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Tue Oct 7 2008 09:04:00

eBay Gains More Intelligence with Bill Me Later

By: Ina Steiner

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eBay is acquiring Bill Me Later, and said it expects to add the service to the eBay marketplace and the PayPal Merchant Services platform sometime next year. Bill Me Later (BML) offers transaction-based credit to online shoppers at the time of checkout. But BML does not have a bank charter. Instead, it must go through its partner, CIT Bank.

It means Bay must rely on a third-party industrial loan company for the model to work, and with the current credit crunch, it's an interesting time for eBay to get in to the mix.

With eBay owning PayPal and soon BML, it will have some interesting data about sales around the Internet on various merchant sites and marketplaces, including Amazon and Overstock. But an analyst told the Washington Post he expects Amazon, which he said has about a 10 percent stake in Bill Me Later, to "sever their relationship." I take that to mean he expects Amazon to remove the Bill Me Later service as an option on its checkout flow.

I always wonder in these acquisitions who needs whom the most. eBay feels BML can increase sales on its site by making it easier for consumers to purchase items (but couldn't eBay have used the service without having to purchase it?). It also likes the synergies with PayPal.

As for BML, wouldn't Amazon.com make more sense as an acquirer since it already had a stake? Or did eBay just have more cash it was willing to use in BML's operations? BML clearly likes eBay's cash and line of credit - from today's AuctionBytes Newsflash article: "eBay represents a large balance sheet with a tremendous amount of liquidity in cash that will enable us to grow well into the future."

eBay is set to roll out its next-gen checkout early next year in an electronics-only payment flow, where BML could be inserted as an option for shoppers. But as eBay observers know, a major change to eBay's technology platform such as the new checkout represents is easier said than done, and will likely come with some bumps in the road.

Update: Saul Hansell's take on the acquisition is a must-read (New York Times blog).




Comments (20) | Permalink

Readers Comments

eBay Gains More Intelligence with Bill Me Later   eBay Gains More Intelligence with Bill Me Later

by: John

Tue Oct 7 09:12:41 2008

I believe this was done to bring PP more in line with google checkout which appears to be more popular with buyers then PP. One of the negatives is the fact that every time a credit check is done on an applicant their score can get dinged which in the long term can actually effect their credit in a negative way.

eBay Gains More Intelligence with Bill Me Later   eBay Gains More Intelligence with Bill Me Later

by: Mechelle

Tue Oct 7 09:47:55 2008

No- this has nothing to do with Google

Bill Me Later is actually a rather popular Brand, and clearly PayPal's PayPal buyer credit and Paylater equivalents cannot compete with Bill me Later (clearly, I am referring to off eBay transaction as we all know eBay users don't get choices).

Just another pathetic demonstration of eBay's inability to succeed in our market economy- can't beat-em buy-em.  However, now Horizontal monopoly can be added to the Vertical monopoly they already function under. I wrote to the FTC stressing my concerns of PayPal's already unusual reach in e-commerce payment services and eBay Inc.'s clear attempt to remove competition by acquiring Bill Me Later.  

It is frightening how fast PayPal is penetrating the off eBay market.  I've decided I'll not shop from any non-eBay merchant/company that accepts PayPal. The company is out of control and will grow exponentially over the next few months with eBay PayPal only policy.  

Remember merchant services must be approved by eBay and regardless none will integrate with eBay checkout until January.  That gives eBay a couple months of as close as can get to PayPal only transactions so they can pick up more PayPal users who will foster the further entrenchment of PayPal off eBay.  

eBay Gains More Intelligence with Bill Me Later   eBay Gains More Intelligence with Bill Me Later

by: unaware

Tue Oct 7 11:57:35 2008

I must be behind the times now days... I thought I was pretty up to date regarding e-commerce but I guess not.... I had never heard of Bill Me Later until yesterday. What do they bring to the table? Who uses them and why? When I first heard about this yesterday my first thought was eBay was overpaying for something again. Donahoe stated that they are buying them at half the cost they could have bought them for last year. But who are they? Do they really have the business or users that justify that sort of money? What do they offer eBay that they don't already have with PayPal? Every day I hear that PayPal is being accepted some place new (I just heard that Wal Mart takes PayPal now). So why do they need this new service as well?

