EBay’s Investment in the Customer Experience Starts Paying Off

Rob is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

Last week EBay (NASDAQ: EBAY) announced the 7th straight quarter of 15% year over year revenue growth. This was fueled by 23% growth in their PayPal division as well as 9% growth in the Marketplace division.  Though PayPal is clearly the driving force for eBay, CEO John Donahoe attributed mobile as a game changer for the company.

Turning Around the Marketplace

The Marketplace may have looked like one of the weak spots in eBay’s third quarter results, with just 9% revenue growth, but the Marketplace shows many signs of turning a corner. eBay reported accelerating user growth of 3% from last quarter and 10% growth from last year. Transactions also grew 19% year over year, even though gross merchandise value (excluding vehicles) grew by 11%. All of these trends point to more eBay users buying more items per user, albeit less expensive items.

eBay is turning around the Marketplace through investments in the user experience. This has been enhanced on both the buyer and user side through development of mobile apps. These apps are available across all major mobile platforms, and have been downloaded over 100 million times. eBay’s mobile app usage is also accelerating; as of July 1.9 million items were listed every week, an increase from just 1.1 million per week last December. 

eBay released an update to their iPad app in May, focused on enhancing the user experience.  One of the enhancements was aimed at making listing items quicker; now it takes less than a minute to list an item in the Marketplace. Its no wonder eBay announced that over 100 million items have been listed through their mobile apps. Enhancements were also made on the seller side, including advanced search results so users can find what they are looking for more easily.

PayPal Grows and Moves Offline

PayPal’s user growth has also continued, adding 4.2 million users, an increase of 14% over last year. Similar to Marketplace users, PayPal users are more engaged than last year. PayPal launched an updated mobile app in March and a new website in June, both focused on simplifying the user experience. These enhancements have already started to pay off; in the past quarter PayPal processed 28% more transactions than the previous year’s quarter, outpacing user growth as the average user made 5 payments this year compared to 4.4 payment last year.

PayPal has plans to drive growth offline through three main areas. First, PayPal plans to expand offline payments through major retailers. PayPal’s first retail partner, Home Depot, increased the number of its PayPal checkout stations from just 5 stores in January to 2,000 stores by March. PayPal has since launched at 10 major retail partners, with plans to have 20 retailers by the end of the year. Secondly, PayPal is focusing on expanding their small business solution PayPal Here, which allows users to accept credit cards with a free card reader for iPhone and Android phones. Finally, PayPal and Discover have partnered to allow Discover’s 7 million merchants to accept PayPal payments. 

 Investing in the Experience

CEO John Donahue has focused on delivering great platforms for users and simplifying the transaction process across all of his company's divisions. These enhancements seem far from over, as eBay is spending 10.4% of revenue on product development, an increase from 9.9% last year. eBay is poised to continue double-digit growth, as they grow their user base and find new ways to leverage said users. Donahue said in an interview, “I think we are a stronger company, more innovative and more customer-focused and getting better every day.” With a CEO focused on the consumer experience, eBay is a great investment for the long run.  



AllPrologue owns shares of eBay. The Motley Fool has no positions in the stocks mentioned above. Motley Fool newsletter services recommend eBay. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.

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