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EBay to Spin Off PayPal

230 points by murtza 12y ago

wheaties 12y ago
Wait, payment processing is seeing a lot more competition and now they decide to split? I don't know if this is such a "value creation" move.
- CamperBob2 12y ago
  I think the argument is that as the landscape gets more competitive, eBay can't afford to tie themselves so intimately to a single payment provider. That is why eBay's stock lurched upwards as soon as the news was announced. To someone looking to invest in an online marketplace, eBay is more important than PayPal by itself.
pratyushag 12y ago
Great decision, allowing PayPal to grow beyond the virtual ceiling placed by being governed by a marketplace company which rightly has its own agenda before PayPal's.
- Shivetya 12y ago
  As long as the split does not disrupt the current relationship for buyers and sellers using Ebay. Right now the process is quite simple and there had been recent efforts to link the two sites even more, as in not needing to ever log into Paypal to complete ebay purchases. hopefully that integration won't suffer.
  - sk55 12y ago
    integration has been live on my account for several months.
  - pratyushag 12y ago
    I don't see why it would... ebay would still hold a significant percentage of paypal and influence such decision making. The main benefit will come from large competitors choosing Paypal as it becomes a less biased payment service and not one that directly profits a competitor. Essentially, Ebay will now have to pay closer to market-rate for processing.
ghshephard 12y ago
The first thing that comes to mind is that the clock has just started ticking for PayPal to become accepted all over the web in places that it may not have been as welcome. For example, I'm sure Amazon will add PayPal within 90 days of Paypal going public (if not sooner).
- CJefferson 12y ago
  Really? Given that Amazon have a competing product (Amazon Payments), I'd be surprised if they supported Paypal?
- spatz 12y ago
  So when are they adding Google Wallet?
- michaelt 12y ago
  Isn't Paypal just another middleman between the retailer and the banks? I mean, Paypal is all very well for a small site where customers don't trust you with their card details or you're not doing enough volume to get a decent merchant account - but neither of those applies to Amazon. Paypal will want a bigger cut than Amazon's existing credit card processors. So why would Amazon want to use Paypal?
  - foldor 12y ago
    PayPal allows people who don't have a credit card to make purchases online. Many people in European countries don't have a credit card for example. Accepting PayPal is an easy alternative to supporting all of the different payment methods that you might need to meet certain regions expectations.
    - VLM 12y ago
      The existing marketplace solution for that is prepaid credit cards, essentially gift certs that can be redeemed by being run as a credit card. Teens use them to shop online, or at least my kids do. There is also limited liability with prepaid CCs, no matter what happens you can't be out more than the value of the CC, but you can get into considerable financial trouble with paypal WRT overdrafts and overdraft fees and bounced check fees ... its just not worth it unless you're well disciplined.
conchy 12y ago
Smart move, eBay divests before bitcoin really starts eating PayPal's lunch
- DanBC 12y ago
  Bitcoin provides zero protection to buyers. It's delusional to think people would want to buy stuff from ebay without the protections from Paypal or their credit card provider. Current consumer protection advice is to walk away from any sale that uses things like Western Union or cash transfer - and this is likely to be extended to include Bitcoin as soon as anyone in the general public hears about Bitcoin.
  - lnanek2 12y ago
    PayPal protections are usually considered a disaster for everyone involved. Sellers and companies are constantly getting their accounts frozen, buyers are constantly getting shipped bottles of shampoo instead of camera equipment, priceless violins are being destroyed, etc..
  - icebraining 12y ago
    Still, a simple escrow system on top of Bitcoin could provide the same guarantees while potentially being cheaper. It's not like Bitcoin prevents such systems from being created - on the contrary, it has mechanisms to support them.
    - jfoster 12y ago
      What makes you think it would be much cheaper? I think it might have to be more expensive. The anonymity aspects of bitcoin could result in more fraudsters getting away with fraud.
      - icebraining 12y ago
        I'm not saying it would; I'm saying it potentially could. But the CC system also provides anonymity, since most cards used for fraud are stolen anyway, so the fact they're tied to a real person is irrelevant. Bitcoin, on the other hand, doesn't suffer from the same problem as CC - that the payment info must be shared with every single merchant - so it's potentially must harder to steal; Target wouldn't have a copy of your bitcoin wallet just because you bought something from them, for example.
Rachelgee 12y ago
NoOoOoOo!
williwu 12y ago
This article come to mind. Would Google be interested in buying a stake in Paypal now? http://www.cnet.com/news/google-to-buy-slice-of-ebay-unlikely-says-analyst/ http://www.cnet.com/news/google-to-buy-slice-of-ebay-unlikel...
bluedevil2k 12y ago
