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Fri, Jul 24, 2009 - Page 10 News List

eBay envisions dominance with PayPal

GROWTH ENGINE: EBay chief executive John Donahoe wants to open up PayPal to third-party developers in an attempt to duplicate the success Apple’s iPhone has had


EBay made its name as the biggest shopping site on the Web. But now, as its e-commerce business slows, it hopes to become the biggest online payments provider on the Web through its PayPal service.

If John Donahoe, eBay’s chief executive, has his way, PayPal will soon become the way that people pay for everything they buy on the Web or on their mobile phones. EBay was scheduled yesterday to announce its plans to open the PayPal platform to developers who want to build applications that use PayPal’s technology.

EBay’s payments business, which consists of PayPal and Bill Me Later, has become the company’s growth engine as e-commerce sales decline.

On Wednesday, eBay reported net income in the second ­quarter, ended June 30, fell 29 percent to US$327 million, or US$0.25 a share, from US$460 million, or US$0.35 a share, in the same period a year ago. Revenue fell 4 percent, to US$2.1 billion from US$2.2 billion.

But eBay’s online payments business posted US$669 million in revenue, an 11 percent jump.

In an interview, Donahoe said that opening up the PayPal platform could transform the online payments marketplace.

“No other global payments platform, online or offline, has been able to open up to third-party developers. And the effect on PayPal will be very comparable to the effect on the iPhone — we’ll see the exponential innovation and growth that comes with it as you release the creativity of those developers,” he said.

For example, Research in Motion, which has been testing the new offering during a pilot period, is using PayPal technology to collect payments from BlackBerry users who buy applications in its app store. And Twitpay, a start-up, uses PayPal’s technology to run its service that allows people to send money using Twitter.

Meanwhile, eBay’s traditional marketplace division continues to struggle. Shoppers have reduced spending during the recession, and eBay has been hurt as other e-commerce sites, notably Amazon, take market share. Revenue from the marketplaces segment, which includes the main eBay site and sites like Shopping.com, fell 14 percent, to US$1.26 billion from US$1.46 billion a year ago.

Still, analysts said there were signs that eBay’s marketplace business was stabilizing. The 10 percent decline in gross merchandise volume was an improvement from the 20 percent drop last quarter, and the number of items sold on eBay actually increased 3 percent.

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