BTW, I saw a link in the blog yesterday to a Forbes article on the state of eBay and it was excellent.... It really nailed what I suspected at eBay Live... eBay management really does not know how eBay sellers and buyers use eBay. They have a ''consultant'' way of managing the company. They really don't have a clue as to what eBay should be or how to get there. If they do I would love to have them share it with us!  

eBay Gains More Intelligence with Bill Me Later   eBay Gains More Intelligence with Bill Me Later

by: TekGems

Tue Oct 7 12:27:56 2008

eBay bought Paypal when their own BillPoint service could not compete. Paypal has a Buyer Credit service, but they just Bill Me Later because its a much better product. Why take years to develop your own when you could just outright buy a company and gain market share?

eBay Gains More Intelligence with Bill Me Later   eBay Gains More Intelligence with Bill Me Later

This user has validated their user name. by: Ming the Merciless

Tue Oct 7 12:48:01 2008

On the NYT blog, Saul Hansell wrote (link above in Ina's story and a must read):

"...EBay’s management is asking its investors to trust that it can do the appropriate due diligence on a banking company. But eBay’s track record on acquisitions is hardly golden. It spent $3.1 billion to buy Skype, only to write down $1.4 billion of that later. I don’t own any eBay shares, but if I did I’d certainly want to know more than eBay is disclosing..."

Only the most out of touch, naive, or just plain stupid investor who STILL owns ebay stock would trust ebay. What a hoot!

Ebay and due diligence? A complete contradiction in terms.

Trust ebay? Never! Nunca! Jamais! Not ever -- no how, no way.

There are porbably several good reasons why ebay refuses to disclose more details even to its own stockholders, and while I can only guess what those reasons might be, ebay once again demonstrates its own unparalleled arrogance, hubris, and utter lack of comprehension about ebay actually works by only disclosing half truths and/or spin to investors.

I watched The Donna Ho CNBC video last, and he reminds me of a blond Howdy Doody or Alfred E. Neuman.

The answers he gave to softball questions were superficial and often irrelevant, but CNBC hosts aren't known for their insightful or penetrating followup questions since their raison de etre is as a corporate cheerleader. Any resemblance to real journalists is strictly accidental.

Faux Financial and CNBC are part and parcel of what's wrong on Wall Street today.

The Ho's defense of buying a credit business with lines of credit evaporating by the nanosecond is that their purchase was -- and I quote -- "counterintuitive." Just like all the other mindless, stupid, dumb, asinine, cretinous "counterintuitive" and "disuptive innovations" (I can't type these b school cliches anymore without laughing,) decisions they've made this year that are responsible for having made their stock so spectacularly successful this year.

And what effect will Bill Me Later have on seller's? More exorbitant fees? Cans ellers refuse to accept Bill Me Later (HA!) as a payment option?

At a time when consumers would be better served paying down their credit cards, ebay is finding new ways to get more people into financial trouble or exacerbate any existing credit card problems.

Ebay doesn't get IT. They never have and never will. And ebay won't survive as as another me-too shopping portal OR another me-too destination because its utter lack of acceptable customer service, their condescension and contempt for their contomers, their fundament inability from top to bottom to truthful, their refusal to provide a stable platform from which to sell or buy, and their assassination of their own customers.

Instead, they look for even more way to manipulate or force members into certain behaviors that harm users but benefit ebay corp and these overpaid executives with stock options guaranteed at a certain price point.

Ebay, virtually all present and past sellers HATE you. Many of your buyers HATE you.

While your irrational business deisions are incrementally putting you out of business, ebay users who you've used and abused will finish the job by telling their friends, writing letters to the editors of their local newspapers, writing goverment agencies and filing complaints, and filing well deserved lawsuits. Your own members will finish the job that ebay management (Whitman, Cobb) started four years ago.