Spinning off PayPal really hurts the long-term growth potential of EBay. They haven't grown much at all over the past few years, once you take out the PayPal revenue. That will really hurt the stock price. Meanwhile, I would expect PayPal's stock price to grow as it's potential for growth is pretty large. Will be very interesting to see how they split the existing EBay shares for shareholder and at what price.
- adventured 12y ago
  eBay has most of the profit in the business. PayPal has sales growth, but is nowhere near as profitable as the eBay auction platform. There's no doubt the market wants access to PayPal's growth, but eBay is the profit machine in that relationship. eBay's platform margins are extreme. PayPal will have to become five times larger to equal the profit that eBay spins off. Perhaps they can pull that off, but it's going to take a decade or longer.
- foobarqux 12y ago
  > Spinning off PayPal really hurts the long-term growth potential of EBay. They haven't grown much at all over the past few years, once you take out the PayPal revenue. But, as a current shareholder, you will still own PayPal and Ebay shares. The question is whether they are better together or better apart. There isn't any obvious synergy between the two anymore. > Will be very interesting to see how they split the existing EBay shares for shareholder and at what price. No, there is nothing interesting about that. Each shareholder get X shares of Ebay, Y shares of Paypal and Z dollars of cash. The price of the shares is set by the market. The values of X and Y are pretty much arbitrary.
danesparza 12y ago
I'm amazed that this jackass who ran TWA into the ground still has so much staying power. http://www.businessinsider.com/marc-andreessen-carl-icahn-killed-an-entire-airline-2014-3 http://www.businessinsider.com/marc-andreessen-carl-icahn-ki...
- psaintla 12y ago
  As long as you have massive amounts of money you'll always be relevant.
- jabberwock 12y ago
  I totally agree with your assessment of Icahn. Andreesen's no saint however, he supports government spying and trampling of civil rights for his personal gain.
- rattray 12y ago
  What, you're only allowed to learn from failure in Silicon Valley?
  - ceejayoz 12y ago
    TWA wasn't a failure for Icahn. He made hundreds of millions of dollars by selling its assets to pay himself.
    - aml183 12y ago
      A win for them (Icahn and Andreessen) is measured by their wallet not about the societal impact.
      - toomuchtodo 12y ago
        We shouldn't confuse what normal people consider success to be with with what a sociopath considers success.
fidotron 12y ago
The recent Alibaba ipo demonstrates this is a stupid idea and that eBay has been chronically mismanaged for years. That it has effectively squandered such a massive lead and headstart is incredible.
- adventured 12y ago
  Alibaba spun off Alipay. How does the Alibaba IPO demonstrate spinning off PayPal is a stupid idea exactly?
  - rebelidealist 12y ago
    Alibaba spun off Alipay because Jack Ma wanted to control Alipay instead of the Alibaba majority stakeholder such as Yahoo and Softbank. It was an uncontested power move by Ma.
    - rebelidealist 12y ago
      Sorry, I don't know why my comment was posted 3 times...
  - rebelidealist 12y ago
    Alibaba spun off Alipay because Jack Ma wanted to control Alipay instead of the Alibaba majority stakeholder such as Yahoo and Softbank. It was an uncontested power move by Ma.
  - rebelidealist 12y ago
    Alibaba spun off Alipay because Jack Ma wanted to control Alipay instead of the Alibaba majority stakeholder such as Yahoo and Softbank. It was an uncontested power move by Ma.
dosh 12y ago
Once this goes live, PayPal will sooner or later face stiff competition beyond its current stage under the umbrella of eBay, competing against Chinese players like those of alipay and tenpay which already have users in the hundreds of millions. These players are agressively looking into the markets outside of mainland China. The landscape won't change in a few years, but in a decade, may look completely different.
- danvoell 12y ago
  Maybe these competitors would want to invest/partner with paypal and splitting from Ebay opens up that opportunity
- 1337biz 12y ago
  These would still have a massive trust issue in most parts of the "Western World". Certainly doable under the umbrella of buying an established western (banking) brand but Asian brands will have a hard time communicating trust, reliability and security.
  - Igglyboo 12y ago
    Even though it makes no sense, I'd rather use an unknown western banking company than an unknown asian banking company and I'm sure many feel the same.
- Shinkei 12y ago
  I agree that they are companies with promise, and certainly will be strong in their domestic markets... but I remain skeptical of their success in the West. I personally would not directly support Chinese businesses if I have an equivalent Western business that I can support, not simply because of xenophobia or some nationalistic nonsense, but because what China does as a Government is reprehensible. For all its faults, America is still a shining emblem of Democracy when compared to other powers such as Russia and China.
  - adventured 12y ago
    Not only that, but China doesn't allow an even playing field in any regard what-so-ever in their domestic economy. Foreign investors still can't own more than the majority share in a Chinese company. China is anti-West when it comes to supporting their domestic companies. They block out major competitors, such as Google or Facebook, and they make life very difficult for anyone that attempts to compete with their domestic companies. The crap Alibaba pulled in stealing tens of billions in wealth from Yahoo by spinning off Alipay without proper compensation and forcing Yahoo to sell half its stake in Alibaba is par for the course in China.
