PayPal Still Making the Cash Registers Ring at eBay

PayPal continues to be the primary engine of growth within eBay (s ebay), judging by the online retailer’s latest quarterly results, and the company’s CEO reiterated that over the next few years, the payment business could grow to be larger than eBay’s core online marketplace business. While eBay’s main retail operations turned in respectable revenue growth of 11 percent year over year, PayPal’s revenues climbed by 22 percent, and total payment volume at the merchant services division grew 45 percent year over year — the third consecutive quarter of 40-percent-plus growth.

eBay CEO John Donahoe said that PayPal signed up three million new users in the quarter, and that the payments business is expanding globally, thanks to agreements with banks in China, Singapore and Australia. The company is also counting on social networking and mobile payments to be big growth drivers in the future — it signed a deal with Facebook earlier this year to allow users to pay for games and applications with PayPal, and also recently launched a mobile version of its Express Checkout feature for retailers. President Scott Thompson said in a recent interview (embedded below) that the company wants to become the default payment option for everything from smart automobiles to set-top boxes (See related GigaOM Pro Report: Monetizing Digital Content (sub. required)).

So is PayPal’s performance enough to make up for the somewhat lackluster growth of the rest of eBay’s business? Morgan Stanley seems to think so — it said in a research note that the continued growth of the payments division makes eBay shares “compelling,” but other brokerage analysts aren’t so sure. Colin Gillis at BGC Financial in New York told Bloomberg that eBay is similar to Yahoo (s YHOO), in that the online retailer is struggling to catch up to Amazon (s AMZN) just as Yahoo is struggling to compete with Google (s GOOG). “PayPal is an overperforming asset, but it’s attached to the Yahoo of commerce,” the analyst said.

Related content from GigaOM Pro (sub req’d): A Mobile Payments Glossary

Post and thumbnail photos courtesy of Flickr user quaziefoto