Moreover ebay, PayPal, and Bill Me Later need to be federally licensed as banks even if their online nature might require new definitions in order to protect customers from NEW forms predatory practices that you just know they will engage in because they can and have done so at every opportunity in the past.

Ebafia: the world's most despicable corporation run by the world's most duplicitous, deceitful, and despicable executives.

And even more so today!

eBay Gains More Intelligence with Bill Me Later   eBay Gains More Intelligence with Bill Me Later

by: otto

Tue Oct 7 15:56:14 2008

Worth repeating:

''Ebay, virtually all present and past sellers HATE you. Many of your buyers HATE you.''


It's quite a business model, you have to admit...

eBay Gains More Intelligence with Bill Me Later   eBay Gains More Intelligence with Bill Me Later

by: M.C. Nygard

Tue Oct 7 16:21:27 2008

I'm one who thinks eBay will do well during the new Great Depression -- the new BILL ME LATER acquisition is a step in the right direction.

Here's the deal: When the economy is down, people want to connect emotionally with “the good old days.” During the Great Depression the country turned to the vices -- smoking, drinking and gambling. People bought small luxuries -- like radios and the ''talkies'' (movies) thrived. These things helped put a bandaid on the emotional reality of the economy. In short, people bought things that made them feel good -- and they bought them on something that was new to them: credit. BILL ME LATER is the new credit option.

Today is no different -- it's the products and services that boost self-esteem or bring positive experiences that will thrive. People want to look good and feel good, so now's the time that beauty and fitness industries will thrive. When money is tight and jobs hang on a thread, it's also the small luxuries and inexpensive products that give us a sense of normalcy. Perhaps BILL ME LATER will help buyers regain a sense of normalcy and bring eBay sellers a much needed reprieve.

Now more than ever people are searching for deals on the items that will bring back the good old days. They are also headed towards the Internet to purchase goods as they fear price gauging at the gas pumps -- in other words, why drive to shop retail when you can get below retail without leaving home? This means eBay sales will pick up as the stock market falls because this is the place where people can hunt bargains for the luxury items. It's also the place where panicked people will dump their wares to help keep food on the table. There will be more wares to buy, but fewer shoppers. Personally, I'm taking advantage of the eBay phenonomenon please write me and learn how you can too.

Whatever you do, don't let gyrations in the stock market give you the jitters. In a shaky economy it's the smart investors and entrepreneurs who thrive!  Shrewd investors are taking advantage of great prices -- they are buying now more than ever, and not selling like the rest of the country. The truth is that converting investments to cash will do more harm than good in the long run, so hang tight to your investments and see how you can profit off this topsy turvy economy.

While you weather the storm, think about ways YOU can capitalize on the small luxuries online. eBay is doing just that in embracing BILL ME LATER! While I don't like Donohue's seller reform policies, it's the first reasonable thing that he's done to ensure that eBay may make it through the disgruntled seller stage.

eBay Gains More Intelligence with Bill Me Later   eBay Gains More Intelligence with Bill Me Later

by: The Graduate

Tue Oct 7 16:31:43 2008

@ Ming,

''At a time when consumers would be better served paying down their credit cards, ebay is finding new ways to get more people into financial trouble or exacerbate any existing credit card problems.''

On the very day eBay created 1,000 more jobless people.

I wouldn't be surprised if Donahoe expects them to become eBay sellers now that they're unemployed!  That's what the 'disruptive innovator' would call ''creating entrepreneurs.''

eBay Gains More Intelligence with Bill Me Later   eBay Gains More Intelligence with Bill Me Later

by: Alice

Tue Oct 7 18:13:08 2008

Ebay has finally figured out how to make money from buyers too. BML  fees and interest from revolving credit accounts.

eBay Gains More Intelligence with Bill Me Later   eBay Gains More Intelligence with Bill Me Later

This user has validated their user name. by: Ming the Merciless

Tue Oct 7 19:22:16 2008

@MC Nyguard

The "talkies" survived because of popcorn sales.

Giving people whose wallet full of credit cards are already maxed out yet another line of credit may make sense for and to the Ebay Greed Machine in the short run but ill serves taxpayers who will next be asked to bail out credit companies.