hemancuso 12y ago
This articles suggests only 20% of PayPal will be sold, although I doubt that number is anywhere near final. It's just like EMC spinning off VMware. EMC held on to 80% of VMware [and still does?]. It lets them capitalize much more effectively on the faster growing subsidiary. Even today VMware trades at double the PE ratio that EMC does.
- lbarrow 12y ago
  The 20% figure quoted is describing an earlier deal that eBay considered and rejected.
btown 12y ago
Is anyone else worried about the long term stability of Braintree under such an aggressive board environment? I was always concerned about conflicts of interest with PayPal acquiring Braintree - two competing and incompatible ways to pay with a credit card. As much as I admire Braintree engineering, and I would normally trust a board to believe in the Braintree brand of reliability, it does no good if a single unpredictable actor, namely Icahn, could strongarm the parent company into underfunding or cannibalizing Braintree. Am I just being paranoid?
- lbarrow 12y ago
  I'm an engineer at Braintree. Speaking only for myself, I don't see a conflict of interest between us and PayPal. PayPal has embraced our APIs and approach to support as the future of how merchants will integrate with PayPal, and we've been able to leverage PayPal's consumer brand to build better products for our merchants. I was initially very, very skeptical of our acquisition, but I have to admit it's turned out well. I don't think there is any risk of them underfunding or cannibalizing us.
  - rkalla 12y ago
    For what it's worth, PayPal is embracing the shit out of BT acquisition - really see that as the north star for our merchant integration story. Everyone knows they know what they are doing and only want to help, they don't want to hinder/hobble/mess with it.
    - zhengyi13 12y ago
      So what you're saying is that they learned their lessons from the VeriSign Payment Services acquisition, and learned not to actively try to break things that work? (Yes, still very, very bitter about that. If you have a different perspective on that time/process, I would genuinely like to hear it.)
- jcampbell1 12y ago
  I see the opposite problem on the horizon. With the Braintree acquisition, Paypal is a lot less likely to integrate with Stripe. Braintree is going to be a worse version of Stripe, but we will use it because it will give us PayPal out of the box. It is a good time to work at Braintree.
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CrazyCatDog 12y ago
When the going gets tough, firms call in consultants. When Bain or McKinsey arrive, they tell you to make a change. Is your firm centralized? Decentralize it! Is your firm decentralized? Centralize it. Donahoe's "master fix" and subsequent exit should give pause to industry thinking of hiring consultants to run their companies in the long-run; for as the saying goes: the apple doesn't fall far from the tree.
- ChuckMcM 12y ago
  Hilarious and on point, but to their credit consultants look at what you are currently doing which isn't working, and suggest you do the other thing on the theory that worst case that won't work either but at least you will have tried something new. I generally think that it is a symptom that the management isn't able to manage the business. Not everyone has the skill set to mix a tech and commerce company into a living / breathing entity.
  - x0x0 12y ago
    Or perhaps for some reason management needs an external blame sink for doing something they wanted to do...
  - mathattack 12y ago
    The "higher brand" consultancies also live by their stamp of approval. A CEO who wants to do a risky strategy will hire the biggest brand name possible to provide cover. "Nobody got fired for hiring McKinsey for advice" is similar to "Nobody got fired for buying IBM hardware". And in this case, the CEO can say, "Well, I hired the best to help me think it up" when it goes wrong.
    - Chronic29 12y ago
      Yep. If you're going to do layoffs at your startup or corporation, call a consultant, get their analysis (which is actually unnecessary), fire people, and bam, point the finger at the consultants if any backlash comes your way
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modeless 12y ago
I wonder if this will affect PayPal's recent enthusiasm for Bitcoin one way or the other.
calcsam 12y ago
Next target: Yahoo.
moony320 12y ago
market share is the most important thing. Paypal will hurtle without Ebay. I think this is a wise and significant decision. And hope Paypal could reduce rates or even chance the fees.
wstcha 12y ago
market share is the most important thing. Paypal will hurtle without Ebay. I think this is a wise and significant decision. And hope Paypal could reduce rates or even chance the fees.
- jessaustin 12y ago
  "hurtle" might be kind of an ambiguous verb here. I think you mean that PP will take off, but hurtling usually seems to imply traveling under the influence of inertia and gravity alone. EDIT: why have two green accounts posted the same non-idiomatic comment in a matter of minutes?
metaphorm 12y ago
