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.
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.
In this case it is more likely that the consultants were brought in to "independently" provide justification for something that had already been decided.
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?
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.
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.
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.
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.
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.
> 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.
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.
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.
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?
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.
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.
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.
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.
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.
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-ne...
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.
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.
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.
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.
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).
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?
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?
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.
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.
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.
"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?
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.
CrazyCatDog|11 years ago
ChuckMcM|11 years ago
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.
danhak|11 years ago
foobarqux|11 years ago
trhway|11 years ago
mathattack|11 years ago
In his defense, he was there for almost 10 years, no?
btown|11 years ago
lbarrow|11 years ago
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.
jcampbell1|11 years ago
pratyushag|11 years ago
Shivetya|11 years ago
hopefully that integration won't suffer.
bluedevil2k|11 years ago
foobarqux|11 years ago
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.
adventured|11 years ago
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.
fidotron|11 years ago
adventured|11 years ago
metaphorm|11 years ago
kolbe|11 years ago
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.
xnull|11 years ago
williwu|11 years ago
http://www.cnet.com/news/google-to-buy-slice-of-ebay-unlikel...
ghobs91|11 years ago
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|11 years ago
hemancuso|11 years ago
lbarrow|11 years ago
bhangi|11 years ago
slykat|11 years ago
"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-ne...
wheaties|11 years ago
CamperBob2|11 years ago
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.
unknown|11 years ago
[deleted]
dosh|11 years ago
The landscape won't change in a few years, but in a decade, may look completely different.
Shinkei|11 years ago
adventured|11 years ago
Visa has a $134 billion market cap and is the payments juggernaut globally. I'd bet on them at least attempting to acquire PayPal.
To put Visa in perspective, their profit for 2013 was roughly 60% greater than Alibaba's.
1337biz|11 years ago
danvoell|11 years ago
phlakaton|11 years ago
modeless|11 years ago
unknown|11 years ago
[deleted]
ghshephard|11 years ago
michaelt|11 years ago
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?
CJefferson|11 years ago
duaneb|11 years ago
spatz|11 years ago
lnanek2|11 years ago
nikant|11 years ago
davidgerard|11 years ago
calcsam|11 years ago
danesparza|11 years ago
jabberwock|11 years ago
rattray|11 years ago
psaintla|11 years ago
Rachelgee|11 years ago
moony320|11 years ago
wstcha|11 years ago
jessaustin|11 years ago
EDIT: why have two green accounts posted the same non-idiomatic comment in a matter of minutes?
conchy|11 years ago
DanBC|11 years ago
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.