The next major meltdown will occur when vast numbers of people can no longer pay their credit card debt. The Ho must be postulating that people will continue to bury themselves in debt if they have new lines of credit available and even if they have a fistful of court judgements against them for defaulting on credit cards.

Don't forget it was the Republicans who, at the behest of their campaign donors credit card companies, made bankruptcy nearly impossible to file anymore.

If Bill Me Later indeed means that PayPal will pay a lower rate to the credit companies, then sellers should expect a corresponding reduction in PayPal fees.

Not in my lifetime, I expect.

Ebafia: the world's msot despicable corporation run by the world's most duplicitous, deceitful, and despicable executives.

Today and every day, but especially today.

eBay Gains More Intelligence with Bill Me Later   eBay Gains More Intelligence with Bill Me Later

by: o.c.d.collectibles

Tue Oct 7 22:31:57 2008

It stands to reason that ebay would be an opportunistic and predatory company, that lacks transparency..they treat their employees and their customers that way, so one would expect they will treat their customer's buyers the same way. They are going to end up losing all that hard earned cash when they have to bail out all the customers who don't pay them after their credit was approved. In fact, if they axctually operate bill me later in a responsible way, they will probably get very few patrons. People who can afford to use credit cards responsibly these days don't need to use any other services. The ones who can't are the ones who will be wanting to use "bill me later". Do businesses really want the kinds of customers who really can't afford to pay?

eBay Gains More Intelligence with Bill Me Later   eBay Gains More Intelligence with Bill Me Later

by: Mechelle

Wed Oct 8 03:21:48 2008

Do businesses really want the kinds of customers who really can't afford to pay?


No because they will be filing charge backs and it'll be us paying their bill

eBay Gains More Intelligence with Bill Me Later   eBay Gains More Intelligence with Bill Me Later

by: eBay is Scum

Wed Oct 8 05:44:08 2008

scary. eBay with MORE info on sellers and buyers. C'mon iOffer.com GET BIGGER, faster.

eBay Gains More Intelligence with Bill Me Later   eBay Gains More Intelligence with Bill Me Later

by: RicRoe

Wed Oct 8 11:43:24 2008

When Bill Me Later gets rolled into PayPal it will be another disaster for sellers.

Buyers will win items,  apply for the BML payment option, and if they have questionable credit they will be refused.

Will eBay prevent buyers who have been refused from blaming the seller and leaving negative feedback? Probably not.

Will PayPal use the credit search function of BML to increase account holds with regular PayPal payments if buyers or sellers are found to be a credit risk? Most likely, yes.

eBay executives must be salivating over the methods they will be able to employ to enrich the company and inflate ledger balances at members expense.

eBay Gains More Intelligence with Bill Me Later   eBay Gains More Intelligence with Bill Me Later

by: Gaz

Wed Oct 8 12:05:16 2008

There is a finer point to the Bill Me Later situation not addressed above ...

It is a US-only operation (currently) and eBay.com is only one of 39 marketplaces for eBay (currently).

Whilst the US is eBay's biggest marketplace, for a couple of years now it has been dwarfed by revenues from the other 38.

On that basis, even if BML goes belly-up, it will only affect ONE marketplace - it won't even affect the Canadian eBay market.

Now think about who has paid the lion's share of the cash to enable the purchase - it wasn't Americans.

Then think about which market gets the service benefit of the purchase.  It isn't the eBay users who contributed the most cash for buying it.

I dunno what all you Americans are moaning at - you got foreigners to give you the money for another payment service option that only you can use.  

'Struth - most of us can't even add PayPal PayLater to our listings ... because we aren't in America.

Try sitting on our side of the fence for a change - e.g. UK's compulsory business registration and compulsory 14-day "any reason at all mandatory return and refund in full including shipping costs" policy.  Heck, even try paying UK fee levels for a change.

As of 20 October, dot com becomes a PayPal-only site for those of us outside your shores, if we don't have a Bricks'n'Mortar business to obtain merchant facilities.

And you lot think you're hard done by?