Icahn is only interested in Icahn. I can't really see this as positive for anyone just because Icahn has a track record of pressuring businesses into destroying their value creating engines in order to enrich his own coffers. He's a pillager, not a builder. Why does anyone tolerate doing business with him anymore?
- xnull 12y ago
  Everyone keep your eyes peeled for same thing re Value Act Capital and Microsoft.
- kolbe 12y ago
  Firstly, this is not an instance of a company being pillaged by an activist investor. Icahn is not assuming control of the company, he's trying to make them change direction. Secondly, Icahn has been completely right about eBay. Andreessen functionally stole billions from eBay via a deal with one of the most egregious conflicts of interest we've seen in all of corporate America. Which, fine, it was a fuckup. Sometimes companies fuck up. But then, eBay keeps the same board of directors with the same crooks running the show. eBay needs an activist investor or else these are the guys who are going to pillage the company (even further). Not Icahn.
  - metaphorm 12y ago
    I wasn't commenting about the board of Ebay or Andreesen. they may well be pillaging assholes in their own right. that doesn't mean that Icahn isn't also a pillager. He certainly has the track record of one.
  - x0x0 12y ago
    To be fair, I think Andreessen only got a couple hundred million (3% on an $8.5B acquisition [1]). But while pmarca says he recused himself, the whole thing reeks. Though don't forget what is actually the far far bigger failure. When that idiot Meg Whitman acquired skype in 2005, she acquired skype but not the underlying tech (Joltid), then fucked the founders on an earnout. So there was tons of bad blood, and they were declining to relicense their p2p tech to skype. You can read all about it [2] and elsewhere. That, plus some other stupid stuff, made ebay give the founders 30% of the company back for $160m. I don't think Andreessen was on the board for the initial acquisition, but what idiocy. It's hard to believe a reasonable technical person was involved in the initial acquisition. Where the hell was the board? The point is, it's hard to say ebay has had competent executive leadership or a board for a while. [1] http://www.bloomberg.com/news/2014-03-03/ebay-andreessen-refute-icahn-s-claims-on-skype-acquisition.html http://www.bloomberg.com/news/2014-03-03/ebay-andreessen-ref... [2] http://mashable.com/2009/11/06/skype-lawsuit-settled/ http://mashable.com/2009/11/06/skype-lawsuit-settled/
ghobs91 12y ago
I think one of the major sources of eBay's troubles is their decision to slowly abandon their P2P focus, in favor of the "shopping mall of the internet" model that Amazon uses. Rather than pursuing this model and doing it better than the competition, they chose to ape them, and badly. Like CrazyCatDog said, eBay is the textbook example of what happens when a tech company is run by consultants who don't understand the users.
- CamperBob2 12y ago
  A contrarian view: there is some room to attack Amazon, primarily in the UX department. I wouldn't rule that out as a strategy for growth, but is eBay the right company to execute it? That's where it gets murky. They have a lot of the same usability flaws.
  - DanBC 12y ago
    I love to think that a web shop with decent search would beat Amazon. However, even though I really freaking hate some aspects of the Amazon website I am a repeat customer. I don't have much money but the small amount of disposable income I do have goes to Amazon. Competitors would need to have similar customer protection and customer service; and at least similar pricez or justification for higher prices.
  - ghobs91 12y ago
    Not only in the UX department, but also in their flawed and not very useful personalization system. "We noticed you bought an iPad, here are some more iPads" is not helpful.
  - toomuchtodo 12y ago
    > A contrarian view: there is some room to attack Amazon, primarily in the UX department. Good luck with that. I've spent over $50K at Amazon over the last decade according to the data I dumped out of my orders. I'm a prime member. Amazon's site isn't perfect, but between the reviews, 2-day free shipping, 1 day at ~$5 extra, and product selection rivaled only by Walmart, I wouldn't look at Ebay unless it was something exotic (5 ton military truck for example). "Bid" on something? No. Use Ebay's UX compared to Amazon's? Again, no thank you. Wait 5-7 days (at least) for something? Good luck Ebay!
davidgerard 12y ago
eBay's acquisitions have rarely made sense, PayPal being the only one I can think of that had synergy. Does anyone understand why they bought Magento, for instance?
bhangi 12y ago
The one question no one seems to be asking is how much of PayPal's revenue is due to transactions on eBay. I suspect that it is the majority. If that's the case, then with the spinoff, it would be in eBay's interest to make all other types of payments equally attractive on its site -- not so good for PayPal, I'd think.
- slykat 12y ago
  Last year Ebay's marketplace accounted for 30% of Paypal's revenue. Ebay mentioned that this number is declining and is forecast to hit 15% in the future. So significant but declining. "That’s no surprise since about 30 percent of PayPal’s business is still on eBay, although that is down from 50 percent only a few years ago. Donahoe said eBay projected it would get to 15 percent quickly." http://recode.net/2014/09/30/ebay-to-spin-off-paypal-with-new-ceos-for-two-publicly-traded-companies/ http://recode.net/2014/09/30/ebay-to-spin-off-paypal-with-ne...

