Economy weighs on eBay

Revenue and profit at eBay have dropped, as even bargain hunters take cover during the credit crunch.

Net profit during the fourth quarter, typically eBay's strongest period due to the Christmas holidays, fell to $367 million (266 million) from $531 million for the same period last year.

Revenues were down seven per cent to $2.04 billion, significantly below the $2.11 billion expected by analysts. The firm was particularly hurt by falling sales at its auctions sites, which were down 16 per cent for the quarter.

The online auctioneer has been increasingly pushing towards fixed-price sales, putting it into direct competition with industry giant Amazon. However, eBay claimed the economic environment rather than its strategy is to blame for falling profits.

"We've been operating in an almost unprecedented external environment," said eBay chief executive John Donahoe. "There is no doubt that eBay was impacted by the macro economy and our fourth quarter results reflect this."

There were a couple of bright spots for eBay, with revenue at its Skype and PayPal divisions growing 26 per cent and 11 per cent respectively.

The company is forecasting revenue for the first quarter of 2009 to be between $1.8 billion and $2.05 billion.