eBay Inc. said that growth in its online auction sales is slowing, and that it is expanding the reach of PayPal Inc., its payment subsidiary, to drive up its revenues.
The San Jose Internet giant said Wednesday that it wants more of its foreign eBay shoppers to use PayPal, and more customers to use PayPal for transactions other than auctions.
"We are going to build out [PayPal's] footprint as fast as we can, following eBay's footprint globally," Meg Whitman, eBay's president and chief executive, said during a conference call with analysts.
However, analysts say PayPal may find it tough to expand into countries with substantially different payment mechanisms.
Net income rose 107% from a year earlier, to $190.4 million, or 28 cents a share. However, eBay also said it expects third-quarter earnings of only 25 cents a share. Ms. Whitman said its revenue tends to be slower in the second and third quarters, because of seasonal trends.
The number of active eBay accounts - those that have had some activity in the past 12 months - rose 41%, to 48 million. However, its growth rate of new accounts slowed each quarter since Sept. 30; the company also attributed this to seasonal trends.
As eBay's auction business matures, its payment service is becoming even more important to the parent company. Amanda Pires, a PayPal spokeswoman, said 91% of eBay's U.S. auctions offer PayPal as a payment option, and 70% of those auctions are completed through a PayPal account.
The number of PayPal accounts swelled 62%, to 50.4 million. PayPal processed $4.4 billion of payments in the second quarter, a 53% increase over a year earlier. Sixty-nine percent, or $3 billion, of those payments were for auctions.
Worldwide, PayPal handled 37.5% of all money that changed hands in an eBay transaction. Though PayPal has users in 38 countries, it moves money in only five currencies. Outside the United States, it has variants of its Web site in just two other countries: the United Kingdom and Germany, eBay's two most popular foreign spots.
Ms. Whitman spotlighted Germany, Austria, Switzerland, Belgium, and the Netherlands as areas where eBay is nurturing PayPal's growth. PayPal has an overseas arm, PayPal (Europe) Ltd., based in Dublin.
Of those countries, only Germany has a PayPal home page; in the other countries PayPal can be found only on the eBay site. The German-language page, introduced in February as the company's only stand-alone site in a foreign language, was originally just a translation of the American site. PayPal revamped the page June 21 to include more localized content.
PayPal introduced its U.K. site in October. Eighty-five percent of eBay's U.K. auctions offer PayPal as a payment option, though Ms. Pires would not say how many actually close with PayPal.
Gwenn Bezard, a senior analyst for the Boston market research firm Celent Communications LLC, said PayPal may have difficulty expanding in foreign countries with different payment systems, even where eBay is already popular.
In Germany, many citizens still prefer to settle online transactions through offline means, he said; half of all online purchases there, even for huge retailers like Amazon.com Inc., involve ACH debits initiated by filling out a paper invoice. As a result, much of PayPal's German volume is used for international sales.
Ms. Whitman said this international traffic could provide an entry point for domestic transactions. "In every country, there is already an installed base of PayPal users, because they have used it for cross-border trades."
Mr. Bezard said cross-border trades account for 20% of PayPal transactions, with half going to U.S. merchants from other countries. Ninety percent of all cross-border transactions are paid by credit card, though this is partially because PayPal has not yet set up broader options in several markets.
To conform with the payments culture, PayPal is working to accept debit cards in foreign countries, he said.
However, international customers use PayPal because "that's the only global system to make payments," Mr. Bezard said. For payments that never have to cross a border, "in some countries, the payment system operated by PayPal might not look very efficient."
