PayPal Still Making the Cash Registers Ring at eBay


PayPal continues to be the primary engine of growth within eBay (s ebay), judging by the online retailer’s latest quarterly results, and the company’s CEO reiterated that over the next few years, the payment business could grow to be larger than eBay’s core online marketplace business. While eBay’s main retail operations turned in respectable revenue growth of 11 percent year over year, PayPal’s revenues climbed by 22 percent, and total payment volume at the merchant services division grew 45 percent year over year — the third consecutive quarter of 40-percent-plus growth.

eBay CEO John Donahoe said that PayPal signed up three million new users in the quarter, and that the payments business is expanding globally, thanks to agreements with banks in China, Singapore and Australia. The company is also counting on social networking and mobile payments to be big growth drivers in the future — it signed a deal with Facebook earlier this year to allow users to pay for games and applications with PayPal, and also recently launched a mobile version of its Express Checkout feature for retailers. President Scott Thompson said in a recent interview (embedded below) that the company wants to become the default payment option for everything from smart automobiles to set-top boxes (See related GigaOM Pro Report: Monetizing Digital Content (sub. required)).

So is PayPal’s performance enough to make up for the somewhat lackluster growth of the rest of eBay’s business? Morgan Stanley seems to think so — it said in a research note that the continued growth of the payments division makes eBay shares “compelling,” but other brokerage analysts aren’t so sure. Colin Gillis at BGC Financial in New York told Bloomberg that eBay is similar to Yahoo (s YHOO), in that the online retailer is struggling to catch up to Amazon (s AMZN) just as Yahoo is struggling to compete with Google (s GOOG). “PayPal is an overperforming asset, but it’s attached to the Yahoo of commerce,” the analyst said.

Related content from GigaOM Pro (sub req’d): A Mobile Payments Glossary

Post and thumbnail photos courtesy of Flickr user quaziefoto


Philip Cohen

Draft Media Release

“It is with very great sadness that eBay’s Chief Headless Turkey, John Donahoe (aka “Peter Principle”—among many other derogatory terms), announces the probable demise of eBay’s most ugly daughter, PayPal. PayPal is about to be stricken by particularly virulent strains of Visa+CyberSource and Mastercard Open Platform, aggravated by PayPal’s insurmountable lack of direct financial institutions participation and a great deal of PayPal merchant dissatisfaction, particularly with respect to PayPal’s grossly unfair, “all responsibility avoiding” UA, totally primitive risk management processes, and grossly unprofessional, buyer-biased, fraud-facilitating, transactions mediation.

“PayPal’s health may therefore be expected to deteriorate and, if ultimately not completely incapacitated, will most likely be eventually confined to its mandatory offering on what little there will be by then left of the Donahoe-devastated eBay marketplaces. There is no cure for this condition, and the “eBafia Don” is particularly saddened by the inevitable presumption that it is unlikely that PayPal, will be able to continue to underpin eBay’s sagging bottom line in the future.”

Unlike all other payments processors operating in Australia, PayPal has declined to sign up to the payments processors’ “Code of Conduct”. The clear message therefrom is “users beware”!

The fact is, had the original developers of the “bankcard” concept ever behaved the way PayPal behaves, credit/debit cards would never have gotten off the ground, and we would still be paying for all our purchases with pieces of paper and little metal discs. PayPal still has some momentum but that momentum will ultimately dissipate as the obvious benefits of the banks-supported online payments systems offered by the likes of Visa/Mastercard gather their own momentum.

A detailed examination of and prognosis for PayPal, (including a further link to the “PayPal Horror Tour”) at:

eBay/PayPal/Donahoe: Dead Men Walking


I’m sure you’re right from a merchant point-of-view (I am not one, so have no experience) but any payment system has to work for both merchants and customers, and the undeniable reality is that PayPal is popular with the latter… the people that spend the money!

The banks and card-brands have a pretty poor record in building customer friendly payment systems that people want to use and this will impede their adoption! They build systems that suit themselves, and possibly the merchants, though often just themselves.

I will await the Visa+Cybersource/Mastercard Open Platform with interest!


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