Pay for a Latte by Mobile at Starbucks

Online auction house eBay reported better than expected earnings Wednesday, driven by the success of its online financial transactions service PayPal.

EBay revenue for the quarter ending December 31 was slightly less than $2.5 billion and its net profit was $559.2 million dollars.

"We delivered a strong fourth quarter and a solid year," said eBay chief executive John Donohoe. "We are driving strong local growth at PayPal and strengthening our core eBay business."

PayPal ended the quarter with 94.4 million registered user accounts and handled a total of $26.9 billion in payments during the period, according to eBay. Nearly half of that PayPal revenue came from outside the United States.

The company saw revenue rise in its online auction Marketplaces during the year-end holiday shopping season.

EBay finished the year with a net profit of $1.8 billion on $9.16 billion in revenue.

The San Jose, California-based Internet firm's stock price climbed nearly three percent to $29.90 per share in after-hours trading that followed release of the earnings results.

EBay is adapting its service to changes in how people shop, focusing on the trend of using smartphones to locate bargains or stores and to even pay for things, Donohoe said in an earnings conference call.

"Mobile is increasing the number of Internet-enabled transactions, and in the process it is rapidly blurring the line between online and offline," Donohoe said.

"We are trying to make sure we are aggressively capitalizing on that as a company."

EBay sees PayPal as a reassuring option for shoppers reluctant to enter credit card or other sensitive financial data into mobile phones.

"We are treating mobile as another device in an increasingly seamless shopping experience," Donohoe said.

Along with building up its mobile platform, eBay will continue to beef up its tools to help shoppers easily find things they want.

Donohoe said the firm's strategy will build on recent acquisitions of US Internet startup Milo, mobile gadget application maker Critical Path Software and brands4friends, Germany's largest online fashion shopping club.

Milo is a website that connects shoppers with real-world shops that have what they seek and then lets them compare prices with those in online stores.

EBay announced in December that it bought Critical Path Software as it follows buyers and sellers onto smartphones and other devices.

"We're very serious about innovating in mobile commerce," eBay Marketplace chief technology officer of global products Mark Carges said at the time.

"Integrating the Critical Path Software team into eBay will be a big win for mobile shoppers around the world... we can make shopping and selling anywhere, anytime, for almost anything, even better."

Critical Path had worked with eBay on applications that let smartphone users connect with the online auction house as well as its other services such as classified ads, ticket marketplace StubHub and

Acquisitions for eBay in the final three months of 2010 included the 200-million-dollar (150 million euro) purchase of Berlin-based brands4friends, which was founded in 2007 and boasted 3.5 million members in Germany.

It sells goods from well-known fashion and lifestyle brands at reduced prices to members through daily offers.

The acquisition was "designed to strengthen eBay's position as a leading online fashion destination in Europe," eBay said.

As part of the deal, eBay will assume brands4friends's equity interests in British shopping club and in its Japan arm,

The acquisition, which is subject to regulatory approval, is expected to close in the first quarter of this year.