eBay's Revenue Diversification Increasing

Click to enlarge:

With last week's Q1 earnings release, one trend the continues at full steam is EBAY's increased level of revenue diversification. This is the natural effect of higher growth rates at Skype, PayPal and advertising-based non-GMV marketplaces. The result is that in just three years, EBAY's revenue from all sources other than Marketplace transactions has jumped from 27% to 42% of EBAY's total.

In 2008, even if we disregard potential acquisitions, the trend is likely to accelerate. Even though Marketplace transaction revenue is still growing at double-digits, PayPal, Skype, classifieds and advertising simply continue to grow much faster.

Disclosure: Long EBAY

Comments

[bck136:]

Positive as those results may have been, this is an obvious pump.

Surely, a user named "Only eBay" would be long eBay.

Take this article with a grain of salt, and don't forget the impact eBay's many negatives could have on their future performance before you go long with real money on this one.

2008 Apr 21 05:47 PM

[Network Effect:]

Finally, why has it taken people forever to realize this? Everyone has been focusing on the US Marketplaces business and that has not been the main revenue or profit driver for a while. It's already second behind International. Soon, it will be third behind PayPal, both of which are growing at a faster pace than the overall pie so growth will start to accelerate. And when Skype kicks in, watch out. This will probably take a couple years though, but soon Skype will pass US Marketplaces as well. US Marketplaces can't possibly compete with these three businesses because it is confined to US eCommerce. PayPal, Skype, and International all have a Global applicable market so they will all dwarf the impact that US Marketplace revenues has on eBay over the long run. HOWEVER, for some reason, the Street will continue to focus on this smaller and smaller portion of eBay's revenue stream because the stock is out of favor. However, at some point, the value players will like this stock because the P/E is going through the floor. And once growth starts to accelerate because PayPal and International are a more and more dominant piece of the pie, the momentum guys will get back on the train and the stock will go through $100. But who knows when this will happen. The street has had blinders on with this stock forever. They just don't like it so they choose to ignore these huge growth prospects inside the company and have stayed in the rut that they have been in with the US Marketplace focus. But at some point, it won't be possible to ignore it. The whole question is when will that happen. If you are a long term investor, I would load up. If you are a trader, proceed at your own peril. This stock has disappointed quarter after quarter, despite blow out numbers quarter after quarter.

2008 Apr 21 08:09 PM

[Dan Buchanon:]

The reason that this story goes unnoticed on Wall Street is because the analysts following this company are still spending their time counting listings on the site and ignoring eBay's overall revenue stream -- at the expense of their investors. It's like valuing Wells Fargo's business solely on the teller activity it gets at its retail banking location. I think management faces a huge challenge in getting the media and investors to focus their obsession with the US ebay.com business on all the other things it has put in to place over the last several quarters.

Revenue diversification is a good thing in a global economy such as this even if it means compression on margins because it means greater market share and stability across more currencies and markets. So, while the Street punishes the stock for its maturing US ebay.com business, the world is also punishing the Street for its own myopia.

If the world hasn't noticed yet, these "smart money" guys aren't so smart. They built a financial services sector on a house of cards and expect us to believe their investment recommendations. Ha!.

2008 Dec 28 01:17 PM