Paypal looks to grow, expand and perhaps distance itself from its traditional partner, which has grown stagnant and controversialPayPal and eBay seemed destined to be best friends forever. PayPal was built on eBay's success, but it in turn helped the auction giant to be propelled to household name status, even finding itself slipping into the colloquial vocabulary. In 2002, eBay cemented the relationship, buying PayPal. However of late, with eBay showing signs of stagnant sales and being embroiled in controversy, this longtime comrade is focusing on its efforts to move into other business markets.
PayPal President Scott Thompson announced at RBC Capital Markets conference Wednesday that by the end of the year, less than half PayPal's revenue will come from eBay buyers and sellers. Rather, the majority will now come from PayPal's Merchant Services.
In addition to providing payment services to individuals, PayPal offers Merchant Services, which provides a payment interface for corporate websites. Starbucks, Delta Airlines, and American Outfitters all use the service thanks to its simplicity and experience.
Despite being an eBay subsidiary, PayPal is finding its best interests for both itself and eBay may be focusing its attention elsewhere. "We've had organic growth with eBay, but as merchants migrated off the eBay platform (by building their own sites), they've brought us with them," explained Thompson.
The new growth has helped PayPal avoid slipping amid newfound competition from Google's Checkout and newcomer Amazon.com's new payment service. Amazon.com, a perennial eBay rival, recently introduced a competitive service titled Checkout by Amazon.
However, by all signs, PayPal is still king. It owns 33 percent of the payment traffic on the top 100 e-commerce sites in the United States. In Q2 2008, it reported revenue of $602M USD, a 33 percent rise from a year prior. Similarly, payment volume was up to $14B USD, or 35 percent growth.
PayPal is not just looking to move away from eBay, it’s also looking to branch out in the booming overseas market as well, raking in new business in China and India, among others. Mr. Thompson stated, "By the back half of 2009, the international business will exceed our North American business."
A key developing sector for PayPal is mobile payments. In the U.S., this service has failed to catch on, despite heavy investment. As a result, Mr. Thompson has decided to steer PayPal's mobile efforts primarily into the international markets, especially countries where robust electronic infrastructures don't exist. He says China and Russia are prime examples of promising markets.
He added optimistically, "In Russia, lots of people stand in line to pay their bills every month. That's a perfect use case for PayPal."
