PayPal’s Strategy Bears Fruit As off-eBay Ratio Steadily Rises

PayPal Inc.'s efforts to lessen its dependence on transaction traffic supplied by the online auctions run by parent eBay Inc. are paying off. Some 44% of the $12.2 billion the San Jose, Calif.-based e-commerce processor handled in the third quarter came from off-eBay merchants, according to statistics filed by eBay on Wednesday as part of its quarterly earnings statement. That's up from 42% in the second quarter and from 37% in the year-ago period, and represents the second straight three-month span in which the processor has logged better than 40% of its dollar volume with Web-based retailers and service providers rather than online-auction sellers. In particular, PayPal has had a recent run of success signing up airlines to accept the payment service to sell tickets on their Web sites. The most recent recruit is US Airways, announced Tuesday. “An important part of our ongoing project to rebuild usairways.com is to provide our customers with the payment options they've asked for, including the ability to pay via PayPal,” said Travis Christ, vice president of sales and marketing at US Airways, in a statement. US Airways is the fourth air carrier to adopt PayPal, following Midwest Airlines, Northwest Airlines, and Southwest Airlines, all of which began accepting PayPal this summer. PayPal now claims 164 million accounts, up 34% from last year's third quarter. Some 37.5 million of these it considers active, up 21%. An active account is one that performs at least one transaction during the quarter, PayPal says. Transaction volume for the quarter reached 177.4 million payments, a 21% rise. Dollar volume was up 34% from the $9.12 billion processed in the third quarter of 2006. PayPal's $68.87 average ticket is up slightly more than $6, perhaps reflecting the increasing proportion of off-eBay business. Transaction traffic and dollar volumes exclude the company's gateway business, which it acquired from VeriSign Inc. in 2005. PayPal's transaction-revenue rate was 3.67%, little changed from recent quarters, while its loss rate dipped to 0.25% from 0.29% in the second quarter and from 0.35% in last year's third quarter.