eBay's Profit and Revenue Soar

The increase in transaction revenue helped to make up for a steep decline in advertising sales and offline revenues. Advertising revenue fell 74% in the quarter to $7.1 million from $27.4 million in the fourth quarter of 2001.

eBay officials gave no details about the decline in advertising revenue and a company representative did not return calls seeking comment. But analysts speculated that they decline had a lot to do with problems at AOLAOL, which sells advertising for eBay.

The company also seems to be focusing more on its core auctions and transactions business than on advertising, said Jeff Fieler, who covers the company for Bear Stearns.

"I'm kind of getting the sense that eBay is giving up on their advertising side," Fieler said. In some ways, since they stopped focusing on advert, they've done a better job with their transactions business. One day, they may come back to it."

Bear Stearns does not have any investment banking business with eBay.

Meanwhile, offline revenues fell from $7.8 million in the year-ago period to $1 million in the fourth quarter, a decline of 87%. Over the last year, the company has sold off its two primary offline divisions: the Butterfields auction house and Kruse Automotive, a classic car auction company.

In a conference call with investors and analysts, eBay Chief Executive Officer Meg Whitman attributed the company's overall success in the fourth quarter in part to a coordinated merchandising and marketing campaign.

One part of the company's strategy involved the toy sector, where the company met with toy retailers and manufacturers before the holiday season to come up with a list of what would be the top 20 toys during the season, Whitman said. The strategy helped to boost listings and sales on the site, she said.

Meanwhile, eBay rolled out its first television advertising campaign in the quarter, which sought to portray the company as a mainstream place to shop during the holidays. The campaign helped drive new users to the site and encourage old users to return, Whitman said.