trading following the announcement.
Visitors chat next to the Ebay logo at the CeBIT computer fair in Hanover. Credit: Reuters/Tobias Schwarz
Expectations were high ahead of the results because sales data from outside sources suggested strong sales growth from eBay's online marketplace and a solid increase in transactions processed by the company's PayPal payments business.
EBay's online marketplace, one of the largest in the world, has lagged behind the growth of e-commerce and Amazon.com Inc for several years. But under Chief Executive John Donahoe, eBay has invested to improve the buying experience by upgrading search capabilities and prodding sellers to provide more services such as free shipping and easier returns.
The explosive growth of mobile shopping and popular mobile shopping applications have also attracted millions of new consumers to eBay's marketplace and PayPal in the past year.
"These are great numbers," said Bill Smead of Smead Capital Management, which owns eBay shares. "The marketplace business used to be a noose around their neck, but now it's a key destination for people wanting to buy new goods as well as existing goods."
Amazon shares edged up less than 1 percent to $269.50 in after-hours trading, close to a record. The world's largest Internet retailer is due to report fourth-quarter results on January 29.
On Wednesday, eBay said fourth-quarter revenue jumped 18 percent to $3.99 billion. Profit came in at $927 million, or 70 cents a share, in the period. That compares with profit of $789 million, or 60 cents a share, in the same quarter last year.
EBay was expected to earn 69 cents a share on revenue of $3.98 billion, according to Thomson Reuters I/B/E/S.
EBay forecast 2013 revenue of $16 billion to $16.5 billion and profit of $2.70 to $2.75 a share. Wall Street was calling for revenue of $16.3 billion and profit of $2.74 a share, according to Thomson Reuters I/B/E/S.
"We feel great about 2012 and are carrying that momentum into 2013," said eBay Chief Financial Officer Bob Swan, during a conference call with analysts.
Still, he said PayPal profit margins will be flat in 2013, compared to 2012, while eBay marketplace margins will be in line with previous forecasts, as the company invests for future growth opportunities.
Tapping mobile consumers
EBay's results were partly driven by rapid growth in mobile shoppers, many of whom bought on eBay.com and with PayPal for the first time.
For 2012 as a whole, more than 4.3 million new users came to eBay through mobile devices, CEO Donahoe said.
The company's online marketplace handled $13 billion in mobile transactions during the year, more than double the volume in 2011. PayPal processed almost $14 billion in mobile payments, more than triple the previous year.
EBay expects both businesses to handle more than $20 billion in mobile transactions each in 2013, the CEO said.
Mobile consumers shop more frequently than personal computer users because they have their smartphones and tablets with them a lot more of the time, Donahoe explained.
EBay's mobile business is also a good way to expand into new countries, the CEO added, citing new mobile applications designed for Brazil and Russia.
In so-called BRIC countries - Brazil, Russia, India and China - as well as emerging markets, many consumers will access the web for the first time using a mobile device, Donahoe said.
"In the BRIC and emerging markets, our new user growth is very significant," the CEO added. "Our 2013 and '14 plans really are stepping on the gas of leveraging our global platforms in those BRIC and emerging markets for new users... We think it's a huge opportunity."
EBay is the largest e-commerce player in Russia and most of the buying and selling happens on the company's English-language sites. The company is planning a new Russian-language website this year, Donahoe said.
Cross-border commerce is about 20 percent of eBay's business now, even though the company has not done much to facilitate such activity, the CEO added.
EBay is trying to increase cross-border commerce by making it easier for sellers to ship products internationally, Donahoe said.