eBay, Inc. (EBAY) has recently gone through some significant changes. After agreeing to sell its Enterprise segment to private investors on July 16, 2015, it spun off its Payments segment—better known by its brand name, PayPal—the very next day. So what is the makeup of eBay’s remaining businesses following these two significant divestments?

Key Developments

On July 16, 2015, eBay formally agreed to sell its Enterprise segment for $925 million, with the implementation of this transaction expected to take place in a matter of months. The following day, the company completed its spin-off of its Payments segment. Registered shareholders of eBay each received one share of the newly spun-off PayPal Holdings, Inc. (PYPL), which now trades alongside eBay as a separate listed entity on the NASDAQ Stock Market. Prior to the spin-off, a significant portion of eBay’s net income was attributable to its Payments business. As such, eBay’s market capitalization declined by roughly 55% in the week following the spin-off. (Learn more in: Spinoff - Video)

The “new” eBay

Naturally, the number one question on many investors’ minds is: what's eBay worth without its Enterprise and Payments segments?

Let's start by clarifying the nature of eBay’s remaining business activities, which the company has historically referred to as its “Marketplaces” segment. At a conceptual level, these activities consist of facilitating connections between inventory owners and prospective buyers, on an international scale. In practice, this is accomplished through a network of online marketplaces.

The most famous of these marketplaces is eBay.com and its localized equivalents (such as eBay.co.uk, eBay.cn and others). On these websites, users can purchase items either through an auction process or by paying a premium to purchase the item directly from the seller. Beyond its “eBay” branded websites, the company also operates a range of more narrowly localized marketplaces such as alaMaula (in Argentina and Colombia), Vivanuncios (in Mexico), Marktplaats (in the Netherlands), and LoQUo (in Spain).

Although most of eBay’s marketplaces seek to facilitate transactions across a wide range of product categories, some service specific types of products. For example, Automobile.fr, Automobile.it, and Mobile.de facilitate sales of automobiles in France, Italy, and Germany respectively, while StubHub.com, is an online marketplace for ticket sales. eBay derives revenue from these marketplaces through fees that are applied to the transactions they enable.

eBay is also involved in the classified ads business. In 2004, eBay purchased a 25% stake in Craigslist. The following year, eBay expanded its involvement in this business by launching Kijiji and acquiring Gumtree. Through these websites, eBay generates revenue by offering paid options for the promotion of classified ads.

Recent Performance

Two measures that we can use to evaluate the performance of eBay’s marketplaces are its Gross Merchandise Volume (GMV) and net revenues. The company defines GMV as the total value of all transactions closed across all eBay’s marketplaces, excluding transactions for vehicles and real estate. Net revenues consist of the total revenue generated from the marketplaces’ transaction fees, together with such marketing services as the sale of classified ads.

Based on the company’s 10-K filings from 2012 to 2014, net revenues from eBay’s marketplaces increased to $8.8 billion in 2014 from $7.4 billion in 2012. At the same time, eBay’s GMV increased to $83 billion in 2014 from $67.7 billion in 2012. (Learn more in: SEC Filings: Forms You Need To Know.)

eBay’s net revenue from transactions—which excludes revenue from marketing services—grew to $7 billion in 2014 from $5.8 billion in 2012. Despite this growth, however, net revenue from transactions actually declined over this timeframe when viewed as a percentage of GMV. This figure, which eBay refers to as the “Take Rate” on its transactions, declined from 8.62% in 2012 to 8.43% in 2014. As we can see from the figures above, however, this decline was principally due to the relatively rapid growth of GMV.

Turning our attention to more recent figures, we find that eBay’s net transaction revenues, "Take Rate", and GMV all declined between the three months ended June 30, 2014 and 2015.

 

Three months ended June 30, 2015

Three months ended June 30, 2014

"Take Rate" on Marketplaces Transactions

8.39%

8.41%

     

in millions (USD)

Three months ended June 30, 2015

Three months ended June 30, 2014

Net revenues

$4,379.00

$4,103.00

Net transaction revenues

$1,684.00

$1,722.00

Marketplaces "GMV"

$20,061.00

$20,485.00

Source: eBay, 10-Q filing for the quarterly period ended June 30, 2015.

Although this recent decline in transaction volume and revenues may cause investors some degree of concern, eBay’s management have claimed that these declines weren't due to any fundamental deterioration in their business. Rather, they reported these declines were due primarily to the adverse effects of foreign exchange movements.

The Bottom Line

Investors have long regarded PayPal as one of eBay’s most valuable assets. Now that PayPal has been spun off as a separate entity, investors must solve the question of how much eBay is worth on its own. Although a detailed valuation of eBay is beyond the scope of this article, the recent growth in the size and profitability of eBay’s marketplaces indicates that the potential value of eBay’s remaining businesses should not be overlooked.

Disclosure: At the time of publication, Jason Fernando had no positions in any of the securities mentioned in this article. He does not intend to trade any of the securities mentioned in this article within 48 hours of publication.