Paypal proves a huge boost to eBay profits

This translated into an operating profit of $155.9m, up 73 per cent year on year. This means that eBay are currently working on a margin of almost 30 per cent operating profit, with net profits at $103.3m or 19.5 per cent of turnover.

The success of the Internet platform has continued to grow in part thanks to the acquisition of Paypal, the online payment system. The company accounts register transaction payment revenues for the third quarter of 2002 – before the Paypal acquisition – as $6.1m. With Paypal added, the third quarter for 2003 registered a figure of $106.4m, an increase of 1645 per cent.

The geographical and category spreads within the results also show interesting developments.

US transactions, which have risen 41 per cent on the same quarter last year, continue to dominate at $256.1m, accounting for three fifths of all sales. The rest of the international market, though smaller, has risen by a higher margin, up 105 per cent year on year from $75.3m to $154.7m.

Across the categories, collectables, which incorporates antiques, accounted for $1.1bn of the $18.4bn in sales registered by the top nine categories on eBay, all of which register sales over $1bn. For the same period last year, only five categories registered over $1bn, and they did not include collectables.

Standing out against this raft of huge increases is a significant fall in third party advertising revenues, which, as a whole, have dropped 20 per cent year on year, from $15m to $12.1m.

As a company spokesman explained, third party advertising on the Internet, in the US at least, has been soft for several years and in eBay terms the sums involved are a very small fraction of turnover.

“Advertising has always been icing on the cake, not the cake itself. In fact, because we strictly control the amount of space available for third-party advertising, and the types of companies that can advertise there, the maximum inventory of ad space on eBay was never very large.”

Nevertheless, the year-on-year fall is significant in volume terms and seems to indicate a change in attitude by those who do advertise.

As far as users of the site are concerned, those confirmed as registered totalled 85.5m (including 3.2m added with the acquisition of EachNet in July), up 56 per cent from the 54.9m registered at the end of the third quarter last year. Within this figure, the number of active users – those who have bought, bid for or listed items in the past 12 months – has climbed from 24.2m for the period in 2002 to 37.4m for the third quarter of 2003, a rise of 55 per cent.

The strong overall performance of the company has led them to revise their outlook for the coming period and for 2004. Full turnover for 2003 is now expected to rise from $2.08bn to $2.1bn thanks to Paypal’s ongoing performance, with a fourth quarter target of $590m. In 2004, the annual turnover is expected to rise to $2.9bn.
eBay’s unaudited accounts showed the company assets as standing at $5.5bn at the end of the third quarter of 2003, compared to just over $4.1bn at the end of the same period in 2002.