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Businesses The Almighty Buck The Internet Technology

eBay To Spin Off PayPal 76

In 2002, eBay bought PayPal for $1.5 billion in stock. Nowadays, PayPal's yearly revenues exceed $7 billion, and investors are worried that eBay and PayPal together are too big to compete effectively. (They're also too big to be acquired, which is on their minds after the ludicrously successful Alibaba IPO.) To solve that problem, eBay today announced it will be spinning off PayPal in 2015, creating two separate publicly traded companies. eBay's current CEO is stepping down, and each of the companies will have a new CEO. "As part of the separation, eBay and PayPal will sign arm’s length commercial operating agreements to work together, with payments on both sides for various referrals and services. That’s no surprise since about 30 percent of PayPal’s business is still on eBay, although that is down from 50 percent only a few years ago."
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eBay To Spin Off PayPal

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  • by jenningsthecat ( 1525947 ) on Tuesday September 30, 2014 @12:40PM (#48028727)

    in the admittedly unlikely but highly desirable eventuality of PayPal going down in flames.

    • by meloneg ( 101248 ) on Tuesday September 30, 2014 @01:14PM (#48029039)

      I'd think the reverse is more likely, eBay going down in flames and PayPal surviving. PayPal has diversified and isn't nearly as reliant on eBay while eBay competition has grown and they've lost their original focus.

      • eBay and Paypal are mutually beneficial. Paypal is absolutely reliant on ebay for sheer volume. It's their foundation.

        But I just don't think sellers liked being cornered into having to accept PP 99% of the time.

        eBay is off it's core market, chasing more lucrative opportunities. Problem is, they don't own that other market (amazon, alibaba), never will, and are pissing off their base with every new change. It's the curse of needing constant growth in our economy.

        • by tlhIngan ( 30335 )

          eBay and Paypal are mutually beneficial. Paypal is absolutely reliant on ebay for sheer volume. It's their foundation.

          But I just don't think sellers liked being cornered into having to accept PP 99% of the time.

          eBay is off it's core market, chasing more lucrative opportunities. Problem is, they don't own that other market (amazon, alibaba), never will, and are pissing off their base with every new change. It's the curse of needing constant growth in our economy.

          Well, eBay and Paypal are fundamentally tied t

  • However, I would be enlightened to understand why the two of them are too big to compete in the market place. Isn't the the whole idea of constant acquisitions. To be so big that you can "optimize and synergize" every damn thing out there? Eh, maybe they are right. Bigger you are the worse you are at doing the mundane.
    • Yes – the reason to merge is to "synergize." However, you are assume that mergers always lead to the expected benefits. This only actually happens about 1/3 of the time. About a 1/3 of the time you get "bleh". And about 1/3 of the time you get dissynergies. Not all marriages work out to be happily ever after.

    • by tomhath ( 637240 ) on Tuesday September 30, 2014 @02:34PM (#48029741)
      PayPal can't go after other auction/retail business because it's part of eBay, eBay can't use other payment systems because it owns PayPal. By splitting them apart there's more room for both of them to grow. Kind of a reverse gestalt.
      • This is correct. The business I work for had to do the same thing. We had different divisions that had different core competencies that synergized well, but having them joined at the hip made it impossible to diversify. Customers looked at you with disdain because they thought you'd treat them like a second class citizen to your sister company. Truth was we wanted to diversify because all parts of the business were simply too reliant on the one big customer, and it made the companies worse. Separating

      • Sounds reasonable. My employer, long before I hired on, did much the same thing.

        They split off one part of the business as a separate company, since the one company's customers were customers of the other company. This meant that the customers of the spun-off company's competitors were at a disadvantage. Or were perceived to be.

        Post-spinoff, Company S's customers wouldn't be locked in to using Company E. And customers of companies competing with Company S wouldn't feel like they were getting less atte

  • by Animats ( 122034 ) on Tuesday September 30, 2014 @12:43PM (#48028767) Homepage

    Then eBay can become a bank. In exchange for more regulation, they get to do lending and can borrow from the Fed.

    • by nospam007 ( 722110 ) * on Tuesday September 30, 2014 @01:00PM (#48028905)

      "Then eBay can become a bank. "

      Since July 2007, PayPal has operated across the European Union as a Luxembourg-based bank.

      • by aitikin ( 909209 )

        "Then eBay can become a bank. "

        Since July 2007, PayPal has operated across the European Union as a Luxembourg-based bank.

        But within the US they are not considered a bank, allowing PayPal to freeze funds of US citizens with no legal reason or ramifications. Additionally, point to make towards the OP, PayPal has owned Bill Me Later for a long time, and have been lending for years.

