Don't look now, but investors have been quietly bidding up the price of eBay (EBAY).

Back in 2004, the online auction site was a cultural phenomenon and a profit machine. eBay's stock price rose above $59 a share that December, before some ill-conceived decisions, among them its expensive purchase of video chat/Internet phone service Skype, sent the company tumbling.

Since last summer, however, eBay has staged a gradual comeback, rising 68% from a low point around $19 in early July to $32.29 as of Tuesday's close.

Those gains are even more striking when compared to the performance of its peers. Since going public in 2007, MercadoLibre (MELI) -- often called the eBay of Latin America -- has seen its stock price more than double. That's not surprising, since MercadoLibre is a small, fast-growing company, while eBay began to drift around then. But their roles have reversed in recent months.

Over the last six months, eBay is up 40% and MercadoLibre is up 1%. And so far in 2011, eBay is blowing away even mighty Amazon (AMZN), rising 16%, while Amazon is down 6%.

Less Than a Third of eBay Sales Are Auctions


What's behind this slow but steady rally? For one thing, eBay seems finally to be reaping the fruits of its long and painful transformation from an auction website to a retail and e-payments company that thrives on mobile platforms and local commerce.

The metamorphosis angered many longtime sellers, driving them to take their business to rival sites such as Amazon. And a series of redesigns aimed at weaning eBay's business model off auctions, which had a limited and fading appeal, ended up confusing many consumers, making the site an afterthought for many online shoppers. Auctions now account for less than a third of the goods sold on eBay.

eBay is still a far cry from the e-commerce trendsetter it was nearly a decade ago. Its marketplace business rose 8% in 2010 following a 5% decline in 2009. But globally, online retailing grew more than 10%. However, by improving the site's search, pushing mobile sales and cracking down on sellers with low ratings from shoppers, eBay is slowly wooing those lost customers back.

In fact, the website that most people think of when they think of eBay will play a smaller and smaller role in the company's future growth. During its recent analysts' day, eBay Chief Financial Officer Bob Swan said he expects eBay revenue to grow as much as 18% a year to $15 billion in 2013, while profits will grow as much as 14% a year.

But Swan also said the "original" eBay site will see much slower growth -- only around 6% a year. Other e-commerce properties that the company bought or built -- such as eBay Classifieds and Stubhub -- will see growth rates of around 14%.

The Power of PayPal


But the biggest reason for eBay's recent gains is PayPal. Revenue from the online-payment service rose 23% last year to $3.4 billion. eBay bought PayPal in 2002 for $1.5 billion, hoping to give buyers an easy, acceptable alternative to using their credit cards at its auction site. Now, that payments business is the parent company's growth engine. Swan expects PayPal revenue will keep growing by around 23% a year through 2013, while its share of the global online payments market approaches 24%, up from 18% last year.

Much of PayPal's growth potential lies in the mobile arena. PayPal payment technology has been embedded so far by 60,000 developers in 1,500 mobile apps.

PayPal now provides 38% of eBay's total revenue, up from only 28% just two years ago. Analysts expect PayPal to become the company's biggest source of revenue in a few years. Once that happens, one wonders: How long before eBay changes its name to PayPal?


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Gordo Peterson

When ebay lost their 5 star CEO, Meg Whitman in 2008, ebay went in the toilet and the flush cycle continues. Customer Service, Format Change, Rating and Selling policies changed to favor ebay, bad sellers and radical buyers.
I know that within the next year, two other companies will come in to play and one is courting Meg for their Board of directors. I am focusing more towards Amazon currently and will "flush" my ebay account as soon as possible!

August 27 2012 at 11:51 PM Report abuse rate up rate down Reply
Gordo Peterson

When ebay lost their 5 star CEO, Meg Whitman in 2008, ebay went in the toilet and the flush cycle continues. Customer Service, Format Change, Rating and Selling policies changed to favor ebay, bad sellers and radical buyers.
I know that within the next year, two other companies will come in to play and one is courting Meg for their Board of directors. I am focusing more towards Amazon currently and will "flush" my ebay account as soon as possible!
ebay is like Obama, the more they talk and implement bad policy, the more the consumers take it in the back side...

August 27 2012 at 11:51 PM Report abuse rate up rate down Reply
Kane

Ebay is on e big scammers breeding ground. I sold a Tiffany set necklace and bracelet for 255.00. Buyer made a chargeback claiming first claim she didn't authorize her credit card for use. It was found in my favovr, then she ckaimed she didnt' receive it, i submitted tracking. 5 months later she claims item not as described in paypal, I sent all correspondence between us with feedback claiming she loved it. She sent me back a fake plastic and rusty set and Paypal gave her a refund send my account $288.00 negative. I'm done. I have 100% feedback no prior history. I have been scammed by ebay / paypal

August 22 2012 at 3:37 PM Report abuse rate up rate down Reply
suejoekaren

EBAY IS SLOWLY DRIVING AWAY SELLERS AND SELLERS ARE CUSTOMERS, ALSO THERE NOW CHARGING SELLERS A % $$$ FEE OF THE SHIPPING CHARGES STARTING THIS JULY , IT NEVER ENDS THE GREED,THE PRICES ARE DOWN,EBAY FORGETS THE PAST.WOOLWORTHS AND OTHERS WHERE THE FIRST SUCCESSES IN RETAIL BUT FADED TO THE PAST WHEN OTHERS DONE IT BETTER,SO WILL EBAY FADE, PEOPLE CANT WAIT TO FIND ANOTHER WAY TO SELL AND GET AWAY FROM THESE GREEDY PEOPLE.THE TIME IS NOW TO SAY GOOD BUY TO EBAY, EBAY YOU DIDNT LISTEN TO THE COMPLAINTS NOW EVERYONE IS LEAVING YOUR SITE.

