EBay Launches Web Store Service

Eager to find new sources of income and keep its sellers from striking out on their own, EBay Inc. launched a service Thursday that encourages small and medium-sized sellers to build Web stores that will be more independent of the e-commerce powerhouse.

EBay’s ProStores service will allow a seller to design a fixed-price e-commerce site with a non-EBay Web address. The service, which costs $6.95 a month with fees ranging from 0.5% to 1.5% of transactions, will allow sellers to link their custom-built ProStores sites to their EBay sites. The ProStores sites will be able to use PayPal, EBay’s payment service.

While aggressively expanding into emerging markets such as China and India, the San Jose-based company also has experimented with online classified advertisements, real estate and other new business ventures to try to maintain double-digit revenue increases in the lucrative e-commerce markets of North America and Western Europe.

The new service comes about six months after EBay enraged many small-scale sellers with a hefty price hike that threatened to dent their profits. In mid-January, EBay warned sellers in a terse e-mail that the monthly subscription fee for people who operate “Basic EBay Stores” would increase from $9.95 to $15.95, and the fee for a standard listing of 10 days would double to 40 cents.

Also Thursday, Chief Executive Meg Whitman said the company, which ended 2004 with net income of $778.2 million and $1.33 billion in cash, may offer a dividend or repurchase some shares. Like many Silicon Valley technology companies, EBay has never paid a cash dividend, preferring instead to reinvest profit in research and development, marketing promotions and other business expenses.

“We aren’t averse to returning cash to shareholders when we think we have a strategic reserve,” Whitman said to about 100 shareholders who gathered in San Jose for an annual meeting. “But you have to be thoughtful of what you communicate when you do that.”