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Do Sellers Care If eBay Spins off PayPal?

A rumor surfaced on Thursday that eBay might be considering plans to spinoff PayPal as early as next year. The report comes months after eBay had quieted Carl Icahn, who had been pressuring the eBay board to spin off the payments service.

In reporting on the rumor on Thursday, SeekingAlpha called PayPal “the group’s most valuable asset.”

While the rumor caused a stir, it shouldn’t come as a surprise that eBay would ask candidates for the job of PayPal president how they would handle such a development, since eBay CEO John Donahoe has said all along the board wasn’t against the idea of a spinoff, they just didn’t feel the time was right. And with Icahn now having eyes and ears in eBay boardroom, eBay at least has to be on the record discussing a potential spinoff with candidates.

More importantly, perhaps, is what sellers think about a spinoff. Some believe it will be better for PayPal to be separated from eBay so that other marketplaces will be more accepting of PayPal. Others think the companies are too tightly integrated to separate them.

Many online marketplaces do support PayPal, with one of the notable exceptions being Amazon. Etsy relied quite heavily on PayPal to facilitate payments, but has since launched its own Direct Checkout, though it continues to allow its sellers to accept PayPal for payments.

Here was some of the reaction from eBay sellers about the rumor eBay could spinoff PayPal:

“Hmm, no more holds on your money or eBay pulling automatic refunds from your PayPal account. This could be good. No telling what would become of eBay, though, since PayPal is it’s cash cow.”

“Interesting…I do wonder what would happen to eBay. PayPal definitely is able to stand on its own. No more auto holds would be a nice benefit..but I wonder then if a disgruntled buyer could file 1 claim with PayPal and then another with eBay simulataneously?”

Another seller said just because PayPal was spun off did mean the two companies would no longer work together with each other’s API. “But,” the seller continued, “what worries me is if PayPal is not longer “supporting” eBays profit points as a whole….then it may even increase all the holes we have to jump through for eBay to make it look good to the stockholders it bends us over for. It may then get sold off to Amazon or the like! Wouldnt that be interesting!”

One reader was suspicious that the rumor might have been an intentional leak, noting the involvement of executives with ties to eBay to the blog that first published Thursday’s rumor.

In January, we speculated whether a spinoff of PayPal could leave one or both companies the target of an acquisition by Google, Alibaba, Rakuten, a financial services firm, or even Amazon.

Some readers said it would be difficult for eBay to spinoff PayPal. “I can’t imagine eBay spinning or selling off PayPal…its way too useful to eBay,” wrote one, while another wrote, “There is no way eBay would sell PayPal, it makes too much money for them and its tightly integrated into their business model.”

Another reader, referencing the fact that eBay deemed Google Checkout unworthy of its Accepted Payments Policy, wrote, “If Google bought PayPal, would PayPal suddenly become an “unsafe” payment method as eBay declared Google payments was when they wouldn’t allow it? That would be rich indeed.”

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Ina Steiner
Ina Steiner
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.