5 Things eBay's Management Wants You to Know

Source: eBay.

eBay 's earnings report for the third quarter tells a story of two different businesses. While PayPal is delivering remarkably solid performance, the Marketplaces division is going through a challenging period.

These considerations are more important than ever now that the company is spinning off PayPal, so let's go through eBay's latestearnings conference callto try to find out what the future may bring for investors in eBay stock.

PayPal is firing on all cylinders

PayPal is a major growth driver for eBay, and performance during the third quarter of the year was nothing short of impressive. Growth rates remain notoriously vigorous, even accelerating in comparison with the second quarter. According to CFO Bob Swan:

Marketplaces is disappointing

The Marketplaces division, on the other hand, is going through a difficult time. The business has not fully recovered from a cyber attack that caused eBay to make all its users reset their passwords in May, in addition, a new search algorithm from Google is having a negative impact on SEO traffic.

President and CEO John Donahue admitted that Marketplaces results were below expectations:

Increased marketing spending

eBay increased its marketing spending to foster the recovery of its Marketplaces business in the third quarter, and management is planning to accelerate spending even more during the fourth quarter. In the short term, this will most likely generate pressure on profit margins, since marketing spending is not usually recovered through increased sales on a quarterly basis.

On a longer time-frame, however, this is not necessarily a bad thing for investors. If eBay spends its marketing money wisely, it could ultimately strengthen the brand and consolidate the company's competitive position. Swan said:

eBay and PayPal will remain friends after the split

There are some clear synergies between Marketplaces and PayPal. Although the details of the separation remain to be known, management intends to maintain a solid collaborative relationship between the two businesses. From Swan:

Playing nicely with both Google and Apple

The mobile payments market is becoming increasingly competitive lately, especially as tech giants such as Google and Apple are making inroads with initiatives like Google Wallet and Apple Pay, respectively. PayPal is accepted by Google Wallet, so eBay seems to be covered in that area. When it comes to Apple, management sounds quite open to the possibility of making alliances, too.

This is probably the smart thing to do, as the mobile payments business will most likely generate enormous opportunities for growth over the long term. By joining forces with powerful tech juggernauts such as Apple and Google, eBay is securing its ability to participate in these opportunities, even if it means having to make some concessions along the way.

Donohue said:

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The article 5 Things eBay's Management Wants You to Know originally appeared on

Andrés Cardenal owns shares of Apple and Google (C shares). The Motley Fool recommends and owns shares of Apple, eBay, and Google (A and C shares). Try any of our Foolish newsletter services free for 30 days . We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy .

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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