Ina Steiner EcommerceBytes Blog
News and insight focusing on ecommerce.
by Ina Steiner, Editor of EcommerceBytes.com
Wed Jan 22 2014 16:46:06

Should eBay Spin Off PayPal?

By: Ina Steiner

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Carl Icahn wants eBay to spinoff PayPal into a separate company. The idea has been batted around before now, but thanks to Icahn's new proposal, eBay now has to deal with it publicly. (You can read what eBay had to say thusfar about the Icahn proposal in the fourth quarter earnings release.)

In fact, eBay said today it has explored in depth a spinoff or separation of PayPal, but the Board of Directors does not believe breaking up the company is the best way to maximize shareholder value.

"As part of eBay Inc., PayPal is able to leverage the company's technology capabilities, commerce platforms and relationships with retailers, brands and large merchants worldwide. Payment is part of commerce, and as part of eBay, PayPal drives commerce innovation in payments at global scale, creating value for consumers, merchants and shareholders."

But more interesting is what a separation would mean for online sellers (and buyers). Would PayPal continue to benefit from eBay's requirements around the use of PayPal on its marketplace? Would disputes be more difficult to resolve, or would the process become more transparent?

What would be the impact on your business if PayPal was spun off of eBay?

eBay spokesperson Ryan Moore said eBay CEO John Donahoe will talk about the board's take on Carl's proposal during the conference call coming up this afternoon - we'll be tuning in to learn more.

Here's a piece of a slide from the eBay earnings slideshow coming up shortly.





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Readers Comments

Perminate Link for Should eBay Spin Off PayPal?   Should eBay Spin Off PayPal?

This user has validated their user name. by: Ed Gadfly

Wed Jan 22 17:17:12 2014

eBa'al without PreyPal
is like Tony Soprano
without the BadaBing.

Perminate Link for Should eBay Spin Off PayPal?   Should eBay Spin Off PayPal?

This user has validated their user name. by: Puck

Wed Jan 22 17:21:53 2014

PayPal has a symbiotic relationship with eBay.

The same one ticks have with a rabid dog.

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This user has validated their user name. by: David Steiner

Wed Jan 22 17:31:47 2014

So...any constructive comments?

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

Wed Jan 22 18:53:18 2014

My constructive comments:

Like anything else to do with these specific companies, how it would impact my business would depend on post spin off policies.

-- Would ebay reinstate paper payments and restore the American tradition of competition (among payment processors)?

-- would ebay allow Amazon payments and the similar payment system the credit card companies themselves have instituted?

-- would ebay secretly negotiate a sweetheart deal with PayPal to get and give preferential treatment?

-- regarding disputes in which the buyer paid with PayPal, whose set of anti seller, pro buyer policies would be operative if there were a conflict/difference?

-- would PayPal restore money market interest on PayPal accounts?

-- could any ebay seller refuse to accept PayPal?

-- would John Donahoe still be CEO?

-- would payment processors be required to sign onto ebay's anti seller, pro buyer policies in disputes?

-- would non ebay related disputes filed with PayPal or any other processor continue to be counted as disputes by ebay?

-- what incentives would PayPal offer sellers to use their MONEY TRANSMITTING service?

In short, ¿quién sabe?

On thing is certain, though. When discussing ebay and PayPal, the small professional seller will likely lose.

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This user has validated their user name. by: WOODJUNGLE! ON EBAY

Wed Jan 22 19:07:35 2014

I think the the real question should be why Paypal is even allowed to be part of Ebay in the first place.

Perminate Link for Should eBay Spin Off PayPal?   Should eBay Spin Off PayPal?

This user has validated their user name. by: Ric

Wed Jan 22 19:21:37 2014

As the two companies stand together today, the low cost / high revenue generator that is PayPal contributes significantly to eBay Corporations bottom line.

Personally, I think that if the two companies were separated, eBay would almost immediately impose substantial fee increases, and seek to create new fees in order to appease Wall Street analysts as well as investors.

One upside to a separation would be that the eBay marketplace would have to be substantially invigorated, and maybe, the focus would turn to genuine sales growth on a transactional level.

That could mean a long overdue end to eBay's biased search manipulations which favor certain classes of sellers and result in listings that are never seen for less favored sellers. eBay might even return to the days of equal exposure for everyone by changing the default search method back to time ending soonest in an effort to grow sales.

Without PayPal's hefty contribution to eBay's bottom line, eBay will be hard pressed to continue bringing in C-Level executives with multi million dollar compensation packages and might even have to shed some of the existing corporate welfare recipients who have created poor policies due to their lack of experience with the platform.