230 points by murtza 12y ago

Wait, payment processing is seeing a lot more competition and now they decide to split? I don't know if this is such a "value creation" move.

CamperBob2 12y ago
I think the argument is that as the landscape gets more competitive, eBay can't afford to tie themselves so intimately to a single payment provider. That is why eBay's stock lurched upwards as soon as the news was announced. To someone looking to invest in an online marketplace, eBay is more important than PayPal by itself.

pratyushag 12y ago

Great decision, allowing PayPal to grow beyond the virtual ceiling placed by being governed by a marketplace company which rightly has its own agenda before PayPal's.

Shivetya 12y ago
As long as the split does not disrupt the current relationship for buyers and sellers using Ebay. Right now the process is quite simple and there had been recent efforts to link the two sites even more, as in not needing to ever log into Paypal to complete ebay purchases. hopefully that integration won't suffer.
- sk55 12y ago
  integration has been live on my account for several months.
- pratyushag 12y ago
  I don't see why it would... ebay would still hold a significant percentage of paypal and influence such decision making. The main benefit will come from large competitors choosing Paypal as it becomes a less biased payment service and not one that directly profits a competitor. Essentially, Ebay will now have to pay closer to market-rate for processing.

ghshephard 12y ago

The first thing that comes to mind is that the clock has just started ticking for PayPal to become accepted all over the web in places that it may not have been as welcome. For example, I'm sure Amazon will add PayPal within 90 days of Paypal going public (if not sooner).

CJefferson 12y ago
Really? Given that Amazon have a competing product (Amazon Payments), I'd be surprised if they supported Paypal?
spatz 12y ago
So when are they adding Google Wallet?
michaelt 12y ago
Isn't Paypal just another middleman between the retailer and the banks? I mean, Paypal is all very well for a small site where customers don't trust you with their card details or you're not doing enough volume to get a decent merchant account - but neither of those applies to Amazon. Paypal will want a bigger cut than Amazon's existing credit card processors. So why would Amazon want to use Paypal?
- foldor 12y ago
  PayPal allows people who don't have a credit card to make purchases online. Many people in European countries don't have a credit card for example. Accepting PayPal is an easy alternative to supporting all of the different payment methods that you might need to meet certain regions expectations.
  - VLM 12y ago
    The existing marketplace solution for that is prepaid credit cards, essentially gift certs that can be redeemed by being run as a credit card. Teens use them to shop online, or at least my kids do. There is also limited liability with prepaid CCs, no matter what happens you can't be out more than the value of the CC, but you can get into considerable financial trouble with paypal WRT overdrafts and overdraft fees and bounced check fees ... its just not worth it unless you're well disciplined.

conchy 12y ago

Smart move, eBay divests before bitcoin really starts eating PayPal's lunch

DanBC 12y ago
Bitcoin provides zero protection to buyers. It's delusional to think people would want to buy stuff from ebay without the protections from Paypal or their credit card provider. Current consumer protection advice is to walk away from any sale that uses things like Western Union or cash transfer - and this is likely to be extended to include Bitcoin as soon as anyone in the general public hears about Bitcoin.
- lnanek2 12y ago
  PayPal protections are usually considered a disaster for everyone involved. Sellers and companies are constantly getting their accounts frozen, buyers are constantly getting shipped bottles of shampoo instead of camera equipment, priceless violins are being destroyed, etc..
- icebraining 12y ago
  Still, a simple escrow system on top of Bitcoin could provide the same guarantees while potentially being cheaper. It's not like Bitcoin prevents such systems from being created - on the contrary, it has mechanisms to support them.
  - jfoster 12y ago
    What makes you think it would be much cheaper? I think it might have to be more expensive. The anonymity aspects of bitcoin could result in more fraudsters getting away with fraud.
    - icebraining 12y ago
      I'm not saying it would; I'm saying it potentially could. But the CC system also provides anonymity, since most cards used for fraud are stolen anyway, so the fact they're tied to a real person is irrelevant. Bitcoin, on the other hand, doesn't suffer from the same problem as CC - that the payment info must be shared with every single merchant - so it's potentially must harder to steal; Target wouldn't have a copy of your bitcoin wallet just because you bought something from them, for example.