Grow up and look around you.

eBay Gains More Intelligence with Bill Me Later   eBay Gains More Intelligence with Bill Me Later

by: cyberdragon

Wed Oct 8 12:22:56 2008

so ebay spent almost 1 billion dollars on a group of people who can't be approved for credit cards.

just because it costs 50% of what it would've cost last year doesn't mean it's a good business decision - if 50% off is such a good deal why doesn't ebay buy its own stock? it is 60% off its 52-week high and 71% off its all time high

eBay Gains More Intelligence with Bill Me Later   eBay Gains More Intelligence with Bill Me Later

by: tula

Wed Oct 8 12:27:31 2008

This company looks to me like a good fit with Paypal.  From what I understand, BML allows people to pay with checks and MO, so perhaps this is eBay's way to cater to that market and make an extra cut on the interest at the same time.  From a business standpoint, this sounds pretty good to me. Personally, I'd love to be able to grab a cut of both ends of a transaction.  

My concern as an eBay seller is how much it's going to cost.  I saw the phrase "12.5% take rate" being bandied about with regards to BML... does this mean it will cost merchants (i.e., us sellers) 12.5% to use this service?  If the pricing turns out to be competitive with Paypal, I'd probably offer it as a way to accept paper payments without having to physically deal with checks and MOs, which are a time-consuming PITA.

eBay Gains More Intelligence with Bill Me Later   eBay Gains More Intelligence with Bill Me Later

by: tula

Wed Oct 8 12:35:01 2008

Gaz,
I don't know what you're complaining about. The main reason so much foreign money is coming into the U.S. is because the value of our dollar is tremendously low compared to the value of most foreign currencies. U.S. goods are at bargain prices these days for you guys, while it costs us boatloads to buy from overseas. Yes, it sucks that eBay is limiting some features to the U.S.-only market, but international finance rules and regs. are very complicated and it will take time to get issues like that worked out, especially with all the credit market turmoil happening these days.

Also, I don't know if it's the same where you are, but here one can get merchant credit accounts without being a B&M business.  Though, I don't know if anyone's getting any credit right now.

eBay Gains More Intelligence with Bill Me Later   eBay Gains More Intelligence with Bill Me Later

by: Lori

Wed Oct 8 13:52:42 2008

Great yet another account to cancel... Dang it ebay just release a list of who you plan to purchase and save me some time.

I just signed up to accept BML now I have to take it off my web site.

eBay Gains More Intelligence with Bill Me Later   eBay Gains More Intelligence with Bill Me Later

by: Gaz

Wed Oct 15 01:55:41 2008

@ tula

This has nothing to do with the value of the dollar - even when it was super-strong, Americans were not spending with overseas suppliers at any significant rate to what they are now.

The volume of cross border trade into / out of the US via eBay is negligible in the greater economy.  If there is "shedloads" of foreign money coming into the US right now, it will be because mega-rich nations are buying up distressed assets such as companies and property.  The UK went through the same scenario in the 1989-92 recession.

Another massive influx of money to the US that IS related to the weak dollar will relate to US oil production and refining - both the black gold itself being exported, and the equipment and technologies to extract it in overseas territories.  Less-rich economies can currently afford to expand extraction and refining while oil is high and the dollar is low.  That will change as the dollar strengthens and oil drops in price - then your oil & gas support industries will be in the poop (again).

Inside eBay, the reason for shed-loads of money flowing into the US is not foreigners buying on dot com - it is the internal trading within the other 38 marketplaces, generating fees nation by nation, then eBay/PayPal pulling those profits back into the US before they can be taxed overseas (this is quite common in big business).

With significantly over half of all eBay+PayPal profits being generated in the non-US marketplaces, then pulled back into the San Jose war chest, perhaps you can understand why non-US sellers are extremely miffed that such a large chunk of cash went to buy a service that only US residents can use?

Imagine it like this - if you were the prime wage earner in your family, and your other half took the lions share of your savings (on top of their own) then went and spent it on a mega-expensive item (e.g. a luxury yacht) that they only allowed themselves to use and excluded you from accessing - how would you feel?

That essentially is what eBay have done with BML

Gaz



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