Tuesday, 21 July 2015 11:17
Where to from here for PayPal and eBay?
Internet giants map their separate journeys
PayPal and eBay, two of the biggest names on the internet are now officially split, and the markets seem delighted.
Shares rose 5% during the first day of separate trading yesterday, and while there are few doubts that both companies will do well as separate entities, what is still unclear is what direction they will now take - especially PayPal, which is now free to work with rivals and has already announced that it would like to develop in foreign exchange, competing with Western Union and other money transfer companies.
CEO Dan Shulman has said: "It is clear that the potential for mobile technology to transform money extends beyond commerce. The vast majority of the world’s 7 billion people lack access to even basic financial services,” Schulman said.
PayPal processed $235 billion in total payment volume last year and logged revenue of about $8 billion. It plans to grow market share in mobile and online payments as well as expanding in areas like in-store payments. It has more than 160 million active accounts, global scale and brand recognition. It is now valued by the markets at over US$50bn. Trading on the Nasdaq Stock Exchange under the stock ticker “PYPL” shares jumped $2.14 to $40.40 on Monday.
eBay, which has been working on streamlining its business by selling some units, is now focused on reinvigorating its marketplace business, which includes the eCommerce arm of eBay. eBay plans to focus on small to medium-sized merchants.
PayPal on the other hand is hoping to get more merchants to accept its payments in stores. They also want PayPal users to pay with the service two/three times a week rather than the current average of two/three times a month. While PayPal has long been eBay's fastest-growing segment, it will have to compete with mobile wallets including Apple and Android Pay and online payment offerings including those from Chinese e-commerce retailer Alibaba and other retailers.
PayPal has been expanding through acquisition of new ideas. In the US, for millennials, there is the Venmo P2P app which is linked to a bank account or card and lets users pay friends with a text-like note.
The Subway app powered by PayPal-owned Paydient is the No. 2 food and beverage app in the US iOS app store and can be used in 30,000 stores. And Burger King is letting users pay with PayPal in 5,000 stores.
PayPal also plans to grow internationally via its acquisition of Xoom which lets users send money from the US abroad.
"We believe our technology platform, global reach and trusted brand can move PayPal from being an occasional transaction to being an integral part of consumers' financial lives," Schulman said.
As separate units, eBay faces stiff competition from Amazon and other online retailers that have gained market share from traditional brick-and-mortar stores. It also has to contend with the lingering effects from a cybersecurity breach and changes in Google's search algorithms that led to fewer eBay results popping up in Google searches.
EBay has streamlined by selling some businesses, and is now focusing on reinvigorating its marketplace business, which includes the e-commerce arm of eBay. On Thursday, CEO Devin Wenig said the company now is asking sellers to include more detailed product identifiers on their product listings, which seems to be helping search results.
Wenig said the company is also focusing on gaining traffic through social media. It was an early adapter of shoppable ads on Facebook and Pinterest and has increased efforts on Tumblr Instagram, Snapchat and Twitter's Periscope to drive traffic and user growth.
"While still small relative to our more established channels, traffic from social channels is growing over 100% year-on-year in the US," he said.