eBay Pulls Itself Out of the Dumps, the Old-Fashioned Way
Amanda is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Internet giant eBay (NASDAQ: EBAY) lost a bit of its stature in recent years as its used-merchandise auction format lost some of its allure with consumers. Recently, however, the company's efforts to reinvent itself are showing results: this year's third-quarter profit rebounded from a disappointing second quarter, and Q4 looks strong, as well. Predictions of a lackluster holiday season for the company haven't materialized, with its Paypal unit racking up mobile payments at an impressive pace.
Year-over-year revenue declines finally look to be a thing of the past, for the first time in five years. This is undoubtedly due in large part to chief executive John Donhoe's three-year improvement plan, put in place back in 2009. Recognizing that customers were defecting to sites like Amazon (NASDAQ: AMZN) in a quest for new--rather than used--merchandise, eBay's Marketplace was shaken up with a new look and vendors were given the green light to sell new products directly to consumers. The site is also beginning to offer sellers more shipping and payment methods, expanding its foray into e-commerce. In a not-so-subtle swipe at Amazon earlier this month, eBay partnered with three retailers in a short-term promotion to reward their online shoppers with coupons redeemable at their offline locations.
As always, Paypal is eBay's best asset and it is in this division that the company's efforts are really paying off. With consumers' increasing use of mobile phones and tablets for shopping, eBay has recently revealed plans to offer customers daily deals, in yet another challenge to Groupon (NASDAQ: GRPN), based upon their location and shopping habits. Paypal's iPad and Android shopping apps have been well received and, like Google's (NASDAQ: GOOG) Google Wallet app, now uses near-field communication technology. Paypal is also expanding its payment services offline, issuing customers an actual credit card to use at brick-and-mortar stores.
It's always heartwarming to see hard work pay off, but investors think with their heads, not with their hearts. Those looking for a long-term investment know that a company's revival as a result of earnest effort means much more than one due to unkown factors or a stock market blip. A close look at eBay's profile shows a strong foundation; the malaise of the last few years was due almost entirely to an outdated format and business model. Analysts have noted that eBay has spent time and money to modernize its business, and the investment is definitely paying off, with the upward earnings trend signaling increased profits and growth potential well into the new year. It's looking like a happy new year indeed for eBay. Why not join in the good cheer?
Fool blogger Amanda Alix does not own shares in any of the companies mentioned in this article.