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eBay revenue shrivel hits nine month mark

Shrinking bread and butter

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eBay's bread-and-butter marketplace business is still shriveling.

During the quarter ending June 30, the company pulled in revenues of $2.1bn, a 5 per cent decline from the quarter last year, and as usual, the culprit was the marketplace unit, where revenues dropped 14 per cent year-on-year.

At the end of 2008, for the first time in its history, eBay stomached a year-over-year decline in quarterly revenue. And now it has happened three quarters in a row.

Gross merchandise volume - a measure of all transactions on eBay.com - dipped 10 percent to $11.13bn.

But during a conference call with industry analysts and reporters, CEO John Donahue called the company's latest quarter "solid," saying "we're moving in the right direction, a strong company getting stronger."

Certainly, revenues continue to grow for the company's PayPal-centered payments unit and its lame-duck Skype unit. The payments unit chipped in $669.3m in revenues, an 11 per cent increase, while communications contributed $170m, a 25 per cent leap.

And though overall profits dipped to $327.3m, a 29 per cent drop from last year, the company managed to beat the guesses of those Wall Street guessmen if you exclude certain one-time charges and stock option expenses. eBay shares were up 2.75 per cent in after-hours trading.

Naturally, Donahue blamed some of those marketplace struggles on a weak economy and a strong dollar. And he assured investors that the company is still on track to meet his three-year growth plan.

Though eBay is attempting to spin-off Skype, Donahue and crew have said that by 2011 its marketplace unit - which includes eBay.com, Shopping.com, StubHub, Kijiji, and other e-commerce sites - will account for only 30 to 40 per cent of the company's entire business.

Today, the company did say that its marketplace biz is "stabilizing." Its year-over-year decline did at least slow down during the second quarter, and its classifieds unit continues to grow, with revenues expanding 19 per cent.

But clearly, as it continues to turn its back on mom and pop sellers, eBay is moving away from classic auction fare. During the quarter, the number of fixed-price items rose 19 per cent, while auction numbers continued to decline (if less than in Q1).

Much of eBay's future lies with PayPal. Tomorrow, the company will officially open the platform to third-party developers, hoping to "fuel payments innovation beyond ecommerce." A sensible move. As Amazon will surely show with its second-quarter earnings, it's more than just the economy that's eating away at the eBay marketplace. ®

The smart choice: opportunity from uncertainty

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