PayPal Racks up Double-Digit Growth, But Still Relies Heavily on eBay

PayPal Inc, which earlier this month announced its foray into mobile payments based on short-message service transmissions (Digital Transactions News, April 6), continues to build transaction volume at double-digit rates in its core e-commerce business, though it remains dependent on parent eBay Inc. for the bulk of its traffic. In its first-quarter earnings report, released this week, San Jose, Calif.-based online auction venue eBay reported that payments initiated on PayPal grew 35% to 149.2 million from 110.4 million in 2005's first quarter. Payment volume hit $8.77 billion, excluding PayPal's gateway business, up 41% from $6.23 billion a year earlier. Total accounts hit 105 million, up 47% from 71.6 million in 2005's first quarter, while active accounts grew 32% to 29.2 million from 22.1 million a year earlier. An active PayPal account is one that completes at least one transaction during the quarter. Net payment-segment revenues for eBay climbed 44% to $335.1 million over $233.1 million in the prior-year quarter. The payment revenue rate, or ratio of PayPal revenues excluding gateway revenues to total payment volume, was 3.74% compared with 3.64% a year earlier. Meanwhile, the transaction processing expense rate fell to1.04% from 1.15% in the year-earlier quarter, and the loss rate fell 1 basis point to 0.29%. Some 35% of payment revenue was international in origin, unchanged from a year ago. Though transaction volume coming from eBay as a fraction of all traffic fell somewhat in the first quarter as PayPal pursues a strategy of attracting non-eBay sellers, it still stands at 67%.