After many years of a functional joint operation that bordered on symbiosis, eBay’s board of directors has decided to split the parent company from its payment division, PayPal, and make the latter its own company.
Although the news may come as a shock to most online shoppers (or anyone familiar with e-commerce, for that matter), no one is more shocked than eBay CEO John Donahoe, who took over the company after its former CEO, Meg Whitman, resigned from the post eight years ago. Donahoe, who has yet to be offered a position at either “new company,” isn’t just sweating the job prospects; he’s also sweating the future of both divisions, especially that of PayPal, whose horizons, he feels, look exceptionally dismal.
“Commerce and payments are converging, not diverging,” he has said while pointing out that eBay has always acted as the main draw for PayPal users who send payments to third-party sellers from whom they purchase goods via eBay.
Even so, PayPal has come to stand on its own. Anyone in the world can start a PayPal account and use it to transfer or accept funds from anyone else in the world who also has an account, regardless of whether either of them has an account on eBay. It’s highly convenient service, especially for artists, designers, and other professionals who rely on commission work arranged via the internet.
But still the split has many wondering about the motive behind it. Although the two companies could theoretically survive independently of each other, especially if the two maintained a contract to carry on business as they did before, separating them feels a bit like separating Tom and Jerry. Many think that eBay intends to sell PayPal (which is valued at a cool $50 billion) to a competitor, possibly even Google. Many more think that the parent hopes that, by cutting out PayPal and making it its own entity, the latter will develop or adopt new technologies that will require users to utilize eBay services in order to fully enjoy them. (This theory draws most of its inspiration from Apple Pay, a funds transferring system like PayPal that requires an iPhones developed by the separate Apple in order to use the service.)
There is no word yet on how or in what capacity the split will affect operation of either site. Right now, eBay redirects users who have just made a purchase to a special page where they may log into their PayPal account and confirm payment without having to go to the actual PayPal site itself. Overall, it’s a convenient, smooth way in which to complete the transaction, free of the usual fuss and muss that accompanies logging in to a second site just to confirm payment. Most likely the two companies will keep this structure, but a certain contract stipulation or—if the theory about selling PayPal to a competitor is true—or complete disbanding of the partnership between the two could make things very messy.
Regardless, the split is sure to have an interesting (but hopefully not harmful) affect on the market and the way in which we use both services.