EcommerceBytes-NewsFlash, Number 3162 - September 27, 2013     1 of 4

eBay to Acquire PayPal Rival Braintree, Gains Hipster Clientele

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eBay acquired online payment service Braintree for $800 million in cash, giving it additional mobile capabilities and some impressive marketplace clients: Airbnb, OpenTable, TaskRabbit and Uber, all the darlings of smartphone-wielding hipsters and hipster-wannabes.

Braintree enables web and mobile payments, charging 2.9% plus 30 cents per transaction, and also offers a mobile application called Venmo that gives people an easy way to pay each other using their mobile devices and leveraging social networks.

Braintree processes $4 billion in mobile payments annually (a third of its $12 billion total annual payment processing), compared to the more than $20 billion in mobile payments PayPal expects to process this year.

Wall Street firm Janney wrote that the acquisition removes a growing competitor in the payment space while adding key talent and technology. Braintree will continue to operate as a separate service within PayPal, and Ready will stay on, reporting to PayPal President David Marcus. However, eBay did not say how long Ready would stay, and it said Braintree's management team and employees were "expected" to stay in place.

Janney estimates net revenue for Braintree "could be in the $100-150M range." However, eBay noted that the take rate associated with Braintree's payment volume varies significantly based on business mix. "Take rate" refers to how much revenue Braintree actually makes on the $12 billion it processes on clients' behalf.

Another Wall Street firm, SunTrust, said Braintree brings several positives to PayPal: 1) the robust set of APIs accelerates the technology development for PayPal, 2) PayPal gets more into the Services side of mobile apps with a strong set of prominent emerging companies (Uber, Airbnb, etc), and 3) the Venmo assets add 1-click tokenization that accelerates mobile adoption.

eBay CEO John Donahoe said in a statement that Braintree was a perfect fit with PayPal. "(Braintree CEO) Bill Ready and his team add complementary talent and technology that we believe will help accelerate PayPal's global leadership in mobile payments. Together, we expect that PayPal and Braintree also will accelerate our leadership in supporting developers who are creating innovative solutions for next generation commerce startups."

Braintree CEO Bill Ready had a message for customers and developers on the Braintree blog where he said nothing would change, but everything would change.

"It means we'll have the autonomy to continue to work the way we always have. We'll continue to provide excellent customer service, thoughtful risk management and great APIs. Our teams and our culture will remain intact since we'll continue to set direction for both."

And, Ready said, "But just as important are the things that will change. By joining with PayPal, we'll be able to expand more quickly around the world. We'll have more tools to offer to our customers through our developer platform. The universe of consumers that we can reach with our services that make it easy for people to pay on a mobile device will expand significantly. Simply put, the resources and scale that only PayPal offers will enable us to move forward with greater speed, broader reach, and higher ambition."

Meanwhile, PayPal President David Marcus wrote on the PayPal blog, "with the addition of Braintree, PayPal gets a lot more than a notable list of clients and an impressive technology portfolio. Today's news means that Braintree's team of brilliant engineers, innovative mobile strategists, and strong business leaders will soon be joining our ranks."

And, Marcus said, "Together, I believe PayPal and Braintree will enable merchants and developers to create new mobile experiences that are magical in ways that we can't even begin to picture today."

The transaction is subject to customary closing conditions, including regulatory approvals, and is expected to close late in the fourth quarter of 2013. Just how much, if any, scrutiny the deal will undergo by the Justice Department is unknown - in 2002, the DOJ investigated the then proposed acquisition of PayPal by eBay for antitrust concerns under the Hart Scott Rodino Act, but green-lighted the deal.

About the author:

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

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