While eBay (NASDAQ: EBAY) has been working hard to manage its marketplace in a trying economy, its PayPayl business has been growing comfortably and could become the company's biggest earner. For the past two years, eBay has focused on improving the look of its website and helping buyers and sellers to get along in a virtual world built entirely on trust.
In the background, though, the segment of the business that moves money from Point A to Point B has been on fire. Even with payment processing competition from Amazon (NASDAQ: AMZN) and Google (NASDAQ: GOOG), PayPal has been able to do more than hold its own.
From its 1998 start, PayPal has become a behemoth, posting $688 million in revenue last quarter, up 15% year-over-year. And, more people are using the service: from 65 million active users at the end of Q3 2008 to 78 million by the same point in 2009. In addition to momentum from already widespread adoption, PayPal doesn't share users' financial info with merchants, providing an extra layer of privacy.
So, PayPal is at the front of the electronic payment market and doesn't yet have any nearby threat. By 2011, eBay CEO John Donahoe expects PayPal to pull in revenues of $4 billion to $5 billion, while the marketplace business -- consisting of eBay.com, Shopping.com and other selling sites -- is forecast to reach $5 billion to $7 billion in revenue that year. Donahoe also believes that PayPal could generate more profits than the marketplace business (later on), even though the margins are thinner.
The next generation for PayPal looks like it will be the intersection of small payments and small blogging (micro logging, that is). A new solution, Twitpay, has been launched using access offered to outside developers. Essentially, PayPal is deputizing the software development community -- as Twitter, Facebook and Apple (NASDAQ: AAPL) have -- to extend the opportunities for user interaction . . . and ultimately revenue passing through to PayPal itself. Initially, Twitpay used Amazon to move money but changed because of PayPal's large user base.
That said, PayPal doesn't have an unobstructed future. Even now, many of the 3 million retailers that work with PayPal also offer other solutions, such as Google and Amazon. So, as PayPal brings in new merchant clients, it may pave the way for competitors to follow quickly. This may be the future of eBay . . . but it's a business everyone wants to be in, too.











Reader Comments (Page 1 of 1)
11-05-2009 @ 10:16AM
bill said...
Paypal has ruined ebay. I used to be a regular ebay buyer of all sorts of things. Once ebay did the paypal cram down on sellers thousand of people like me were done. Sellers, even if they don't want to use paypal are forced to list it as primary payment source and use it. Sellers that would otherwise still take credit cards and money orders essentially can't list that for customers.
Several years ago I resignedly did the paypal registration. Gave the credit card information and everything else. First transaction? Failure. Paypal demanded my primary bank information including routing number as (what they referred to as) "backup" so that they could tap into my account for payment if the credit card didn't work. No fucking way Paypal. I gave you the credit card info. If that isn't enough then no business. You will never have access to my bank account. Anyway I no longer patronize ebay. Paypal is a monopolistic scam of evil proportions.
11-05-2009 @ 12:11PM
DOLLY said...
PAYPAL IS NOT A BANK!!!!!!You don't hav ethe [protection you think. You should see the fees Paypal hoses sellers on ebay down with. They pay ebay fees and paypal fees. I stopped selling on ebay, as did many others about a year ago. The fees are insane and there are layers upon layers of them. I am sure they are trying to get Paypal to be a sponsor here, so that's why they don't tell you what a rip off paypal is, and that Paypal is under investigation in almost every state. Yes, I have a Paypal account, but I rarely use it anymore, as I don't use ebay much anymore if at all.
11-05-2009 @ 12:14PM
Paul said...
Paypal killed my father!!!
11-05-2009 @ 1:08PM
Douglas Anderson said...
Paypal is the most arrogant a**hole vendor in the whole Internet universe. I have refused to use them since the day they wanted me to fax my bank statement to them years ago to prove I exist. My daughter signed up using my account and then my wife tried to register using the same account - both are signatory to the account - and Paypal refused to enroll my wife using the excuse that "this account is already in use." Duh! Can't you have more than one signatory on a checking account? And that sums up how anal retentive these a**holes are!
11-05-2009 @ 1:29PM
schnazzybo said...
Paypal is a joke, they have cost me money twice , taken the side of a scammer vs an obvious longtime ebay user with 100% feedback, and ebay is worse for running a monopoly with Paypal, telling sellers they HAVE TO use Paypal or cant post a listing
well, I stopped using ebay and Paypal and Im happier for it
oh, the best part......now Meg Whitman wants to run California?
B>S>
11-05-2009 @ 1:27PM
spugadiccio said...
I still sell on ebay but just to let the people that buy on ebay know.... at the end of the year my total ebay and paypal fees are 17% of the gross sales . Ebay and paypal make more money off our sales than we do (11.5%) - just fyi.....
11-05-2009 @ 2:05PM
Coop said...
Wow - I thought I was the only one who felt that PayPay was a total crock of sh*t. eBay lost me as a regular seller when they forced PP on everyone. I sold a very expensive piece of electronic gear on eBay and the buyer used PP to "buy it now." Then the buyer complained that the USED gear had a scratch on it. eBay denied his claim. Even PP denied his claim. But, then the buyer called his credit card company and PayPal rolled over for them! Fortunately, I had transferred my PP balance to my bank already or PP would have stolen it. They still claim that I owe them $80 or so and have my account locked. Fine with me - I wouldn't do business with or through PayPal if it meant never doing online business again. Investors, read these comments and beware. PayPal sucks and lots of us would be happy to drive them out of business.
11-05-2009 @ 1:40PM
Jon said...
Paypal sucks!! Im wondering, if all the people are not using Paypal,, how is Paypal still bringing in revenue?? They are a scam. You sign up and then they want you to fax them your life story just to you can prove to them youre the person on the account. Im thinking ,,, ok i opened up a paypal account, i have a bank account, i sumbitted the 2 small deposits that paypal sent to my bank to activate and prove im the account holder. Now they want you to fax them your license, SS Card and then if you want limitaions removed , you have to put in a 4 digit code from your monthly bank statement.
How much more do they need?? How does anyone put up with this? Paypal didnt does this stuff 10 years ago,, why now??
11-05-2009 @ 2:08PM
Coop said...
I'd love to see all of us who obviously HATE PAYPAL get together and put them under! PP is going to ruin eBay, too. No problem - I've already switched to Craigs List.
11-05-2009 @ 4:32PM
Jon said...
Burn in Hell Paypal. All they do is freeze accounts and ask for your life story.