First-quarter earnings at eBay Inc. dropped 22% from a year earlier, to was $357.1 million, or 28 cents a share, despite strong growth in its PayPal Inc. online payment unit.

Executives at the San Jose online auction company said Wednesday that they anticipate significant further growth in PayPal.

Revenue in eBay's core online market, which includes its flagship Web site and accounts for the majority of its revenue, declined 18%, to $1.22 billion.

However, revenue in the company's online payment operation, which includes PayPal and Bill Me Later, the instant credit provider it purchased last year, rose 11%, to $643 million. The number of registered users increased 22%, to 73.1 million, and payment volume increased 10%, to $15.9 billion.

Online payments currently account for about 32% of eBay's revenue, but "I think this business should and will be bigger than eBay," said John Donahoe, the parent company's chief executive. "Its target market is all of e-commerce. And payments is more of a winner-take-all market, whereas retail is a very fragmented market."

The company's first-quarter revenue fell 8%, to $2.02 billion, as customers tightened purse strings and took their business to after-holiday sales on sites such as Amazon.com.