While there would be doubtless downsides for small sellers, I believe the pressure a separation would create on eBay to become laser focused on growing sales would eventually improve the marketplace and benefit small sellers.

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This user has validated their user name. by: bitbybit

Wed Jan 22 19:25:43 2014

I think Donahoe knows (even though he won't admit it) the ebay marketplace would not survive without forced Paypal and doubt also Paypal would show much growth on its own.  

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by: HappyOne This user has validated their user name.

Wed Jan 22 20:21:41 2014

Sorry Ming by the time I found my password you had posted much of this.
Right now I (as a small seller) am pretty much forced to accept Paypal as almost only ''accepted/approved'' payment method  for EBay sales. If Paypal was ''truly'' a separate company would other payment methods be accepted? How much of Paypal's revenue is from forced EBay transaction? I bet more than 50%. Which company would JD go with? I doubt he would stay with EBay. I have not seen any one use Paypal as a payment choice at Home Depot , since they first made a big deal about it. I do not know what the big deal about taking out wallet and using credit card is. I also have $2 in my pocket for a cup of coffee is not a big deal. I guess paying with phone is ''hip'' and faster?

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by: 1beck3 This user has validated their user name.

Wed Jan 22 20:39:27 2014

I don't see the point in spinning off PayPal.

It's no different than having an ebay account to sell on even though you have your own website. ebay is a great way to attract new customers to your website, just like ebay a great way to grow PayPal's revenue which helps ebay the company's bottom line.

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This user has validated their user name. by: Philip Cohen
Web Site

Wed Jan 22 21:00:11 2014

Johnny Ho Pumps Hot Air into eBay Share Price with Disclosure of Proposals Received from Investor Carl Icahn”

http://investor.ebayinc.com/releaseDetail.cfm?ReleaseID=820644

“Proposal from Carl Icahn — The company also announced today that it has received a notice from Carl Icahn indicating that he has nominated two of his employees to its Board of Directors and submitted a non-binding proposal for a spinoff of its PayPal business into a separate company. The notice stated that companies controlled by Mr. Icahn had, earlier this month, acquired shares and derivative securities that give him an economic interest of approximately 0.82% in the company.

“eBay welcomes the opportunity to listen to the perspective of all of its shareholders, including Mr. Icahn. His Board nominations will be passed on to the Board's Corporate Governance and Nominating Committee, which will consider them in the ordinary course of business. We would note that eBay has a world-class board of directors with directors who have significant experience in technology and financial services.

“Regarding Mr. Icahn's separation proposal, eBay's Board of Directors routinely assesses the company's strategic direction and has explored in depth a spinoff or separation of PayPal. eBay's Board of Directors has concluded that the company and its shareholders are best served by the current strategic direction of the company and does not believe that breaking up the company is the best way to maximize shareholder value. As part of eBay Inc., PayPal is able to leverage the company's technology capabilities, commerce platforms and relationships with retailers, brands and large merchants worldwide. Payment is part of commerce, and as part of eBay, PayPal drives commerce innovation in payments at global scale, creating value for consumers, merchants and shareholders.”

What a total non story! Still, the Ho had to figure out some way to try to get some hot air into the moribund eBay stock. Corporatize “PreyPal”? Why not? Because effectively, without eBay, “PreyPal” is finished, and without “PreyPal”, eBay is finished …

The ugly reality of eBay's clunky, unscrupulous "PreyPal" operation ... http://bit.ly/UVXx53

And then there is the massive, demonstrable, eBay-facilitated criminal activity …

The ugly reality of eBay eBay's crooked auctions marketplace ... http://bit.ly/11F2eas
The ugly reality of eBay Motors (UK sample): Auction Fraud Galore ... http://bit.ly/I2gTEU

The fact remains that if, in August 2007, before Johnny Ho started his demolition work, all these major “long” eBay shareholders had instead put their funds into Amazon stock, they all would now be ~8x wealthier! Clearly, none of the above nonsense alters the reality that the truly “smart money” on Wall Street knows that eBay is a “dog” and that Johnny Ho is a very poor dog handler, otherwise eBay would also be valued at $400/share …

eBay / PayPal / Donahoe: Dead Men Walking ...

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by: NetWatch This user has validated their user name.

Wed Jan 22 21:12:18 2014

Bluntly put, PayPal is almost single-handedly the only reason ebay stock is worth anything nowadays.

