19 February 2012
Last revised 11 May 2012
There’s more involved in judging the future of a commercial entity than simply its published financials and its disingenuous PR nonsense, and this applies especially to eBay/PayPal, who, under the direction of John Joseph Donahoe, have become the two most despised commercial entities on the planet—even more despised than “the banks”—and that has taken some doing ...
“When Do We Start Calling eBay A [Failed] Payments Company?”
A picture is worth a thousand words, so they say. The above graph lifted from an 18 January 2012 “Business Insider” article (with the same headline) shows quite starkly how—notwithstanding eBay’s “reductions” [sic] in fees and Donahoe’s pursuit of big name national “brands”—eBay’s Marketplace gross market value has been stagnant since 2007 when this headless turkey from Bain & Co got hold of the tiller and started his “destructive renovations”. Likewise, eBay’s share price has moved little in the same period. Ergo, relatively speaking, the eBay marketplace has effectively been in decline since 2007.
And here is another graph from another “Business Insider” article on 18 April 2012 showing clearly that eBay's marketplace business drags behind the overall growth of the U.S. e-commerce market. “Since mid-2007, eBay's gross merchandise volume, excluding vehicles, has consistently underperformed industry growth.”
And, those big name national “brand” merchants that Donahoe has pursued, and whose business has done no more than barely fill the hole created by the many other merchants that he has driven away, will also dump the clunky eBay/PreyPal duo and their fees when it suits them. Anyone who thinks otherwise is dreaming.
It should be obvious, even to the simplest of analysts, that as time passes, the “Amazon” flows ever more strongly, whereas the eBay Marketplace now consists of a chain of stagnant ponds covered in slimy green algae—and isn’t that a couple of rusting Chinese-made shopping trolleys that I can see dumped therein?
The graph also shows the eBay-underpinning increases in revenue that eBay has received from PreyPal since 2007, that is, from when the “eBafia Don” effectively mandated PreyPal’s use on the eBay Marketplace. Some analysts therefore, naively, think that eBay’s future lays in PayPal.
“PayPal will become bigger than eBay in the next 3–5 years”—John Donahoe, eBay Analyst Day, 10 February 2011
Notwithstanding Donahoe’s obviously delusional mental state, eBay’s chief headless turkey has got that right: undoubtedly PreyPal will soon be bigger than eBay, but it won’t be because PreyPal has gotten any more successful, just the opposite—Visa’s V.me and MasterCard’s PayPass digital wallet will see to that—it will be because the eBay “house of cards” has finally imploded.
Even Wall Street recognises the fact that eBay is going nowhere: take a look at the share price performance of Amazon or the “bankcards”, Visa and Mastercard, over the past five years and then look at eBay’s share price performance. Yuck!
Regardless, if anyone thinks that the retail banks are going to let a layer of middlemen—in particular the parasitic, clunky, unregulated, “merchant of sorts”, PreyPal—all of whom, after all, do no more than ride, precariously, on the back of those same banks’ own payments processing systems—continue to nibble away at one of the banks’ principal areas of business for any length of time, all I can say is, dream on.
PreyPal—in particular—is little more than a particularly clumsy, fraud-enabling middleman, the use of which logically nullifies the statutory protections that, in many countries, would otherwise be available to consumers paying a merchant directly via a bank-issued credit card.
Why should the credit card issuer have any liability for any fraud perpetrated further down the line, fraud that is only able to be committed principally due to PreyPal’s unsatisfactory verification and assessment of its account holders? Who then carries the risk for such fraud? The PreyPal account holder, apparently. And on top of that, without pressure from the media, PreyPal will make absolutely no effort to assist anyone, buyer or seller, so defrauded.
Not even from Western Union can a payee receive funds without stringent verification.
PreyPal is the holder of a “merchant account” (with Wells Fargo Bank) through which buyers’ credit card-sourced funds are accessed and, regardless of how PreyPal sources the funds, PreyPal takes a high “credit purchase risk” discount fee for the provision of their payment processing service.
How is it then that PreyPal and their merchant account provider, Wells Fargo Bank, can apparently avoid the liability that would otherwise be statutorily or contractually imposed on a credit card issuer or merchant account provider?
And if you think that eBay sellers “love” PreyPal, then, again, dream on.
PreyPal’s transaction mediation process has a hard wired bias towards buyers. Indeed, there are only two types of small merchants using PreyPal: those who have already been defrauded by someone with the aid of PreyPal and those who eventually will be defrauded by someone with the aid of PreyPal.
Then there is PreyPal’s current testing of “mobile” payments at POS in Home Depot stores. Are people actually leaving their hard-earned funds “on deposit” with this clunky, unlicensed, prudentially unregulated, PayPal “bank” that is itself not even licensed to provide credit? Otherwise, how are the funds for such “mobile” payments being sourced by PreyPal from the payer’s real banking account in a way that the B&M merchant can be sure of ultimately getting paid by PreyPal? Not with the standard non-guarantee of payment that PreyPal serves up to its online merchants, I hope.
Who then is assuming the risk in this PreyPal mobile payments process? Not PreyPal: they want to charge the higher credit-purchase fee but want none of the risk.
