EBay Sees Rise in Costs, Drop in Transactions

EBay Inc., one of the few profitable Internet retailers, said its costs are expected to rise because of growing marketing expenses and an anticipated decline in the number of transactions per user. “Our historic growth rates are not sustainable and we expect in the near term that our costs . . . will continue to increase,” the online auction operator said in a filing with the Securities and Exchange Commission. EBay made no direct forecasts about its profitability and it said it expects to have sufficient cash to fund all of its activities “for the foreseeable future.” But the company referred to its recent stock price volatility in its lengthy regulatory filing that carried a cautious outlook for investors.

Since its founding, EBay has benefited from a core following of active users who promote the use of the auction service by “word-of-mouth” advertising. EBay said it no longer can count on word-of-mouth and media exposure to keep it visible, especially with increased competition. EBay closed up $6.19 at $127.50 on Nasdaq before news of the SEC filing was reported.