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Fri, Jul 20, 2007 - Page 10 News List

EBay struggles for new customers


Meg Whitman, chief executive of eBay, has repeatedly vowed to improve usability of the auction site by redesigning its home page, being more aggressive in combating fraud and improving the usefulness of search engine results.

But while profit was up 50 percent and revenue growth was strong in its second quarter, the company revealed in its most recent financial report on Wednesday that it is still struggling to draw more customers. The number of listings on eBay fell 6 percent from last year, and the number of active users is stagnant at 83.3 million, the same as last quarter.

Whitman said her efforts to improve the user's experience should address these problems.

"In the next six months," she said, "you will see more changes to eBay than you have in the last two or three years, whether that is an improved search experience or fun things that make the site better, like Bid Assistant, which allows you to bid on more than one item without worrying that you will end up buying five iPods by mistake."

Overall, it was a strong quarter because the total value of sales on the site was up 12 percent from last year, to US$14.46 billion, and it was getting more revenue from ads on its core marketplace site.

It reported that net income grew 50 percent, to US$376 million, or US$0.27 a share, from the period a year ago. Sales rose 30 percent, to US$1.83 billion.

Whitman said "this was one of our best quarters in the last several."

The earnings beat Wall Street estimates, and eBay slightly raised its outlook for the year, saying it expects sales of US$7.3 billion to US$7.45 billion, up from a previous projection of US$7.2 billion to US$7.45 billion.

It also said that earnings per diluted share were expected to be in the range of US$1.34 to US$1.38 for the year, up from US$1.30 to US$1.34.

Investors greeted the news, announced after markets closed, with less enthusiasm. In after-hours trading on Wednesday, the stock closed at US$33.42, down 1.9 percent. In regular trading, shares closed at US$34.05, down US$0.20.

"Remember, the stock had increased 10 percent or so going into the quarter," said Aaron Kessler, a senior research analyst at Piper Jaffray. "The last couple of weeks people had increased their expectations, so these results just confirmed that."

The company's efforts to improve usability appear to have yielded some early fruit.

In eBay's core marketplace, revenue totaled US$1.29 billion, which represented a growth rate of 26 percent over the second quarter of last year.

Revenue from the PayPal unit, which faces competition from Checkout, a service from Google, grew 24 percent, to US$454 million. In the last month, two airlines, Northwest and Southwest, have said they will accept payments via PayPal on their Web sites.

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