Rachelgee 12y ago

NoOoOoOo!

williwu 12y ago

This article come to mind. Would Google be interested in buying a stake in Paypal now? http://www.cnet.com/news/google-to-buy-slice-of-ebay-unlikely-says-analyst/ http://www.cnet.com/news/google-to-buy-slice-of-ebay-unlikel...

bluedevil2k 12y ago

Spinning off PayPal really hurts the long-term growth potential of EBay. They haven't grown much at all over the past few years, once you take out the PayPal revenue. That will really hurt the stock price. Meanwhile, I would expect PayPal's stock price to grow as it's potential for growth is pretty large. Will be very interesting to see how they split the existing EBay shares for shareholder and at what price.

adventured 12y ago
eBay has most of the profit in the business. PayPal has sales growth, but is nowhere near as profitable as the eBay auction platform. There's no doubt the market wants access to PayPal's growth, but eBay is the profit machine in that relationship. eBay's platform margins are extreme. PayPal will have to become five times larger to equal the profit that eBay spins off. Perhaps they can pull that off, but it's going to take a decade or longer.
foobarqux 12y ago
> Spinning off PayPal really hurts the long-term growth potential of EBay. They haven't grown much at all over the past few years, once you take out the PayPal revenue. But, as a current shareholder, you will still own PayPal and Ebay shares. The question is whether they are better together or better apart. There isn't any obvious synergy between the two anymore. > Will be very interesting to see how they split the existing EBay shares for shareholder and at what price. No, there is nothing interesting about that. Each shareholder get X shares of Ebay, Y shares of Paypal and Z dollars of cash. The price of the shares is set by the market. The values of X and Y are pretty much arbitrary.

danesparza 12y ago

I'm amazed that this jackass who ran TWA into the ground still has so much staying power. http://www.businessinsider.com/marc-andreessen-carl-icahn-killed-an-entire-airline-2014-3 http://www.businessinsider.com/marc-andreessen-carl-icahn-ki...

psaintla 12y ago
As long as you have massive amounts of money you'll always be relevant.
jabberwock 12y ago
I totally agree with your assessment of Icahn. Andreesen's no saint however, he supports government spying and trampling of civil rights for his personal gain.
rattray 12y ago
What, you're only allowed to learn from failure in Silicon Valley?
- ceejayoz 12y ago
  TWA wasn't a failure for Icahn. He made hundreds of millions of dollars by selling its assets to pay himself.
  - aml183 12y ago
    A win for them (Icahn and Andreessen) is measured by their wallet not about the societal impact.
    - toomuchtodo 12y ago
      We shouldn't confuse what normal people consider success to be with with what a sociopath considers success.

fidotron 12y ago

The recent Alibaba ipo demonstrates this is a stupid idea and that eBay has been chronically mismanaged for years. That it has effectively squandered such a massive lead and headstart is incredible.

adventured 12y ago
Alibaba spun off Alipay. How does the Alibaba IPO demonstrate spinning off PayPal is a stupid idea exactly?
- rebelidealist 12y ago
  Alibaba spun off Alipay because Jack Ma wanted to control Alipay instead of the Alibaba majority stakeholder such as Yahoo and Softbank. It was an uncontested power move by Ma.
  - rebelidealist 12y ago
    Sorry, I don't know why my comment was posted 3 times...
- rebelidealist 12y ago
  Alibaba spun off Alipay because Jack Ma wanted to control Alipay instead of the Alibaba majority stakeholder such as Yahoo and Softbank. It was an uncontested power move by Ma.
- rebelidealist 12y ago
  Alibaba spun off Alipay because Jack Ma wanted to control Alipay instead of the Alibaba majority stakeholder such as Yahoo and Softbank. It was an uncontested power move by Ma.

dosh 12y ago

Once this goes live, PayPal will sooner or later face stiff competition beyond its current stage under the umbrella of eBay, competing against Chinese players like those of alipay and tenpay which already have users in the hundreds of millions. These players are agressively looking into the markets outside of mainland China. The landscape won't change in a few years, but in a decade, may look completely different.

danvoell 12y ago
Maybe these competitors would want to invest/partner with paypal and splitting from Ebay opens up that opportunity
1337biz 12y ago
These would still have a massive trust issue in most parts of the "Western World". Certainly doable under the umbrella of buying an established western (banking) brand but Asian brands will have a hard time communicating trust, reliability and security.
- Igglyboo 12y ago
  Even though it makes no sense, I'd rather use an unknown western banking company than an unknown asian banking company and I'm sure many feel the same.
Shinkei 12y ago
I agree that they are companies with promise, and certainly will be strong in their domestic markets... but I remain skeptical of their success in the West. I personally would not directly support Chinese businesses if I have an equivalent Western business that I can support, not simply because of xenophobia or some nationalistic nonsense, but because what China does as a Government is reprehensible. For all its faults, America is still a shining emblem of Democracy when compared to other powers such as Russia and China.
- adventured 12y ago
  Not only that, but China doesn't allow an even playing field in any regard what-so-ever in their domestic economy. Foreign investors still can't own more than the majority share in a Chinese company. China is anti-West when it comes to supporting their domestic companies. They block out major competitors, such as Google or Facebook, and they make life very difficult for anyone that attempts to compete with their domestic companies. The crap Alibaba pulled in stealing tens of billions in wealth from Yahoo by spinning off Alipay without proper compensation and forcing Yahoo to sell half its stake in Alibaba is par for the course in China.

