PayPal looks forward to a future without eBay
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PayPal looks forward to a future without eBay

We’ve all (or almost all) had relationships that we’re happy to consign to the dimly remembered past. In the case of online payment giant PayPal, that relationship is the one it shares with its first partner, online auction site (once a titan of the ecommerce landscape itself) eBay. Now, PayPal is ready to spread its wings and escape a partnership that hasn’t been working in its favour for some time.

PayPal’s share price has appreciated 32% year to date

Paypal June 3

Source: Yahoo Finance

PayPal started its life as eBay’s in-house payments system. It “broke free” in 2015, but remains in thrall to its former partner in relation to certain operating agreements with remain in force until 2020. In a recent interview with online business publication Business Insider, PayPal’s chief financial officer, John Rainey, said that the company was “looking forward” to July of that year (when it will really be free of eBay) because eBay is “not as relevant” as it was ten years ago.

Why the desire to be free of its old partner? To be blunt, PayPal’s looking mighty fine, and it suspects that once it’s free of eBay, it could extend a number of other lucrative relationships with attractive new prospects like Facebook (which it’s already in bed with).

Rainey said: “Once we are sort of freed of those shackles next year, it gives us an opportunity to go do things with some of these other marketplaces. It just gives us a freedom that we didn't have before.”

For Rainey, that means courting what’s hot once it’s dropped what’s not… and that could take it into international waters. With millions of dedicated users, the company is undoubtedly an attractive proposition: “What matters to both marketplaces and large merchants is sales. And so how are you going to increase my sales? Assume that there is a big marketplace in China [on the list] that is probably pretty Chinese-centric. What would be appealing to a company like that is that we bring 277 million customers that can then shop at that marketplace.”

In short, he summed up PayPal’s feelings thusly: “eBay is not as relevant as it was 10 years ago. When we look at where we want to tie our balloon to companies in the future, we want it to be those large and fast-growing technology platforms.”

Disclosure

Dominion holds PayPal in its Global Trends Ecommerce Fund.


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The views expressed in this article are those of the author at the date of publication and not necessarily those of Dominion Fund Management Limited. The content of this article is not intended as investment advice and will not be updated after publication. Images, video, quotations from literature and any such material which may be subject to copyright is reproduced in whole or in part in this article on the basis of Fair use as applied to news reporting and journalistic comment on events.