What then does this say about Home Depot’s management’s decision making process, to get involved with the clunky PreyPal? Then, the only people who might want to use PreyPal to make a payment at POS would be some one selling on eBay who is naive enough to be leaving their funds in a phony PreyPal “bank” account.
Apparently, eBay’s Donahoe has literally “bought” PayPal’s way into Home Depot, et al. Why does that not surprised me? For how else could such an arrangement be achieved? Regardless, that any B&M merchant would contemplate getting involved with PreyPal for POS transactions, demonstrates how little that merchant knows about the efficacy of the bank-issued card payments processing system and, in particular, that they know absolutely nothing about the “eBafia’s” money skimming operation, aka PayPal. Additionally, there is no nominal-fee “debit” purchase facility available via PreyPal; every sale is a “credit” transaction at credit transaction rates.
But, ultimately, the real question to be asked is, what possible benefit is there for any B&M merchant to offer PreyPal at POS? I can see no benefits, but many undoubted problems.
And, what is all this constant beat-up of “mobile” payments about, anyway? When you go out, do you take your phone with you but leave your wallet/purse at home? Does your phone have a little pocket to carry your driver’s licence, etc? I’ll take the efficacy of my NFC “chip and pin” MasterCard, in my wallet, any day, thanks ...
Unfortunately for eBay’s chief headless turkey, Visa’s dynamically integrated, professional and secure online payments gateway, “V.me”, when it is up and running later this year, will undoubtedly put paid to whatever success that the clunky, unscrupulous, “merchant of sorts” middleman, PreyPal, has had with professional online merchants outside of its mandated use on the eBay Marketplace.
The even greater advantage of Visa’s V.me will be its ability to enable an online payment via a nominal fee “debit” transaction from a bank issued credit card. Why would any sane merchant offer the clunky PreyPal if they had a chance of being paid by “debit card” via V.me?
Regrettably, there will be no relief from the clunky PreyPal for eBay merchants, for the eBafia Don to allow the Visa V.me payments gateway on the eBay Marketplace would effectively be the signing of PreyPal’s death warrant, and PreyPal is currently keeping eBay afloat.
“Scotty” Thompson caught the dazzling reflection off the “V.me” iceberg ahead and very wisely decided to “beam himself up” from the rusting hulk before the impact is felt. John Donahoe remains delusional, that fact confirmed by the many reported sightings of him waving his mobile phone about (and mumbling about UFO sightings over San Jose).
The story is that John Donahoe never liked being the CEO of the world’s biggest and most successful online “flea market”, so he set about making big changes, the benefits of which, over the past five years, have been negligible for shareholders and disastrous for many of the then eBay merchants that had helped to make eBay what it used to be.
Now, rather than destroying the eBay marketplace as it used to be, as Donahoe certainly has done, anyone with an intelligence greater than that of an imbecile would have simply divided the site into two parts: “eBay Used” and “eBay New”, or the like. eBay may then well have been at least fifty percent bigger than it is now and its shareholders that much richer; why, they might even have been paid some cash dividends.
But no, the “Pain from Bain” knew best. It was his way or the highway. Well, it appears that all that opposition from the eBay sellers, that Donahoe so arrogantly dismissed as mere “noise,” has had a quite debilitating effect on the performance of the eBay marketplace. Well done John. (Dare we hope that John’s Bain mate, Mittless, might offer this headless turkey the position of Vice President on the GOP ticket.)
John Donahoe’s greatest disability, of course, emanates from his time at Bain & Co where he apparently learnt how to dismember businesses. Being now in the fifth year of his stated three-year turnaround of eBay, he clearly has no idea how to build a business, and his management decisions will undoubtedly be mentioned in future business school case studies as examples of just what not to do.
This man is indeed an arrogant, incompetent, unscrupulous sociopath, and a fool to boot.
And then there is Pierre Omidyar, who is supposedly now giving away some of his great wealth while at the same time, as chairman of eBay, is simply sitting back and watching the destruction that this fool Donahoe has wreaked on so many of the people who actually made eBay the success that it used to be.
What then is the moral of this story? It seems that if you rob a person with a gun or rob a few people of large sums, then you may go to prison for a long time, but if you rob very many effectively powerless people of small sums you can likely get away with such criminal activity forever. Well, eBay and PayPal have refined that activity, of facilitating rampant petty wire fraud on naïve eBay users, to an art and on a unbelievably massive scale.
Is there not something wrong with this picture?
And a little more light reading on the clunky, unscrupulous PreyPal:
And a little more light reading on the eBafia:
“eBay Scammers Lose Bid for Sentence Reduction”
[Gee, and they only got away with six million dollars before they were caught, and what about the conscious enabling of their shill bidding wire fraud by eBay; when do some criminal facilitators from eBay go to jail?]
Then, if all that’s not enough to inform you of the utter contempt that a great many users feel for PreyPal and eBay, try Googling “PayPal sucks” (or similar) and you will find about ten million more reasons.
eBay / PayPal / Donahoe: Dead Men Walking