Ecommerce company eBay (Nasdaq:EBAY) reported a strong revenue increase led by PayPal, which contributed $1 billion in revenue for the first time. The online marketplace company had lower income compared to the same quarter last year, due to charges. Adjusted earnings, however, increased substantially.

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PayPal Continues To Drive Revenue Growth
PayPal's global payments business provided nearly 40% of eBay's net revenue of $2.76 billion for the quarter. Last year's second quarter net revenue was $2.55 billion for eBay, so this quarter's revenue increased 8%. GAAP income was $283 million, or 22 cents per share, compared to last year's quarter, when net income was $412 million, or 31 cents per share. Non-GAAP or adjusted net income, excluding charges, was $631 million or 48 cents a share this quarter, compared to $530 million or 40 cents in last year's quarter. Analysts expected 46 cents per share.

Pay Pal increased its number of registered accounts by 15%, to 100.3 million. Its net total payment volume (TPV) grew to $28.7 billion in the quarter, a 34% increase over last year's same quarter. eBay continues to make acquisitions, and the company also reiterated an aggressive stance to partnering with other retailers in the multi-channel ecommerce environment. eBay's marketplace business grew by 17% in the quarter, as gross merchandise volume excluding vehicles was $14.7 billion. Merchant services and mobile payments continue to be an increasing part of eBay's revenue equation, as total payment volume, or TPV, for mobile payments is expected to rise to $3 billion this year from $750 million last year.

The ecommerce business is popular, with the model spreading to China which has its E-Commerce China Dangdang (NYSE:DANG). It is also diverse, with the HSN (Nasdaq:HSNI) network and website, and is expanding in ways that were unforeseen just a few years ago. Leading online retailer Amazon (Nasdaq:AMZN) just made a deal with CBS Corp. (NYSE:CBS) to stream CBS content on its Amazon Prime. Amazon Prime is the online retailer's aggressive entry in streaming video, which had previously been the province of Netflix (Nasdaq:NFLX).

eBay's Prospects
There appears to be a number of interesting ways for online commerce companies to attach revenue producing arms to their main business bodies - ways that may or may not bring them into direct competition. Amazon has elbowed its way into online selling, which eBay had staked out for itself several years ago via its auctions. However, eBay's business renaissance after buying PayPal is striking.

PayPal gives it an income stream that is not locked strictly into eBay's marketplace business. Could eBay still improve its online selling business? Probably. Anecdotally, unhappy eBayers once filled the internet with angry posts. Whatever problems eBay had, these seem to be less prevalent now - at least as far as the company's revenue increases show.

Bottom Line
Mobile payments, speed, ease of use, and streamlining the customer's experience - whether it's on eBay's marketplace or with its partner businesses - is the challenge in eBay and PayPal's future. Whether eBay enters some area that will further remove the company from its historic dependence on its auctions and marketplace model is intriguing to speculate, but so far eBay hasn't indicated such a grand move. For now, raking in cash via PayPal and continuing to run with its marketplace division is producing impressive enough results.

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