PayPal Continues to Drive Growth for eBay; Mobile Payments to Explode in 2012

eBay (NASDAQ:EBAY) reported its earnings for Q1 2012 this week. ^[1] It was a great quarter with revenue increasing to $3.3 billion, up 29% year-over-year and net profit increasing to $570 million, up 20% year-over-year. eBay’s growth this quarter was driven primarily by PayPal as its payments business saw net revenue grow by nearly a third of its value. Revenue growth for Marketplaces, its core -e-commerce business was around 11%. eBay competes primarily with Google (NASDAQ:GOOG), Square, Intuit GoPayment and other competitors in the payments space, and Amazon (NASDAQ:AMZN) in e-commerce.

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PayPal: eBay’s growth engine

PayPal saw its total payment volume increase 24% to $34 billion, driven primarily by increased penetration on eBay and merchant and consumer adoption. Its registered user base grew to 109.8 million. We expect the total number of accounts to reach nearly 121 million by the end of 2012.

eBay announced its focus on the mobile payments space and international markets to drive PayPal’s growth. It expects to do nearly $7 billion in total mobile payment volume in 2012. eBay also launched PayPal Here in the U.S., Australia, Canada and Hong Kong, which could further drive payment volumes through point-of-sales terminals at merchants and small businesses.

Marketplaces

Though Marketplaces still contribute to a majority of eBay’s total revenue, they have been shadowed by PayPal’s blinding pace of growth. eBay’s total gross merchandize volume including vehicles increased to more than$18 billion, growing around 10% year-over-year. eBay has seen transaction volumes from international markets thanks to improved performance in Europe and Korea. Its mobile apps have also been instrumental in driving sales on the platform. eBay expects to generate $8 billion in mobile transaction volume in 2012.

We expect eBay to continue to see a steady growth in the merchandize sold on its Marketplaces.

PayPal accounts around 36%, while Marketplaces account for around 52% of eBay’s overall value. We are in the process of updating our estimates which are currently slightly ahead of the market.

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1. Revenue and Net Income up Double Digits Year Over Year as PayPal and Marketplaces Momentum Continues, SEC [↩]