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eBay endures revenue shrinkage deja vu

But all will be fine in 2011

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At the end of 2008, for the first time in its history, eBay stomached a year-over-year decline in quarterly revenue. And at the beginning of 2009, it happened again.

For three months ending March 31, the online tat house pulled in revenues of $2.02bn, an eight per cent dip from the first quarter of 2008, while profits topped out at $357m, a 22 per cent shrinkage from Q1 2008.

Chief executive John Donahoe played the party line. "We delivered solid Q1 results, exceeding expectations in a tough economy," he told analysts and reporters during the company's requisite quarterly earnings call. "Overall, we're a strong company operating in a challenging economic environment."

Last month, Donahoe told the world his waning outfit would refocus efforts on its online marketplace and payment units. And one of those units is in the tank. The marketplace business - which consists of eBay, Shopping.com, StubHub, Kijiji, and other e-commerce sites - pulled in revenues of $1.22bn during the first quarter, a 18 per cent drop.

Gross merchandising volume - or GMV, the sum of all auctions closed on eBay during the quarter and prime indicator of tat house health - shrunk 16 per cent. That's three quarters of shrinkage on the hop. The primary culprit is the company's core auction biz, which accounts for roughly half of GMV, according to Donahoe. Online classifieds revenue from sites like Kijiji actually increased, jumping 23 per cent.

Though Donahoe put the blame squarely on the worldwide economy and a strengthening US dollar, he admitted that in 2009, his marketplace unit would continue to grow at a slower rate than the net's overall e-commerce biz. But he insisted that by 2011, as the company expands its classifieds and secondhand ticket businesses (read: StubHub), growth rates will exceed those of the net as a whole.

By 2011, he said, the company's auction biz will account for only 30 to 40 per cent of the all-important GMV. But auctions are still very much on Donahoe 2011-obsessed brain. Last week, eBay said it would pay $1.2bn for South Korea's leading online auction house, Gmarket.

eBay's payments unit, anchored PayPal, is a different story. The company's online payment boondoggle raked in $643m in revenue, a 11 per cent leap. Net total payment volume, or TPV, was $15.86bn, a 10 per cent from last year, thanks in part to the recent acquisition of instant-credit outfit Bill Me Later.

Donahoe insists he will double PayPal's business over the next three years.

eBay's communications unit - aka Skype - pulled in revenues of $153.2m, a 21 per cent increase, as the VoIP service added another 37.9 million users. But the company will soon part ways with Skype, after belatedly realizing its not a comms company. eBay claims it will spin Skype off with an IPO sometime in 2010, five years after paying $2.6bn for the Luxembourg-based outfit. ®

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