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EBay bets the house on mcommerce, PayPal

April 20, 2012

EBay first-quarter financial results beat analysts’ expectations in part because of the leadership role that the company has taken in mobile commerce, which is helping to drive healthy gains across its businesses as consumers increasingly embrace mobile to shop and pay for purchases.

As one of the early innovators in mobile commerce, eBay is reaping the benefits now that mobile commerce is taking off, with the company reporting that revenue for the first quarter ended March 31, 2012, increased 29 percent for a total of $3.3 billion. The company also said that PayPal’s net total payment volume grew 24 percent for a total of $34 billion and that there 12 million downloads of eBay Mobile apps in the first quarter, bringing total downloads to 78 million.

“EBay is one of the most innovative mobile players in the business,” said Mark Beccue, senior analyst at ABI Research, New York. “They have completely understood that there is a lot of benefit to them in enabling mobile commerce.

“When it comes to mobile online shopping, they are a world leader,” he said.

“EBay knows this is a fast-moving space and is willing to try and move on if it does not work. They have really been on top of it more than anyone.”

At the forefront
EBay expects to generate $8 billion in mobile volume transacted in 2012 on EBay and for PayPal to process $7 billion in mobile total payment volume.

While this is still a small percentage of the company’s overall volumes, it is growing and is likely going to continue to grow.

In a conference call with analysts to discuss the first quarter results, eBay pointed to two ways that mobile is transforming the retail space.

One way is with applications and other products that enable shoppers to close a transaction on a mobile device while the other is how consumers are using mobile devices as part of the shopping experience even if they do not close the transaction on a mobile device.

EBay insists it is at the forefront of both.

“Mobile is fundamentally changing the retail landscape and there’s no going back,” John Donahoe, CEO of EBay, San Jose, during the conference call with analysts. “It’s sort of stunning to see.”

Mr. Donahoe also pointed to EBay’s continued investment in mobile.

“We’re doubling down on our mobile investment and feel very good about the innovations that are happening and are finding a growing number of retailers and merchants who are coming to us saying, ‘Can you help us in this mobile world?’” he said.

A busy quarter
Some of the recent highlights in how eBay is innovating in mobile commerce include expanding PayPal’s payment services to offline merchants in the first quarter. As a result, merchants such as Home Depot enabling customers to pay for in-store purchases via PayPal by keying in their mobile phone number or using a PayPal payment card.

PayPal is also increasingly being used in mobile applications, with convenience store chain Cumberland Farms recently introducing an app called SmartPay that lets users pay for their gas with PayPal.

During the first, eBay introduced PayPal Here, which enables small businesses to accept credit or debit card payments, checks and PayPal using a smartphone.

Additionally, EBay continues to tap mobile to deliver innovative shopping experiences, such as the Watch With eBay iPad app which was introduced in March and offers up merchandise related to what a user is watching on TV.

“This is really advanced thinking – what can we leverage from these devices that can reduce friction and make experiences more rich,” ABI’s Mr. Beccue said.

“They were one of the first ones to come out with tablet optimized apps and a tablet optimized Web site,” he said.

A growing role
Some of the other mobile topics discussed by eBay in the conference call included the use of visual recognition and search to create a more engaging fashion experience and how eBay is innovating in the payments space without being dependent on near-field communications technology, which has been slow to get out of the starting gate.

EBay has also been innovative other areas, including experimenting with augmented reality.

“You don’t see the physical product with eBay because it is an online retailer,” Mr. Beccue said. “If users were able to see a 3D image of a product that might enhance the sale of that product.”

A big part of eBay’s current success is coming from international markets. On the mobile front this means that in countries where credit card penetration is lower than in the U.S., more consumers may be inclined to use PayPal to pay for purchases made via merchants who also accept credit cards.

“EBay has one of the best use cases for mobile commerce online, where you are anywhere with a smartphone and being able to rebid and close a sale from your phone,” Mr. Beccue said. “They were early jumping on it.

“The mobile payment part is a growing number but is less than 10 percent of sales right now,” he said. “Mobile is going to be an increasingly larger percentage for eBay.”

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