EBay's billion-dollar bet on PayPal pays off
Three Questions For Scott Thompson, PayPal President
Published 4:00 am, Sunday, May 9, 2010
Billion-dollar acquisitions are risky gambits that all too often don't pay off. EBay Inc.'s $1.5 billion purchase of PayPal in 2002 was not one of those cases.
On the contrary, the deal is looking smarter and smarter every quarter. PayPal is the uncontested leader in online payments, with 84 million active customers in 190 markets using 24 currencies.
In the first three months of the year, its revenue rose 26 percent over the prior year to $809.3 million, 37 percent of the company's total revenue. By comparison, eBay's marketplaces posted $1.4 billion in revenue, a gain of only 13 percent.
Q:PayPal's mobile payments were nearly as high in the first quarter as they were for all of 2009, according to eBay's earnings announcement last month. What does that say about the shift in consumer shopping patterns?
A: Consumers are clearly adopting mobile as a legitimate channel for shopping and payments. From PayPal's perspective, consumers are spot on - the future of money is mobile. The wallet people carry in their pockets or purses today will be available virtually anytime and anywhere on many different devices - and mobile devices will be just one way consumers will use to access it.
Q:PayPal has been the fastest-growing segment of eBay for several quarters, representing nearly 37 percent of revenue in the latest. Is eBay morphing from an e-commerce business into a payment business?
A: No. EBay has two core businesses: marketplaces and payments. With that said, PayPal's growth has been astounding and is a vital part of the entire company's success. We're committed to the success of all of eBay's segments and look forward to continued growth in all the company's business units.
Q:I realize PayPal doesn't talk about specific competitors, but a number of credit card companies have made recent acquisitions and announcements in the online payment space. Can you tell me in a general sense how PayPal is working to ensure its lead in the sector?
A: While we can't comment on what other companies are doing, what I can tell you is that innovation is in the very DNA of PayPal. In just the last six months, we've announced a whole new way for developers to innovate with PayPal X (which allows outside developers to create applications for PayPal); partnerships with leading global companies such as China Union Pay, Facebook and IBM; and a whole new way for consumers to pay from their iPhones. This is building on PayPal's capabilities that are unmatched in the industry.