      • There is a huge regulatory difference. (At least from the US perspective. I think Europe is roughly in line.)

        Pay Pal is currently a "money transfer agent". That has fairly light regulatory requirements, mainly around money laundering.

        If Pay Pal began offering financial services – like credit cards, then it would be treated as a real bank. This means a whole new world in terms of regulations. It also means that the Federal Reserve would not only regulate Pay Pal but would also regulate eBay as a bank h

        • BillMeLater is now Pay Pal Credit. [billmelater.com] Maybe that's the direction they are heading?

          • That is an exclent example to my point. BillMeLater is explicitly not a bank and does not offer loans, credit card services etc. It is a payment system. The "Bill Me Later" part is handled by a outside 3rd party - Comenity Capital Bank

  • I pay everything in Dogecoins.

  • PayPal's yearly revenues exceed $7 billion ... they're also too big to be acquired, which is on [investors'?] minds after the ludicrously successful Alibaba IPO

    Just ask for dividends.

    • PayPal's yearly revenues exceed $7 billion ... they're also too big to be acquired, which is on [investors'?] minds after the ludicrously successful Alibaba IPO

      Just ask for dividends.

      What are you, some kind of Communist?

  • address the customer service problems. I regard PayPal as unusable.
    • by Nyder ( 754090 )

      address the customer service problems. I regard PayPal as unusable.

      They won't. That cuts into the bottom line.

  • by Anonymous Coward

    Despite his ego Icahn doesn't count as plural. I wish that guy would STFU and I also wish that the term "activist investor" would stop being applied to greedy people like him. It's not like he's promoting clean energy or trying to shut down sweatshops or such.

  • Interestingly, this was predicted quite a few years out. I wonder what took so long?

    Kucera over at Bloomberg seems to be one of the earliest analysts to identify it back in very early 2012: http://www.bloomberg.com/news/... [bloomberg.com]

  • how to the rich get richer? they have sponsors like carl icahn who come up with nefarious plans to squeeze profits from services, ahem, from customers.

  • I wonder what the over/under is on how long before the new ebay creates yet another version of PayPal?
  • by Anonymous Coward

    Pardon my ignorance but i don't understand the term spin off in this sense. Ebay owns paypal now but wont after this is that correct? what compensation does ebay and its stock holders get for spinning off paypal. If they are not selling PayPal how do they make money from getting rid of it. If they are not making money why would they let this huge profitable part of the business go for free. can someone explain how the spin off works.

    • Re: (Score:3, Informative)

      by smwny ( 874786 )

      Pardon my ignorance but i don't understand the term spin off in this sense. Ebay owns paypal now but wont after this is that correct? what compensation does ebay and its stock holders get for spinning off paypal. If they are not selling PayPal how do they make money from getting rid of it. If they are not making money why would they let this huge profitable part of the business go for free. can someone explain how the spin off works.

      Its stock holders get an equal number of shares in the new company. So if you own 10 shares of ebay, you will now own 10 shares of ebay and 10 shares of paypal. You can then buy and sell each one independently of the other. For some companies, the whole company is greater than the sum of its parts. In this case, the powers that be (the board members), have decided that each one would be worth more on its own than bundled together.

      This could be because they are interested in acquisition. It could be they

  • "investors are worried that eBay and PayPal together are too big to compete effectively." Ebay and Paypal don't compete. Ebay doesn't have any payment services (BillMeLater is also owned by Paypal). Paypal doesn't let people post items for sale.
    • They compete in the sense that eBay + PayPal is a competitor to something like Amazon which means Amazon won't let people pay via PayPal.

      Split off, with PayPal on its own again, then only eBay will compete with Amazon directly, although PayPal will still compete with Amazon payments, there is a better chance Amazon will accept it, since they want to let people spend money.

      And on the other side, there is no real advantage to eBay in keeping PayPal linked. It will still be a payment option just as it is now.

  • by jonwil ( 467024 ) on Tuesday September 30, 2014 @04:37PM (#48030753)

    For example, if eBay no longer owns PayPal (or has any connection to it) they no longer have the incentive to force people to accept it (or like they did in Australia before they got in trouble for it, make PayPal the only method of payment).

    Also maybe this will impact the ability of eBay to do certain things they do now like holding money from an eBay auction instead of releasing it to the seller straight away.

  • The holy grail for me would be the ability to make payments on Amazon using PayPal, something not currently possible since they are rival companies with eBay in the mix.

    But once it gets spun out or sold, perhaps, maybe, Amazon will begin accepting it. And I would love that.

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