New life of eBay and PayPal

EBay has a simple way to gain an advantage during the worst economic downturn in more than 50 years: it focuses on e-commerce and online payments.
The biggest marketplace on the Web, with nearly 90 million active users, is pinning its future on those two businesses as it helps to pass over all rivals like Amazon.com, Walmart.com and hundreds of other major retail sites. EBay has particularly high hopes for PayPal, its online-payments business. It expects its revenue to double, to about $5 billion, by the end of 2011.
"E-commerce is 10 years old, but it is still in its infancy," eBay CEO John Donahoe said in his interview last week.
E-commerce accounts for only 5% of all retail sales but will soar to 15% to 20% in five years, as more consumers conduct transactions via mobile phones and the Internet, Donahoe says.
EBay anticipates more than $500 million in mobile-based application revenue this year, mostly through the iPhone. The eBay app has been downloaded more than 5 million times.
It won't be easy, says Scot Wingo, CEO of ChannelAdvisor, a software company that retailers use to sell on marketplaces such as eBay and Amazon. He calls Donahoe's prediction of $5 billion in PayPal revenue by late 2011 a "big, hairy, audacious goal," but believes it is achievable.
EBay reported revenue improved 6%, to $2.2 billion, in the third quarter from the period a year ago, ending a year-long stretch of sliding sales.
EBay's online-payments business, consisting of PayPal and Bill Me Later, grew 15%, to $688 million in third-quarter revenue.
Last month, eBay made PayPal technology available to software developers so they can create applications for PayPal. "It could unleash a revenue stream and innovation" in the $30 trillion payments industry, Donahoe says.
Two recent examples include Twitpay.me, a virtual-payment system that links PayPal accounts to Twitter, so people can tweet payments, and ShopSavvy, a mobile comparative-shopping service available on the iPhone and Android phones.
In other matters, eBay is fighting to reinstate its minority stake and board seat at online classifieds service Craigslist, where it became a shareholder in 2004. The companies are locked in a lawsuit in a Delaware court.
Last month, eBay settled litigation around its sale of the Skype online-calling service.
Skype founders Niklas Zennstrom and Janus Friis dropped their lawsuits against eBay and a consortium of buyers whose bid to purchase 65% of Skype was announced in October.