eBay and PayPal pairing has been one of the most successful ones since the dot-com days. Then the 2 companies decided to split off.
The Separation of eBay and PayPal
13 years have passed since eBay acquired PayPal in a $1.3 billion deal. eBay has recently decided to fight the competitiveness existing in the modern eCommerce world on its own.
According to analysts, PayPal will grow more quickly and compete more aggressively in the mobile payments field. In 2014, PayPal raised $7.9 billion, which was almost half of eBay’s total revenue. PayPal’s growth surpassed any other division of eBay.
eBay has had $2 billion – $4 billion in annual free cash flow, and much of these resources has recently been spent on funding PayPal’s innovation, acquisitions, research, and also on buying back stock from shareholders.
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What to Expect
After the breakup, it is expected that PayPal will make some purchases of its own. As some analysts suggest, PayPal could target such payment companies as Square or Stripe.
Devin Wenig, newly appointed CEO of eBay, says the company would focus on building a website for mom-and-pop retailers to sell their goods.
The company separated its enterprises division for $925 million to a consortium of private equity firms. This was a business related to creating, developing and operating online shopping sites for retailers. The sale came at a loss since the business was bought by eBay for $2.4 billion.
According to Charles King, principal analyst and president of Pund-IT, the real question has to do with whether or not eBay can change rapidly enough so to bring back some of the customers the company lost to its competitors such as Amazon. King further notes eBay needs to become a friendlier place for sellers to do business.
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