hemancuso 12y ago

This articles suggests only 20% of PayPal will be sold, although I doubt that number is anywhere near final. It's just like EMC spinning off VMware. EMC held on to 80% of VMware [and still does?]. It lets them capitalize much more effectively on the faster growing subsidiary. Even today VMware trades at double the PE ratio that EMC does.

lbarrow 12y ago
The 20% figure quoted is describing an earlier deal that eBay considered and rejected.

btown 12y ago

Is anyone else worried about the long term stability of Braintree under such an aggressive board environment? I was always concerned about conflicts of interest with PayPal acquiring Braintree - two competing and incompatible ways to pay with a credit card. As much as I admire Braintree engineering, and I would normally trust a board to believe in the Braintree brand of reliability, it does no good if a single unpredictable actor, namely Icahn, could strongarm the parent company into underfunding or cannibalizing Braintree. Am I just being paranoid?

lbarrow 12y ago
I'm an engineer at Braintree. Speaking only for myself, I don't see a conflict of interest between us and PayPal. PayPal has embraced our APIs and approach to support as the future of how merchants will integrate with PayPal, and we've been able to leverage PayPal's consumer brand to build better products for our merchants. I was initially very, very skeptical of our acquisition, but I have to admit it's turned out well. I don't think there is any risk of them underfunding or cannibalizing us.
- rkalla 12y ago
  For what it's worth, PayPal is embracing the shit out of BT acquisition - really see that as the north star for our merchant integration story. Everyone knows they know what they are doing and only want to help, they don't want to hinder/hobble/mess with it.
  - zhengyi13 12y ago
    So what you're saying is that they learned their lessons from the VeriSign Payment Services acquisition, and learned not to actively try to break things that work? (Yes, still very, very bitter about that. If you have a different perspective on that time/process, I would genuinely like to hear it.)
jcampbell1 12y ago
I see the opposite problem on the horizon. With the Braintree acquisition, Paypal is a lot less likely to integrate with Stripe. Braintree is going to be a worse version of Stripe, but we will use it because it will give us PayPal out of the box. It is a good time to work at Braintree.

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CrazyCatDog 12y ago

When the going gets tough, firms call in consultants. When Bain or McKinsey arrive, they tell you to make a change. Is your firm centralized? Decentralize it! Is your firm decentralized? Centralize it. Donahoe's "master fix" and subsequent exit should give pause to industry thinking of hiring consultants to run their companies in the long-run; for as the saying goes: the apple doesn't fall far from the tree.

ChuckMcM 12y ago
Hilarious and on point, but to their credit consultants look at what you are currently doing which isn't working, and suggest you do the other thing on the theory that worst case that won't work either but at least you will have tried something new. I generally think that it is a symptom that the management isn't able to manage the business. Not everyone has the skill set to mix a tech and commerce company into a living / breathing entity.
- x0x0 12y ago
  Or perhaps for some reason management needs an external blame sink for doing something they wanted to do...
- mathattack 12y ago
  The "higher brand" consultancies also live by their stamp of approval. A CEO who wants to do a risky strategy will hire the biggest brand name possible to provide cover. "Nobody got fired for hiring McKinsey for advice" is similar to "Nobody got fired for buying IBM hardware". And in this case, the CEO can say, "Well, I hired the best to help me think it up" when it goes wrong.
  - Chronic29 12y ago
    Yep. If you're going to do layoffs at your startup or corporation, call a consultant, get their analysis (which is actually unnecessary), fire people, and bam, point the finger at the consultants if any backlash comes your way
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modeless 12y ago

I wonder if this will affect PayPal's recent enthusiasm for Bitcoin one way or the other.

calcsam 12y ago

Next target: Yahoo.

moony320 12y ago

market share is the most important thing. Paypal will hurtle without Ebay. I think this is a wise and significant decision. And hope Paypal could reduce rates or even chance the fees.

wstcha 12y ago

market share is the most important thing. Paypal will hurtle without Ebay. I think this is a wise and significant decision. And hope Paypal could reduce rates or even chance the fees.

jessaustin 12y ago
"hurtle" might be kind of an ambiguous verb here. I think you mean that PP will take off, but hurtling usually seems to imply traveling under the influence of inertia and gravity alone. EDIT: why have two green accounts posted the same non-idiomatic comment in a matter of minutes?

metaphorm 12y ago

Icahn is only interested in Icahn. I can't really see this as positive for anyone just because Icahn has a track record of pressuring businesses into destroying their value creating engines in order to enrich his own coffers. He's a pillager, not a builder. Why does anyone tolerate doing business with him anymore?

