Rob
8th July 2002, 13:31
Paypal has been sold to eBay for $1.5b dollars! What are your views on this? Remember how eBay screwed some get-paid programs such as PrimaRewards and CreationsRewards out of earnings? Is this a good thing for us?
Full story follows...
On Monday, eBay said it is acquiring online payments company PayPal in a deal valued at $1.5 billion. eBay will also phase out its own competing service, eBay Payments by Billpoint.
PayPal, which went public earlier this year, allows consumers to make and accept payments over the Internet without using a credit card. The bulk of its business comes from eBay auctions.
With the acquisition, eBay gains control of the popular electronic payment service favored by many of its customers. "PayPal is the 'gorilla' in the online payment market, as eBay is the 'gorilla' in the online auction market," Merrill Lynch analyst Justin Baldauf said in a research note.
eBay bought Billpoint in May 1999 but did not fully launch the service until spring 2000. Despite heavy promotion, Billpoint has struggled to win market share from PayPal.
According to PayPal, it handles payment for one in four winning auctions on eBay. Given that eBay is hoping to boost the use of electronic payments for auctions, analysts said it was easier to buy its rival than to beat it.
eBay said it is hoping to increase the number of electronic payments made via eBay. The bulk of transactions on eBay are still conducted via check or money order.
eBay CEO Meg Whitman said the PayPal acquisition will help both customers and the company's bottom line by speeding up the payment process. Buyers and sellers complete transactions days faster using electronic payments, Whitman said.
Whitman, speaking on a conference call, said about 40 percent of eBay transactions are settled with electronic payments, a figure she hopes will "increase dramatically."
"It's very hard to give a specific number--two years ago it was practically zero--but I would think 60 to 70 percent range would be a realistic goal," she said.
Although the PayPal-eBay rivalry was heated at times, the two parties said they had been talking over a deal for a month. Analysts had long expected some sort of deal between the two companies.
"eBay and PayPal have built vibrant user networks on the Internet," PayPal CEO Peter Thiel said in a statement. "The beauty of this deal is that it will allow us to offer our communities new tools and added flexibility to do more business."
One longtime eBay and PayPal user, however, wasn't impressed.
Harrisville, Rhode Island, resident Donna Pelletier said the acquisition of PayPal gives eBay too much control over her business.
Pelletier, who sells books and collectibles on eBay, had avoided using eBay's Billpoint service. She said she may abandon PayPal, even though her customers use the service to pay for about 80 percent of her auctions.
"I don't want to get rid of PayPal, but I may have to down the road because I just don't think it's right," Pelletier said. "My auctions are supposed be my business. I don't want eBay having total control of it."
Changes for PayPal
PayPal will continue to offer its service as an independent brand, but there are some changes ahead.
eBay Chief Financial Officer Rajiv Dutta said eBay will discontinue PayPal's online gaming business, which was expected to account for 10 percent to 15 percent of total revenue in fiscal 2003. Dutta said the move is due to the "uncertain legal situation" around online gaming. Citibank recently said it would stop allowing its credit cards to be used for online gambling, and a bill is currently pending in Congress that would ban online gambling.
PayPal also brings other problems to the table. A few states have begun to question whether the business constitutes illegal banking or money-transmitting services. PayPal also faces several class-action lawsuits from customers who claim the company illegally froze their accounts.
eBay's biggest goal right now should be improving PayPal's somewhat poor reputation for customer service, said Forrester Research retail analyst Carrie Johnson.
"PayPal users have a love-hate relationship with the service mostly because of customer service problems," she said. "PayPal has had so many problems with customer service in terms of being difficult to reach, etc. If eBay can put a little muscle behind the service, PayPal users will be pleased, as opposed to being alienated or frustrated by the change."
PayPal has tried to branch out beyond eBay and launched a bill payment service in February. Thiel said on the conference call that "seamless integration" with eBay should enhance such services.
But Forrester's Johnson said she believes eBay may dump the extra services to focus on auctions.
