After the confirmed split with PayPal, where is the online marketplace headed
Do you remember the time when we mentioned eBay frequently? When there was either something fun, interesting or actually valuable there? They were doing so well and even merged with the largest purely online payments system – PayPal. Now, with the announced split of the two companies, traders and investors are wondering what is next for both and while the future of PayPal looks bright, things aren’t the same for it’s former parent company.
Billionaire investor Carl Icahn was quite vocal in his wish to separate the two and now his wish will finally come true. In hindsight, many have come to agree with him that PayPal has enormous potential. It is already challenging the likes of Visa and Mastercard in terms of online transactions and is looking for more ways to solidify its position before the inevitable arrival of Apple Pay and/or some other system that Google and Amazon haven’t announced yet (although potential partnerships are being discussed).
Most analysts agree that the spinoff of the payments company is actually good for both of them. The types of challenges they are facing are distinctly different. While PayPal is focusing on one touch transactions in the mobile segment, eBay is losing share to different companies like Amazon and Walmart. The latter has outperformed the 16% growth of the overall e-commerce market and the former is increasingly moving their sales online. Compared to this, eBay registered sales growth around 6.5%.
In addition the company got several other hits last year. A security breach forced the company to contact all its users, warning them of potential account and data theft. This led to a drop in overall activity and revenue, from which they haven’t recovered completely. On top of that, the change in Google’s SEO (search engine optimisation) algorithm, filtered a large portion of “low-grade” links from eBay, limiting their exposure and again hurting sales.
Last, but definitely not least, the reputation of eBay, as THE place to auction, buy and sell products has been waning. In it’s heyday it dominated headlines and conversations, it was the model to follow and replicate. But in a highly competitive business like online retail, they haven’t kept pace with the pack.
Not for a lack of trying. In 2012 they formed a special team that has been looking into connecting online and brick and mortar stores through interactive screens placed around stories and in changing rooms. There are rumours of testing RFID tags that allow the customer to buy the item through her phone without even speaking to a sales rep.
For now eBay still has the PayPal numbers to cover any weaknesses. Earnings per share are expected to rise from $0.71 to $0.78 and revenue consensus estimates are $4.94 billion, a jump of 8.3% compared to last year. The stock price itself will be jittery even without all the expectations surrounding the announcement, given the overall nervousness in the markets, so large movements can be expected.
Our next article will be online at 4:00pm GMT – “The Internet of Things – Which Companies are at the Forefront”.