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What's Left for eBay After the PayPal Breakup? For the ecommerce company, life could get lonely in a hurry.

By Ari Levy

entrepreneur daily

This story originally appeared on CNBC

For eBay, life after PayPal could get lonely in a hurry.

Not only is the company tasked with taking on e-commerce giant Amazon.com, but it has to find a way to keep its prized merchants, who are increasingly being lured to rival online marketplaces.

Merchants like Evelyne Teman in Southern California. A 46-year-old clothing seller, Teman moved her business off eBay two years ago after finding much more success on a start-up site called Poshmark, which focuses on women's fashion. There, she said she can generate $15,000 to $20,000 a month in sales, compared with $3,000 in a good month on eBay.

Poshmark is a network of independent retailers, some offering used dresses from their closet, and others the latest Ann Taylor shoes and Kate Spade handbags.

Teman, who sells contemporary sportswear, likes Poshmark because of its social experience. She has over 440,000 followers on the site, and to her most loyal customers she provides product recommendations and notices when new items arrive.

"People ask you questions, you get to know people, you get to know your customers and have a relationship with them," said Teman, a mother of five who works from home. "There's no community on eBay."

Poshmark is just one example. In women's fashion, others like ThredUp and Tradesy are also competing.

There's an online marketplace for just about everything. While eBay promotes products in 34 categories plus "everything else," there are fewer areas where it's the dominant player.

In handmade goods, there's Etsy. For used furniture, consumers can use Move Loot, and for vintage furniture, there's Chairish. EBay Motors has to vie with Autotrader. And if you want to hawk your used Nike high-tops, try Kixify.

Even for Beanie Babies, eBay is no longer the only game in town.Bonanza and Swap.com do plenty of business for lovers of the 1990s stuffed teddy bears.

Plus, eBay now has to contend with the "buy" button. Pinterest, Facebook and Google are diving deeper into e-commerce, opening up new ways for businesses to sell and consumers to buy goods from their own apps.

This is the fragmented market that new CEO Devin Wenig faces as eBay spins off PayPal into a separate company. As of Monday, the San Jose, California-based company's stock market value will shrink from over $75 billion to about $30 billion, leaving it worth less than Yahoo.

The numbers speak for themselves. In a global e-commerce market that grew 22 percent last year to $1.3 trillion, eBay's marketplace business only expanded 6.4 percent to $8.8 billion. Amazon grew at more than three times that rate.

Competition has hardly been the only problem. In the middle of last year, eBay was stung by a cyberattack that forced it to tell 145 million users to change their passwords, and a Google algorithm change that pushed down eBay results in search traffic.

None of that has been enough to scare away one of eBay's top investors.

Hamish Douglass, CEO of Australia's Magellan Financial Group, which owns 2.6 percent of the e-commerce site, sees tremendous value in eBay's customer base (now 157 million), its leadership in countries including the U.K., Germany and Korea and the highly profitable marketplace model that comes from not holding inventory.

As for battling Amazon and a host of upstarts, the critical factor for Douglass is that they're all grabbing business from traditional stores, particularly as shopping goes mobile.

"Both eBay and Amazon are taking market share from physical retailers, it's just that Amazon is taking it faster," said Douglass. "They're both winning."

One emerging area where eBay has been particularly quiet is in marketplaces for services. Loads of start-ups have popped up to clean houses, park and drive cars, install complicated electronics and deliver groceries.

Porch in Seattle connects 3.2 million home improvement and maintenance pros with consumers across the country who need specific types of help.

Landscapers, plumbers, electricians and gadget geeks find jobs in their area by signing on with Porch and taking advantage of the site's rapidly growing customer base. Porch also has a deal with Lowe's, so the big box retailer can offer experts for any home improvement gig imaginable.

EBay could choose to forge a similar partnership, said Porch CEO and co-founder Matt Ehrlichman.

"Imagine if you're buying a certain product on eBay that requires installation or assembly," said Ehrlichman, whose company has raised $100 million in the two years since its launch. "That's where product sales coupled with services makes sense for users."

In a statement, an eBay spokesperson said the company has a three-pronged strategy for growth, albeit with very broad mandates.

"EBay will focus on our core customers and build a more robust commerce platform, create a more vibrant marketplace and deliver exceptional product and brand experiences for our 157 million active buyers around the world," the statement said.

To be sure, the company still has plenty going for it. The business is generating so much cash that in January, management announced a $2 billion stock repurchase plan. (The company also announced an additional $1 billion buyback Thursday morning when it reported Q2 net revenue that grew 7 percent to $4.38 billion.)

Even as small merchants like Teman have bailed for rival sites, eBay still ranked fifth on the 2015 EcommerceBytes Sellers Choice list, which factors in qualities like profitability, customer service, ease of use and communication. Ahead of eBay were Etsy, Amazon, Bonanza and Ruby Lane.

Brian Yacktman, a longtime eBay investor, originally bought the stock because of PayPal, but expects to maintain shares of both after the split.

Yacktman, who manages $400 million as chief investment officer of YCG Investments in Austin, Texas, sees an online commerce market growing 15 to 20 percent a year through 2018. Even though eBay won't keep pace with the sector, it remains a big brand in a hot space.

"Yes, eBay will be a share loser, but at least the pie is still growing," Yacktman said. "It's still prevalent in people's minds. People still think of Amazon and eBay along with the niche places, and they may shop between all of them."

Ari Levy is CNBC's senior technology reporter in San Francisco.

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