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EBay's Earnings Challenge: "Beat And Raise" For Investors

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It's been a busy quarter for eBay, highlighted of course by the naming of John Donohoe as Meg Whitman's successor, but investors are focused more on share price than who's sitting in the C-suite.

And that's where the eBay story gets cloudy, and for the foreseeable future, I don't see those clouds dissipating. EBay has owned the online auction world these last several years, but as auctions blend with "buy it now," and eBay tries to become a broader online marketplace instead, it's butting up against Amazon.com , and therein lies the problem. Amazon's operations are consolidated under one corporate structure; eBay is composed of millions of individual retailers with hardly a consistency among them, and as more shoppers head online, that could be a key differentiator for investors.

In the meantime, eBay is also facing continuing pressure from its very lifeblood: the power sellers who compose most of the sales volume on the site. EBay said in January it would dramatically restructure its fee plans, reducing listing charges by up to 50 percent, but increasing the commission it collects on items that sell.

As you might expect, those big eBay sellers weren't happy, and to respond, the company reduced listing fees again. But there's still a lot of dissention and eBay continues to try to walk that fine line between corporation beholden to shareholders, and online community catering to its members.

This time around, analysts are expecting 39 cents a share on revenue of $2.08 billion, at the high-end of the range eBay offered back in January. Some of that optimism comes on the back of a weakened dollar since eBay generates better than half its sales from overseas clients. That bodes well for the company especially as recession worries continue to dog tech companies in this country.

Aside from the top and bottom lines, analysts will be paying very close attention to some other key metrics, most notably the GMV, or gross merchandise volume, in the U.S. Last year, the category grew between 5 percent and 8 percent. Mark Mahaney at Citigroup tells me that if the company can get that figure above 10 percent, the low double-digits, consistently, that'd be a huge positive for the story. He tells me, "If there is any success returning that business back to anything approaching normal industry, online retail sales growth rates, you'd want to be buying that stock all day long. We don't see evidence of that yet, but it's certainly something worth watching."

He also says PayPal's success is absolutely key to the company's success, and any weakness there could be a serious sign of trouble. Citi expects 29 percent growth on the quarter, but anything under 27 percent would be viewed negatively.

Citi offers up a helpful cheat sheet as well to navigate through earnings across the key metrics: Anything less than $2.1 billion in revenue is a negative, in line is neutral, above $2.1 billion is a positive. For EPS, under 39 cents, bad; in line to a penny above, neutral; over 40 cents a share, good. U.S. GMV under 5 percent growth, bad; 5 - 7 percent, neutral; over 7 percent, good. Active User Growth, which has spiraled downward for the past several quarters, under 5 percent, bad; 5 - 7 percent, neutral; over 7 percent, good.

Make no mistake, though: eBay is setting itself up for a pitched battle with Amazon as the net's online marketplace. We'll get a good idea today as to whether eBay is making any progress. If it is, and today's report is that classic eBay "beat and raise," investors should be rewarded handsomely. Feel like rollin' the dice?

Questions? Comments? TechCheck@cnbc.com

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