World Cup puts boot into eBay

By THIS IS MONEY
Updated:

 

THE World Cup was bad news for online auctioneer eBay, which saw traffic to its site fall every time a football game started.

'The first ball [that] was kicked, site activity declined. It stayed low through the whole game and then popped right back up again, and we saw this time after time again,' chief executive Meg Whitman said.

'I wouldn't say it was a huge factor in our second-quarter results, but it was just remarkable.' she said, adding: 'When the World Cup game started, you could actually see the site activity decline pretty dramatically.'

The plunges in auction activity were felt most prominently in Germany, which is eBay's second-largest market and which played host to the competition, but it was also felt across Europe and Asia.

The California-based company reported second-quarter revenue rose 30% to $1.41bn (£738m) but net profit fell from $291.6m to $250m. The number of registered users on eBay grew to 203m at the end of June, up 10m from three months earlier.

Executives said eBay was introducing its first-ever buyback of up to $2bn of stock over the next two years, even as they spelled out plans to increase the volume of sales in its core auction business by raising prices of some listings.

'E-commerce is slowing down a bit. I think that with the changes we are making we can actually do better,' said Whitman.

Revenue from its online payments service PayPal grew 39% to $339m. Skype revenue totaled $44m and eBay reaffirmed that it expected $200m from Skype in 2006.

EBay has been hit by changing dynamics in the online auction market, where growth is maturing and web search and advertising - areas where it relies on partners - become ever more important to lure auction buyers. It said 83% of all listings are now in what the company calls its store inventory format - items available for instant purchase, like on Amazon.com - overshadowing the company's classic auction bidding format.

Overall listings were up 35% while gross merchandise volume, or the total value of items sold on eBay, rose only 18%. This suggests there were more inexpensive goods sold than high-ticket items, which drive growth.

Whitman said it has become 'a little bit harder to find items' when consumers search the site. 'I think that has caused the buyer experience to suffer,' she said.

The company reiterated its previous full-year outlook of $5.70bn to $5.90bn. It tightened the range of its earnings per share outlook for 2006 to 98 cents and $1.01.Analysts were looking for profits to range between 97 cents to $1.05 per share on revenue of $5.82bn to $6.06bn.

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