|Thu Jan 23 2014 15:26:33|
Would Google Eye PayPal if Spun Off from eBay?
By: Ina Steiner
Bloomberg got right to the heart of the matter yesterday when its reporter asked Carl Icahn how much a spun-off PayPal might go for. The question came after eBay revealed Icahn was pressuring the company to spin off PayPal into a separate company.
If it eventually came to pass that eBay spun off PayPal (and certainly that's a big if, since eBay's board doesn't go along with the idea), that could leave PayPal and eBay, as separate companies, open to an acquisition by a third party. That could even be the impetus behind the push to spin off PayPal.
It's fun to think about how acquiring PayPal could benefit industry players (leaving aside whether or not such a purchase is within reach of them).
- Google. It already has very close relationships with retailers including on the local level, and its failed Google Checkout PayPal-clone shows it clearly sees the benefit of a payments service. And imagine this: clicking on a PayPal button in a Google advertisement and paying for the product without ever leaving the site you're on?
- Rakuten. This Japanese juggernaut has been acquiring marketplaces worldwide. PayPal could do for Rakuten what it did for eBay Marketplaces. First, merchants using PayPal might be more likely to sell on Rakuten marketplaces, and of course, PayPal would give Rakuten instant access to shoppers around the world, boosting conversion rates for Rakuten marketplaces.
- Alibaba. PayPal is currently locked out of China's domestic market, but with Chinese ownership, that barrier would be eliminated. That would present a huge growth opportunity for PayPal.
- A large financial institution (CyberSource, Wells Fargo, etc.). PayPal is poking sleeping giants with its point-of-sale and mobile payments solutions. This scenario presents the most danger to PayPal's traditional offering that might not be left intact.
- Amazon. It's hard to envision Amazon acquiring PayPal, so this is classified under "unlikely."
If eBay did spin off PayPal, it could still offer PayPal on its marketplace, but it could also move toward offering its own checkout system a la Etsy Direct Checkout. So who might be interested in acquiring the rest of eBay if it spun off PayPal? Yahoo might be somewhat interested in operating eBay.com. (Remember, it still has an auctions business in Japan and operates Merchant Services, which includes Yahoo Stores.) What about Microsoft or IBM? And what changes might they make to the Marketplaces business?
By the way, just the talk of eBay spinning off PayPal could be spooking large brands and merchants eBay is wooing (and currently servicing) through eBay Enterprises.
eBay CEO John Donahoe is certainly not doing any salesmanship to attract potential buyers to its marketplace assets. We're undervalued, he said of the company during eBay's post-earnings conference call with Wall Street analysts. And, he said: "I've said this before, I'll say it again, there are no silver bullets in our Marketplace business. If anything, it has been proven over the last five or six years is no single platform initiative or product thing in and of itself created viral improvements."
Note that he didn't allow for the possibility that his strategy of moving away from auctions might have been a failure, as the company is still sticking to its premise that his 3-year turnaround was a success.
Feel free to put forth your own eBay or PayPal mashups - and what would you like to see if the companies were separated?