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EcommerceBytes-NewsFlash, Number 2843 - July 09, 2012 - ISSN 1539-5065    2 of 3

Tenth Anniversary of eBay's PayPal Acquisition

By Ina Steiner
July 09, 2012

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VentureBeat noted on Sunday that the day marked the 10-year anniversary of eBay's acquisition of PayPal. History now heralds the deal as a coup for eBay's then-CEO Meg Whitman, but she had resisted acquiring the payment service, instead acquiring BillPoint and attempting to crush PayPal with its own online payment service. Whitman paid $1.5 billion for PayPal in 2002, and she later acknowledged she could have paid less had she acted sooner.

At the time, eBay was earning much more revenue than PayPal: eBay revenue was $266 million in the second quarter of 2002, while PayPal's revenue was between $53 - $54 million.

Fast forward to today, and PayPal is catching up to its parent - eBay reported net revenue of $1.7 billion for eBay Marketplaces in the first quarter of 2012, and $1.3 billion for its payments unit. In fact the payments unit is growing faster than marketplaces and eBay is pinning its hopes on PayPal to help it grow in the mobile and local commerce space.

Prior to the acquisition 10 years ago, PayPal was very nervous about the power eBay wielded over its customers who sold on eBay. The fear eBay could suspend sellers who advertised PayPal in their eBay listings was very real, and most likely the reason it chose to sell to eBay.

This article from July 2002 provides an interesting look back at the news, as does this transcript of an October 2002 meeting with eBay executives where they answered seller concerns.

One common concern at the time was whether eBay and PayPal would "share" account suspensions: "If an account was frozen by PayPal will my eBay account be too," asked a seller at the meeting. eBay executive Alex Kazim answered, "Currently we have no plans to link the accounts like that."

Other concerns revolved around the monopoly power an eBay-PayPal entity could wield. eBay has indeed since required sellers to accept PayPal when selling on its Marketplace in many situations, prompting a lawsuit by sellers on 2010 against eBay's practices that is still ongoing.

About the author:

Ina Steiner is co-founder and Editor of EcommerceBytes and has been reporting on ecommerce since 1999. She's a widely cited authority on marketplace selling and is author of "Turn eBay Data Into Dollars" (McGraw-Hill 2006). Her blog was featured in the book, "Blogging Heroes" (Wiley 2008). Follow her on Twitter at @ecommercebytes and send news tips to ina@ecommercebytes.com.

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