eBay looking up

I have probably written more about eBay than any other company on this blog. When I first started investing my comments on eBay were filled with optimism about the near term prospects of the stock. Then as the stock continuously fell my posts became more resigned and circumspect.

It could be that eBay is now at an inflection point between pessimism and optimism. The 2009 Q4 results were released last night and marketplace revenue has finally returned to growth.

However it must be remembered that Q4 2008 was the peak of the credit crisis and for the next 3 quarters or so eBay will have some easy comparisons.

So the Q4 2010 results will probably be a better indication of how eBay is growing.

In the meantime some exciting things are happening. In particular payment revenue growth is accelerating. If PayPal can become the de facto payment method for online transactions then the sky is the limit. eBay are away of this and now talk about payments first in all reports. Users who sell on eBay will end up with a PayPal balance. It is much more convenient if they can spend this cash directly using PayPal rather than having to transfer the balance over to another account, incurring fees in the process.

In terms of marketplaces John Donahoe (CEO) is rightly totally focused on the user experience. I was so gratified to hear that advertising revenue is down as eBay optimise the user experience. Hopefully they will get rid of those annoying and distracting banner ads sometime soon.

It looks like Amazon has the big ticket B2C (business to consumer) market pretty well wrapped up but if eBay can stay in the C2C and more obscure B2C markets then it will have a valuable niche.

How investors would like to see eBay trade at Amazon like multiples at some point. If PayPal growth keeps accelerating that could become a reality.