PayPal Enjoys Another Strong Quarter, Though eBay Boss Says Little About Offline Growth

EBay Inc.’s first-quarter conference call Tuesday was as remarkable for what chief executive John Donahoe did not say as for what he did say.

Asked by a stock analyst for an update on PayPal Inc.’s move into physical stores, Donahoe added little to what eBay and its PayPal unit have already made known. Indeed, after conceding in eBay’s last earnings call three months ago that the initiative was proceeding more slowly than eBay had expected, Donahoe said nothing further about concrete progress.

“We’re positioning ourselves for what will be an enormous opportunity over time,” Donahoe told the analysts. He said PayPal is working on extending its “merchant coverage” and “going where the action is,” specifically restaurants, where such functions as PayPal’s order-ahead feature can play a role.

He also cited Beacon, a Bluetooth Low Energy technology that detects and communicates with consumers’ mobile devices when they enter a store, as an example of how PayPal is working on improving the consumer experience and merchants’ relationship with their customers.

Beyond these observations, Donahoe said, “We’ll continue to test and learn.” Altogether, mobile payments volume reached $11 billion for the quarter.

PayPal’s expansion into brick-and-mortar payments, which relies on mobile devices as well as a PayPal card, began two years ago with a handful of Home Depot stores. It has since signed agreements with more chains along with a number of payment processors, though one of the largest processors, First Data Corp., has refused to support PayPal at merchants it serves.

Apart from the physical-world thrust for PayPal, Donahoe disclosed that PayPal is planning a major marketing push, though he did not say when that will start. “We’re going to increase our level of investment in PayPal marketing [with[ a new brand campaign,” he said. “You’ll hear soon the specifics of it.” The campaign will include digital channels and TV, he added.

Donahoe also made it clear eBay is holding on to PayPal for the long haul. The company waged and won a proxy fight earlier this year with famed activist investor Carl Icahn, who argued eBay should spin off the payments unit. Referring to that dust-up, Donahoe told the analysts that major eBay investors “affirmed eBay and PayPal are better together and full separation doesn’t make sense at this time.”

Statistically, PayPal enjoyed a strong quarter. Active accounts grew 16% over the year-ago quarter to 148.4 million. Transaction count was up 22%, to 834.4 million, while dollar volume reached $52 billion, up 27%.

PayPal posted a transaction margin of 64.6% for the quarter, little changed from a year ago.