xnull 12y ago
Everyone keep your eyes peeled for same thing re Value Act Capital and Microsoft.
kolbe 12y ago
Firstly, this is not an instance of a company being pillaged by an activist investor. Icahn is not assuming control of the company, he's trying to make them change direction. Secondly, Icahn has been completely right about eBay. Andreessen functionally stole billions from eBay via a deal with one of the most egregious conflicts of interest we've seen in all of corporate America. Which, fine, it was a fuckup. Sometimes companies fuck up. But then, eBay keeps the same board of directors with the same crooks running the show. eBay needs an activist investor or else these are the guys who are going to pillage the company (even further). Not Icahn.
- metaphorm 12y ago
  I wasn't commenting about the board of Ebay or Andreesen. they may well be pillaging assholes in their own right. that doesn't mean that Icahn isn't also a pillager. He certainly has the track record of one.
- x0x0 12y ago
  To be fair, I think Andreessen only got a couple hundred million (3% on an $8.5B acquisition [1]). But while pmarca says he recused himself, the whole thing reeks. Though don't forget what is actually the far far bigger failure. When that idiot Meg Whitman acquired skype in 2005, she acquired skype but not the underlying tech (Joltid), then fucked the founders on an earnout. So there was tons of bad blood, and they were declining to relicense their p2p tech to skype. You can read all about it [2] and elsewhere. That, plus some other stupid stuff, made ebay give the founders 30% of the company back for $160m. I don't think Andreessen was on the board for the initial acquisition, but what idiocy. It's hard to believe a reasonable technical person was involved in the initial acquisition. Where the hell was the board? The point is, it's hard to say ebay has had competent executive leadership or a board for a while. [1] http://www.bloomberg.com/news/2014-03-03/ebay-andreessen-refute-icahn-s-claims-on-skype-acquisition.html http://www.bloomberg.com/news/2014-03-03/ebay-andreessen-ref... [2] http://mashable.com/2009/11/06/skype-lawsuit-settled/ http://mashable.com/2009/11/06/skype-lawsuit-settled/

ghobs91 12y ago

I think one of the major sources of eBay's troubles is their decision to slowly abandon their P2P focus, in favor of the "shopping mall of the internet" model that Amazon uses. Rather than pursuing this model and doing it better than the competition, they chose to ape them, and badly. Like CrazyCatDog said, eBay is the textbook example of what happens when a tech company is run by consultants who don't understand the users.

CamperBob2 12y ago
A contrarian view: there is some room to attack Amazon, primarily in the UX department. I wouldn't rule that out as a strategy for growth, but is eBay the right company to execute it? That's where it gets murky. They have a lot of the same usability flaws.
- DanBC 12y ago
  I love to think that a web shop with decent search would beat Amazon. However, even though I really freaking hate some aspects of the Amazon website I am a repeat customer. I don't have much money but the small amount of disposable income I do have goes to Amazon. Competitors would need to have similar customer protection and customer service; and at least similar pricez or justification for higher prices.
- ghobs91 12y ago
  Not only in the UX department, but also in their flawed and not very useful personalization system. "We noticed you bought an iPad, here are some more iPads" is not helpful.
- toomuchtodo 12y ago
  > A contrarian view: there is some room to attack Amazon, primarily in the UX department. Good luck with that. I've spent over $50K at Amazon over the last decade according to the data I dumped out of my orders. I'm a prime member. Amazon's site isn't perfect, but between the reviews, 2-day free shipping, 1 day at ~$5 extra, and product selection rivaled only by Walmart, I wouldn't look at Ebay unless it was something exotic (5 ton military truck for example). "Bid" on something? No. Use Ebay's UX compared to Amazon's? Again, no thank you. Wait 5-7 days (at least) for something? Good luck Ebay!

davidgerard 12y ago

eBay's acquisitions have rarely made sense, PayPal being the only one I can think of that had synergy. Does anyone understand why they bought Magento, for instance?

bhangi 12y ago

The one question no one seems to be asking is how much of PayPal's revenue is due to transactions on eBay. I suspect that it is the majority. If that's the case, then with the spinoff, it would be in eBay's interest to make all other types of payments equally attractive on its site -- not so good for PayPal, I'd think.

slykat 12y ago
Last year Ebay's marketplace accounted for 30% of Paypal's revenue. Ebay mentioned that this number is declining and is forecast to hit 15% in the future. So significant but declining. "That’s no surprise since about 30 percent of PayPal’s business is still on eBay, although that is down from 50 percent only a few years ago. Donahoe said eBay projected it would get to 15 percent quickly." http://recode.net/2014/09/30/ebay-to-spin-off-paypal-with-new-ceos-for-two-publicly-traded-companies/ http://recode.net/2014/09/30/ebay-to-spin-off-paypal-with-ne...