Intriguing corporate news today as eBay has announced that it is calling it quits with Paypal. The payment system, which was co-founded by electric cars and space tech entrepreneur Elon Musk is being spun off as a separate company.
The split will see current eBay Marketplaces President Devin Wenig become the new CEO of a separate eBay, and former American Express executive Dan Schulman join the separate Paypal company as CEO.
It marks the end of a long relationship between the two: Paypal initially grew as the favoured payment system amongst eBay traders, and was so popular that eBay eventually bought it outright in 2002. Now it seems that sure, whilst they had fun at the time, the spark has gone out and it is better for the kids (umm, investors) if they see other people. Hey, it’ll be okay – little baby Skype moved out of the family home and shacked up with Microsoft years ago and that was fine.
So why did they do it?
This is where it gets interesting. In the press release announcing the change, if you read through the corporate nonsense-speak, there’s some interesting phrases: It describes “A changing competitive landscape creates enormous opportunities for eBay and PayPal” and how “The benefits of the existing relationships between eBay and PayPal will naturally decline over time”.
And this actually makes sense.
From eBay’s perspective, it is going to want to offer the widest range of payment options, to make sure that people can buy goods as easily as possible. At the moment, owning Paypal it is pretty much tied to Paypal’s system – whereas it is conceivable that users may prefer to use Apple Pay or one of the other emerging payment services in the future.
Similarly for Paypal, it is obviously a competitor with the likes of Apple Pay – so wants to be accessible for other companies to use, and will want to be seen as a vaguely ‘neutral’ arbiter of payments. By being associated with eBay, other merchants might be wary of accepting Paypal: What if as you were buying something from Shop X, Paypal was to pop-up and say “Hey, you can get it cheaper on eBay!”?
If you’re into wild speculation: This might now may Paypal a tasty acquisition target for one of the big tech giants… say a Google or a Samsung looking for a quick way to grow market share in the payments space against the forthcoming Apple behemoth.
It is unclear exactly when the uncoupling will happen – but chances are it’ll take a few months as big financial events like this always do.