August 02 2011 at 12:07 AM Report abuse +1 rate up rate down Reply
ukelaine

I miss the old Ebay, the thrill of the auctions, both as a Buyer and Seller. Yes, there are still there, but, far less than there used to be.
It was THAT concept that made Ebay, now, there may be some thrill to the hunt for that treasure you've been seeking, but, now all it takes is a press of a button and it's yours, that extra thrill of a potential "other" bidder coming along has mainly gone.
So many rules have changed, mainly for Sellers, that many of the Original Sellers have long gone. To be taken over by mass Buy It Now Sellers, so many duplicated items that you get fed up looking.
Many more sellers from China, many listing items that once would never have been seen on Ebay, has taken away more of the thrill of searching Ebay.
The only reason there are less auctions is that fees for many sellers are the highest by using that form of listing.
IF all auctions were as cheap as listing Buy It Now items then you would see a dramatic shift, but, sadly that will probably never happen.

March 03 2011 at 2:59 PM Report abuse +1 rate up rate down Reply
lsstuff

E bay is losing customers because of its own policies - the customer service is terrible and there is no accountability - if they treat a seller or buyer like garbage ther e is no lader to go up to speak to someone after an incredibly long wait time for customer service - they can lie to its sellers saying they are going to do something then dont do it or cant do it - the fees are outrageous then throw in that they only want you to use there company pay pal to pay for things only increases your fees

You cant go to the corp site as you can not ever find a lader to climb if there is a problem..

The only place we pay for people to treat us like crap

Find another auction site that appreciate ya

Ls

March 03 2011 at 1:56 PM Report abuse +1 rate up rate down Reply
RMS

In this down economy, more and more people are selling off collectibles and other posessions on E Bay just to pay their bills, and E Bay is profiting off of this, as is PayPal.

March 03 2011 at 1:36 PM Report abuse +1 rate up rate down Reply
1 reply to RMS's comment
Gordo Peterson

When ebay lost their 5 star CEO, Meg Whitman in 2008, ebay went in the toilet and the flush cycle continues. Customer Service, Format Change, Rating and Selling policies changed to favor ebay, bad sellers and radical buyers.
I know that within the next year, two other companies will come in to play and one is courting Meg for their Board of directors. I am focusing more towards Amazon currently and will "flush" my ebay account as soon as possible!

August 27 2012 at 11:52 PM Report abuse rate up rate down Reply
jeff

Ebay has customer service that is so pathetic it is unbelievable for a company this large. They use under-trained people from India, the Phillipines and other out-sourced countries who cannot speak English well and seem to have lower than normal IQs. Most are rude and get impatient very quickly. The "customer service agents" have to be told something over and over for them to finally understand. Often, the ebay seller knows more about it than the customer support agent does. Ebay has become a total waste of time for sellers. Ebay has forced Paypal down the seller's throats as the only way they can be paid (costs fees for sellers which all go in ebay's pockets). They even tell the sellers how much they can charge for shipping (even if the seller will lose money on shipping), there are limits on how much a seller can charge to ship an item. Ebay is always hyping up that sellers should offer "free shipping". That's because ebay makes nothing on shipping costs. Ebay is a ruthlessly greedy company that is only out for itself. In the several years I've been following it I have seen it go downhill steadily. I believe it will end up being a flash in the pan on the ash heap of history in a few years. People will talk about ebay and the other person will say "who?" It will be forgotten.

March 03 2011 at 1:02 PM Report abuse +2 rate up rate down Reply
2 replies to jeff's comment
ysm725

Why is it that when you are asked to press #1 for English, you still can't understand the person on the other side.

March 03 2011 at 1:41 PM Report abuse rate up rate down Reply
lsstuff

TOTALLY AGGREE JEFF!! Hate E bay cust service and ya cant get people from USA

March 03 2011 at 1:57 PM Report abuse rate up rate down Reply
Jerry

I used Ebay for years, it use to be a fun site to buy nice things but it is just a dumping ground for these so called stores now. I refuse to give them my banking account number. Paypal is one big rip off. I don't even go to that site anymore.

March 03 2011 at 11:36 AM Report abuse +1 rate up rate down Reply
gregstew25

I love how the article says that e-bay purchased paypal to give buyers an easy, acceptable alternative to using credit cards. What a bunch of crap. It was purchased so e-bay could get rid of all other forms of payment a seller could accept. Not all buyers were happy about not being able to use money orders, cashiers checks. Paypal was just another way to make money and take money out of the pockets of the sellers on e-bay.

March 03 2011 at 11:29 AM Report abuse +4 rate up rate down Reply