Ebay buys PayPal

mdahlman was among several readers who submitted the story that eBay has bought Paypal in a deal worth $1.5B in stock. The article is mostly numbers and money related stuff, but it also briefly mentions some of the controversy surrounding eBay.

if you can't beat them, buy them

[Anonymous Coward]

eBay had long had the "Billpoint" payment option, but very few people used it--instead, PayPal became very popular. Although it wasn't as easy to set up as Billpoint, it didn't have any silly fees (at least not from when it began) and just worked better.

So I find it funny that this happens now :)

controversy

[AlgUSF]

Controversy over eBay? How about the controversy over Pay Pal (the Gestapo of the 21st century).

Re:Smart Move for Ebay, bad for paypal people.

[Washizu]

Who else can see paypal becoming a "have money sent to you, but only be allowed to be spent on ebay" type of service?

I do not. If paypal becomes the universal standard for person to person financial transactions online, they stand to make much more money than if they only sold "ebay bucks."

Bye Bye Billpoint

[asv108]

From the WSJ:

EBay agreed to buy PayPal, a popular payment service, in a stock-swap transaction valued at $1.5 billion. EBay, which separately reported stronger-than-expected earnings, will phase out its in-house Billpoint unit.

I'm sure billpoint wont be missed until paypal fees are raised due to lack of competition.

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[account_deleted]

Comment removed based on user account deletion

BayPal, ePay?

[cybermace5]

This is an interesting development. I really don't think we should be worried about some kind of monopoly appearing here, since the success of eBay depends on hundreds of thousands of sellers.

We've seen a few moves like this on eBay's part. This is another way that eBay is trying to shield itself from being slaughtered in the current economy.

First, you have eBay beginning to offer benefits for sellers over a certain income margin, which should encourage sellers to stay with eBay, which increases eBay's financial security. Then, you have eBay buying PayPal. PayPal is one of the most influential external factors to the success of eBay; if PayPal went under, many sellers and buyers would have more difficulty making transactions.

This also allows eBay to begin attacking the single factor that keeps many people from buying at online auctions: fraud. Before now, eBay did not have any ability to track fraudulent users, or take any action against them if they used PayPal. Now, they have the ability to go after and probably halt fraud for the most part.

Overall, this looks like a very intelligent business move, and one that should help continue eBay's pattern of success.

Domination of an Industry

[pgrote]

It is the domination of an industry. Period. There are no viable alternatives to either.

eBay has 85% of the market.

PayPal has almost the same numbers.

What you get is one company that can control everything in the process of selling goods auction style online. Fees are raised, people who don't play the game get squeezed out.

Yahoo has seen the light and has stopped their auction services in every country except America. Where do the send the traffic? eBay of course.

I like eBay and I like PayPal. I don't like the combination. eBay has shown a historical record of squeezing out the little guy. They will continue this with PayPal who already has draconian methods of handling customer service.

This is a monopoly of an industry pure and simple. The only thing left for ebay to buy is a delivery company and it will be complete.

One of the chief metrics used to determine a monopoly is viable competition. On this web we use it all the time to look at Microsoft. Here it applies as well. Is there a viable alternative to eBay. No. Is there a viable alternative to PayPal. No.

Re:Why buy a bad reputation?

[happystink]

Because it would take them far more than 1.5 billion to gain the market dominance that Paypal has, and because Paypal only has a bad rep among a small percentage of internet users who reside on boards like this. Any huge company is going to have unhappy users, any huge financial one even moreso, just because you find a dozen unhappy stories (or one sides thereof) at paypalsucks doesn't mean the company is the sham it's portrayed as there.

Re:Domination of an Industry

[FlyingDragon]

One of the chief metrics used to determine a monopoly is viable competition.

Ahh... but one of the other metrics is the barrier to entry for the market. Office applications and operating systems have a massive barrier. In online auctions, any trusted site can open an auction to chip niche markets away from eBay. With some luck, it will hit mainstream and take a bite out.

Ebay vs. Amazon zShops

[quistas]

While I don't have numbers, I think you'll find zShops is more popular than you think. I buy used stuff off of Amazon constantly, not only because I've found some great prices, but because I don't have to use PayPal.

And my wife, who runs a bookstore, tells me that her store lists their collectable stuff on Amazon and does well with it.

From a user perspective, it's much easier to wander around on Amazon, find the book you want, compare (if applicable) the new/used price, and then order it from some random book dealer without having to deal with back-and-forth emails or new payment options. If you head to eBay and search right off the front page for a book title, you're likely to turn up 20-some irrelevant responses (Brand New Copy L@@K!!! keyword keyword).

-- q

BillPoint problems coming to paypal?

[Cyberllama]

I, like many other eBay users, will only accept paypal with my auctions because like many others, I have been jilted by the poor quality of service of ebay's own service, Billpoint. While PayPal is certainly not known for being big on customer service, it has always had one thing going for it that kept it alive: It wasn't billpoint.

Paypal's service survived until simply because, shocking as it seems given the horror stories, it was better than the eBay offered alternative. Now with eBay having snagged it, it seems unlikely that they will abstain from changing and likely ruining the service.

Sad indeed.

Ebay announces increase in P/E ratio

[jrennie]

Viewed through dot-com glasses, I have trouble seeing the sense in this purchase. Through more traditional financial analysis, I have even more trouble.

EBay is a profitable company (strange, I know!). PayPal is not. Hell, it ain't even close (-78.7M ttm income vs. 139.6M revenue). Buying PayPal puts a serious dent in EBay's own numbers. Before the purchase, its P/E ratio was about 146 ($17B market cap divided by $117M income---I'm looking at 3/31/02 numbers). After, it will be about 448 ($17B market cap divided by $38M income). If that doesn't look bad, consider profit margin. It's currently about 14% ($117M income divided by $840M revenue). After PayPal, it drops to 4% ($38M income divided by $979M revenue). Ouch!

EBay seemed to be one of the (very) few dot-com companies with a head on its shoulders. Now I even wonder about EBay.

Btw, did EBay really think that PayPal would be around for *that* long? At the rate it's bleeding cash and annoying customers, I'd think it would be dead in another 3-4 years. Or, did the EBay CEO forget that sometimes it's useful to think of the long-term future of a company?

Jason