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by: Bloggo This user has validated their user name.

Wed Jan 22 22:07:30 2014

If PayPal was spun off of eBay, eBay fees would skyrocket.

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This user has validated their user name. by: iheartjacksparrow

Wed Jan 22 23:16:06 2014

I can't see eBay spinning off PayPal. I thought eBay showed a profit each quarter mainly because of the money generated by PayPal. I agree with others who envision eBay fees being significantly raised if PayPal fees are no longer in the mix.  

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by: Steevo This user has validated their user name.

Wed Jan 22 23:27:26 2014

If they spun Paypal off then Paypal could not be ordered by ebay to hold sellers funds for 21 days.

Ebay would never allow that.

I did complain again last week to the California department of financial institutions about Paypal.

I pointed out to an official there that though Paypal is licensed as a ''money transmitter'' they are making business loans.  Clearly outside the functions of their business as a money transmitter.  They guy admitted it.  

If they would just suspend Paypal  completely that would bring this all to the forefront. The legislature is going to have to get involved.

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This user has validated their user name. by: thehosst
Web Site

Thu Jan 23 00:43:15 2014

The rolling reserve lawsuit is going to damage Paypal and perhaps is best to separate both, but eBay is now using the same illegal tactics, holding the money for 21 days, charging the seller for fees, even if they have most of the money. I agree that there has to be some kind of control but eBay is holding money without respecting its own policy, every time you call some eBay rep, they seem to create their own internal policy with the sole intention to keep your money. eBay should really start thinking of new ways to watch dubious sellers, low DSRs for late shipping during holidays or weather conditions should not be a reason to hold seller's money, new sellers should not be treated like criminals neither. Paypal has much better customer service, why eBay is not doing the same, the telephone transferring game is getting old.I think Paypal is a very nice payment solution, if they can only keep it honest. eBay is great for sales and purchases but they REALLY need to improve the customer service.  

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by: lostinNYC This user has validated their user name.

Thu Jan 23 01:13:18 2014

This would not necessarily raise fees either for PayPal or on the eBay side. I use other payment processors on eBay as well and they charge roughly the same as PayPal does.

What might improve: PayPal basically threatens buyers in overseas markets that their purchases will not be protected when using another payment processor, this might somewhat disappear if eBay might be forced to level the playing field for all payment providers.

Other things that might improve: when receiving payments through other processors, eBay has stopped marking the item as paid even when the seller marks that the funds have been received in the sales record. This is just one of many inconveniences one has to endure to make shopping for buyers easier. I can't see how this could get worse...

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This user has validated their user name. by: Philip Cohen
Web Site

Thu Jan 23 01:43:25 2014

@Steevo, "PreyPal" does not “make” those loans, they only collect the necessary information which they then pass on to a licensed bank in Utah who “makes” the loan; "PreyPal" then buys back that debt from that bank; it’s how all the “pay day” lenders do it; it’s all legal ...

The ugly reality of eBay's clunky, unscrupulous "PreyPal" operation ... http://bit.ly/UVXx53

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by: comet This user has validated their user name.

Thu Jan 23 01:45:04 2014

Whatever do you mean???  I never heard of such a thing!  

Ebay without Paypal---

Hmmmm---

Brave new world indeed.

Exactly HOW much in USD DOES Ichan own of ebay---and how much do you NEED to do a hostile takeover?

I picture Ichan in a tower like Sauron--casting his Eye towards Paypal----

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by: KathleenJohnson This user has validated their user name.
Web Site

Thu Jan 23 06:18:45 2014

If PayPal and eBay were "spun off", along with that, to the PayPal side at least, hopefully, would come new management that does not include the eBay "mindset" - inflexible, closed and zero transparency.

The problem with Corporate raiders is that they swoop in, make their changes, their "money back", and then swoop out again Someone has to pay those "costs", that "profit", and for those "changes" and that, unfortunately, in this case, is the users of PayPal.

I have zero appreciation of eBay's management style. I have little to complain about at PayPal (considering they just over turned a Facebook payment for advertzing a sponsored add that I disputed the results on and they sided with me and returned my funds without as much as a quibble).

If the corporate raider was wanting to take over eBay - I's say "go for it", it could not get worse. But, PayPal is working well for most of us - so, for me, I would hate to see what they would "fix" that would cost me "more".

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This user has validated their user name. by: baconsdozen
Web Site

Thu Jan 23 06:49:24 2014

Without paypal ebay is finished. One props up the other.

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