"There's plenty of room to grow in the auction business," she said. "PayPal had to look for other sources of revenue. eBay doesn't have to do that. I would expect them to make sure they can get the core service down pat."
Full story follows...
On Monday, eBay said it is acquiring online payments company PayPal in a deal valued at $1.5 billion. eBay will also phase out its own competing service, eBay Payments by Billpoint.
PayPal, which went public earlier this year, allows consumers to make and accept payments over the Internet without using a credit card. The bulk of its business comes from eBay auctions.
With the acquisition, eBay gains control of the popular electronic payment service favored by many of its customers. "PayPal is the 'gorilla' in the online payment market, as eBay is the 'gorilla' in the online auction market," Merrill Lynch analyst Justin Baldauf said in a research note.
eBay bought Billpoint in May 1999 but did not fully launch the service until spring 2000. Despite heavy promotion, Billpoint has struggled to win market share from PayPal.
According to PayPal, it handles payment for one in four winning auctions on eBay. Given that eBay is hoping to boost the use of electronic payments for auctions, analysts said it was easier to buy its rival than to beat it.
eBay said it is hoping to increase the number of electronic payments made via eBay. The bulk of transactions on eBay are still conducted via check or money order.
eBay CEO Meg Whitman said the PayPal acquisition will help both customers and the company's bottom line by speeding up the payment process. Buyers and sellers complete transactions days faster using electronic payments, Whitman said.
Whitman, speaking on a conference call, said about 40 percent of eBay transactions are settled with electronic payments, a figure she hopes will "increase dramatically."
"It's very hard to give a specific number--two years ago it was practically zero--but I would think 60 to 70 percent range would be a realistic goal," she said.
Although the PayPal-eBay rivalry was heated at times, the two parties said they had been talking over a deal for a month. Analysts had long expected some sort of deal between the two companies.
"eBay and PayPal have built vibrant user networks on the Internet," PayPal CEO Peter Thiel said in a statement. "The beauty of this deal is that it will allow us to offer our communities new tools and added flexibility to do more business."
One longtime eBay and PayPal user, however, wasn't impressed.
Harrisville, Rhode Island, resident Donna Pelletier said the acquisition of PayPal gives eBay too much control over her business.
Pelletier, who sells books and collectibles on eBay, had avoided using eBay's Billpoint service. She said she may abandon PayPal, even though her customers use the service to pay for about 80 percent of her auctions.
"I don't want to get rid of PayPal, but I may have to down the road because I just don't think it's right," Pelletier said. "My auctions are supposed be my business. I don't want eBay having total control of it."
Changes for PayPal
PayPal will continue to offer its service as an independent brand, but there are some changes ahead.
eBay Chief Financial Officer Rajiv Dutta said eBay will discontinue PayPal's online gaming business, which was expected to account for 10 percent to 15 percent of total revenue in fiscal 2003. Dutta said the move is due to the "uncertain legal situation" around online gaming. Citibank recently said it would stop allowing its credit cards to be used for online gambling, and a bill is currently pending in Congress that would ban online gambling.
PayPal also brings other problems to the table. A few states have begun to question whether the business constitutes illegal banking or money-transmitting services. PayPal also faces several class-action lawsuits from customers who claim the company illegally froze their accounts.
eBay's biggest goal right now should be improving PayPal's somewhat poor reputation for customer service, said Forrester Research retail analyst Carrie Johnson.
"PayPal users have a love-hate relationship with the service mostly because of customer service problems," she said. "PayPal has had so many problems with customer service in terms of being difficult to reach, etc. If eBay can put a little muscle behind the service, PayPal users will be pleased, as opposed to being alienated or frustrated by the change."
PayPal has tried to branch out beyond eBay and launched a bill payment service in February. Thiel said on the conference call that "seamless integration" with eBay should enhance such services.
But Forrester's Johnson said she believes eBay may dump the extra services to focus on auctions.
"There's plenty of room to grow in the auction business," she said. "PayPal had to look for other sources of revenue. eBay doesn't have to do that. I would expect them to make sure they can get the core service down pat."