeded Meg Whitman as chief in March. Under his leadership, eBay has changed the fees charged to sellers, stressed fixed-price listings and invited established Web retailers like Buy.com to sell their merchandise on the site.
The changes have had some benefits. For example, the number of listings on the site grew 19 percent in the quarter, compared with the previous year. But some angry sellers have organized several boycotts and tried to disrupt eBay’s annual eCommerce Live event for top sellers in June.
“When you have 84 million active users, any time you make a change, someone is going to be upset,” Mr. Donahoe said in a call with analysts and investors. “But we listen and we incorporate their feedback with what we believe is best for the collective good of the marketplace.”
After it reported earnings, eBay also announced that Rajiv Dutta, the president of eBay’s global marketplace, was retiring from the company after 10 years. Mr. Dutta has run the eBay marketplace since the beginning of the year. At various times, he led PayPal, Skype and was eBay’s chief financial officer. Lorrie Norrington, president of eBay’s marketplace, will replace him.
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