EBay sees PayPal doubling its size by 2011

EBay Inc.'s name may conjure images of online auctions, but the company is hoping to turn attention to its second-largest business — PayPal — which it expects to blossom significantly in the next few years.

That could be a welcome boost for eBay, which posted drops in revenue and profit in the last quarter and has seen its stock lose 80 percent of its value since late 2004.

Speaking Wednesday during a day of briefings for analysts, PayPal President Scott Thompson said the service should double in size in the next three years, processing between $100 billion and $120 billion in annual payments by 2011.

EBay shares jumped 39 cents, 3.6 percent, to $11.49 in afternoon trading.

PayPal, which has 70 million active user accounts, processed $60 billion in transactions in 2008. It runs local sites in 17 languages and accepts 19 currencies for transactions.

PayPal, which takes a cut of transactions, reported $2.4 billion in 2008 revenue, while eBay as a whole had revenue of $8.5 billion. The projected increase in PayPal's volume would translate into $4 billion to $5 billion in revenue in 2011, Thompson said.

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PayPal plans to do this by continuing to grow on eBay itself and by increasing the service's use among merchants that are not part of eBay. PayPal wants to handle more mobile transactions and payments for businesses like banks, non-profits and online social networks.

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"It doesn't matter where you go online today," Thompson said. "Almost everybody needs a fast, secure way to pay for something."

PayPal is still combining its operations with Bill Me Later, a company eBay bought in October that lets online retailers extend credit to shoppers without requiring detailed application forms. This will let people choose to pay for purchases immediately through PayPal or be billed down the road through Bill Me Later.