A divorce between ebay and PayPal

Since 2002 when eBay acquired PayPal, at a price of $1.5 billion, the merger was successful. PayPal boasted more than 162 million active digital wallet users globally in 2014 and processed some $624 million in payments every day.

However, as more payment companies showed up in the payment market, bundle of two companies seems to be a disadvantage for both ebay and PayPal. They limited each other and start losing chances to corporate with other companies. For example, PayPal after divorce with ebay would be able to corporate with Amazon and Alibaba. Meanwhile, ebay could work with Apple pay and Google wallet.

 “As independent companies, we expect eBay and PayPal will be sharper and stronger, and more focused and competitive as leading, standalone companies in their respective markets,” according to the filing with the Securities and Exchange Commission. “EBay and PayPal also will benefit from additional flexibility and agility to pursue new market and partnership opportunities.”

The arrangement would increase both companies’ competitive power by remaining independent of each other but excluding prohibition on each working with the other’s core competitors.

Like real divorce, if PayPal’s share of the transactions falls below that level, eBay must pay its former subsidiary restitution. The deal will last for six years, including a one-year transition period.

Advertising on Alibaba Marketplaces heats up

According to an article published by the WSJ this week, advertisers are jockeying for position on Alibaba properties; tbao and tmall where daily banner ads run as much as 180,000 yuan ($29,242).

From the various seller responses, it is not clear that future will include the same vibrant diverse marketplace as it does today, which was perhaps the primary driver that led to Alibaba's success.

The article paints a picture where Alibaba offers an auction environment, where sellers with the deepest pockets will outlast the smaller players that cannot keep pace with necessary spend to maintain ideal product placement on Alibaba properties.

But this is not a new story.  Sellers on Alibaba can draw from the experiences of eBay sellers, who at first prosper, yet as the relationship dynamic shifted in favor of eBay, sometimes find themselves increasingly at odds with eBay's policies.

Hence, if Alibaba continues this path, will it also face a similar path to growth as it's US counterparts eBay and Amazon, which depend on both volumes and community growth across both buyers and sellers?

We Wish You A Mobile Christmas

The red cups are back at Starbucks which officially signals the start of the holiday season, right?

In all seriousness, with Thanksgiving around the corner, holiday shopping will be in full force if it hasn't already started for some of the eager beavers. With the increases in online shopping, industry experts agree that this will be the year for mobile. TechCrunch ran an interesting story on what this will mean including specific mention of trends in mobile and tablets. The basic gist is that retailers' investments in apps and integration of PayPal onto their sites will address the pending increases in online shopping.

But what I found most interesting was the integration of mobile into brick and mortar shopping. People are using their phones more and more to do comparative shopping at stores and find the best deals with apps like eBay's RedLaser which allows shoppers to scan a barcode and find products across multiple online and local stores including prices. Another app, ShopKick, is taking this even further by awarding loyalty points and discounts to consumers for going into participating merchants and performing actions like scanning bar codes or trying something on. The points can be redeemed for gift cards at the same participating merchants. So instead of killing traditional shopping, mobile is actually making it more rewarding. Brilliant!

http://techcrunch.com/2011/11/13/how-google-ebay-and-paypal-are-gearing-up-for-a-very-mobile-holiday-shopping-season/

Craigslist Crackdown - How Will this Affect its Business?

As the online classified ad site of Craigslist continues to accumulate bad publicity, the centralized online community faces increasing pressure to clean up its act. The attorney general of South Carolina, Henry McMaster, has even threatened to open a criminal investigation into the company's executives if changes aren't made. These changes include removing a section devoted to erotic services that allows providers of sexual services to post ads.

Craigslist argues that any website featuring third-party content can't be held responsible for posts that violate state laws (via the Communications Decency Act of 1996). However, this issue of legality will not protect Craigslist's brand image. In order to promote the website as a clean, professional, and safe community to conduct business, Craigslist may need to review its postings with greater scrutiny.

Such a shift in policy would have dramatic effects on Craigslist's business model. With a total of 28 employees, Craigslist has very low overhead costs. Policing for inappropriate posts would require a huge increase in staff and overhead costs. Currently, Craigslist's main source of revenue comes from fees for posting job ads in select cities. If these revenues do not cover potential increases in overhead costs, new fees must be initiated. By initiating new fees, the executives of Craigslist will have retracted from their underlying ideal of providing such an extensive online community completely for free. This is a dilemma they dearly hope to avoid.

But it would appear that Craigslist already faces this dilemma. Do they keep their costs low and by doing so risk damaging their reputation or do they incurr the increase in overhead to maintain positive publicity? Should they consider alternatives to improving their brand image? Such a brand is important, given that Craigslist is not alone in providing online classified adds. Competitors such as Ebay (who also happens to own 20% of Craiglist), Walmart Classifieds, and OLX would surely benefit from a weakened Craigslist brand.