Interesting article on a few fronts. Crux is that Paypal's CEO is leaving to go lead FB messaging. He says it to be an entrepreneur. My guess is FB is going to use messaging to try to grow their payments business and he saw the writing on the wall at paypal.

EBay’s PayPal Head Departing to Lead Facebook’s Messaging

By Brian Womack and Sarah Frier  Jun 10, 2014 12:01 AM ET  

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June 9 (Bloomberg) -- Bloomberg’s Cory Johnson reports on eBay losing its PayPal president David Marcus to Facebook. He speaks on Bloomberg Television’s “Street Smart.” (Source: Bloomberg)

Facebook Inc. (FB) hired EBay Inc. (EBAY)’s PayPal President David Marcus to lead its mobile messaging business, as the social network seeks to gain an advantage in a fast-growing and competitive business.

Marcus, 41, is leaving PayPal on June 27, according to a statement yesterday from EBay. He will head up Facebook’s Messenger application and other mobile messaging efforts, reporting to Chief Executive Officer Mark Zuckerberg and Javier Olivan, who is in charge of growth at the social network, said Vanessa Chan, a spokeswoman at the Menlo Park, California-based company.

Marcus is charged with eventually finding a business model for Messenger, which currently doesn’t make any revenue, according to a person with knowledge of the matter, who asked not to be identified because the information is private. The executive’s mandate won’t include messaging startup WhatsApp Inc., which Facebook said in February it would acquire for $19 billion and which will operate independently, Chan said.

The hire is a major Silicon Valley executive defection and underscores how Facebook is bolstering its product portfolio with a key new recruit. Apart from agreeing to buy WhatsApp, Facebook has said it will acquire virtual-reality goggles maker Oculus VR Inc. and has diversified into photo sharing with startup Instagram. The company has also released its own standalone apps, including Facebook Paper, which delivers a magazine-like experience on mobile phones and tablets.

Photographer: David Paul Morris/Bloomberg

David Marcus, president of EBay Inc.'s PayPal unit, smiles during a Bloomberg West... Read More

Messaging is a particularly competitive area as more people use the apps to communicate on the go. Companies including Rakuten Inc. and Tencent Holdings Ltd. have pushed into the industry to be on the front lines of how consumers communicate with one another using their mobile devices. Alibaba Group Holding Ltd. and others are investing in up-and-coming messaging apps such as TangoMe Inc.

Key Messaging

“Messaging is a core part of Facebook’s service and key to achieving our mission of making the world more open and connected,” Facebook said in a statement yesterday. The company said 12 billion messages are sent every day on its social network and that its Messenger app is used by more than 200 million people every month.

Prior to agreeing to buy WhatsApp, Facebook was struggling with the rise of mobile messaging, as the apps threatened people’s usage of the social network. Meanwhile, Facebook was grappling with how to fit all the features of its social networking product into a single mobile application.

Standalone Apps

Starting this year, the company has been dividing parts of the product into their own standalone apps to make them easier to use. One such app is Slingshot, which enables people to share disappearing moments and that would compete with Snapchat Inc. Facebook accidentally released Slingshot and then pulled it from several countries yesterday.

Facebook, which has vacuumed up talent in recent years from other Silicon Valley technology companies including Google Inc., declined to make Marcus available for an interview and said he wouldn’t be in charge of Slingshot.

“Facebook is still a place that can hire talent that can seemingly go anywhere,” said Brian Wieser, an analyst at Pivotal Research Group LLC.

Marcus’s departure from EBay follows his work building up PayPal’s payments business since joining the company in 2011 and becoming PayPal president in 2012. Marcus boosted PayPal’s active accounts by more than 30 percent to almost 150 million users at the beginning of this year from the quarter after he was named president. He also grew payments volume to $52 billion in the first quarter, up about 50 percent over the same period.

PayPal’s Role

PayPal is one of EBay’s faster-growing businesses, which has helped boost the company as a whole as its traditional e-commerce business underwent a turnaround. In the first quarter, PayPal’srevenue rose 19 percent to $1.85 billion, while EBay’s marketplaces business -- which includes auctions and sales of fixed-price items -- increased 10 percent to $2.16 billion.

Marcus’s exit is “challenging for EBay,” said Robert Peck, an analyst at SunTrust Robinson Humphrey. “To leave during a turnaround is going to create a little more pressure than they had before.”

PayPal was recently targeted by activist investor Carl Icahn, who agitated for the San Jose, California-based Web company to spin off the payments business. Icahn and EBay settled the proxy fight in April.

EBay CEO John Donahoe said in a statement that he wished Marcus well. He didn’t name a replacement for Marcus at PayPal.

“An entrepreneur at heart, David has made a career decision to focus on what he loves most –- leading smaller teams to create great product experiences,” Donahoe said.

Amanda Miller, a spokeswoman for EBay, said Marcus’s departure wasn’t tied to the proxy fight with Icahn this year.

Entrepreneur First

Marcus, a native of France, joined PayPal after EBay acquired his mobile-payments startup, Zong. The executive has long had an entrepreneurial streak. After studying economics at the University of Geneva in Switzerland, Marcus started his first company at 23. That venture, called GTN Telecom, grew to be one of the top telecommunications carriers in Switzerland. He later founded Echovox, the foundation for Zong.

In a post on Facebook, Marcus said he found it difficult to manage a large team at PayPal where he “suddenly found myself leading 14,000,” he wrote. “The first year took its toll on me. It was hard.”

Marcus wrote that Zuckerberg later talked to him about taking on the new role at Facebook.

“Mark shared a compelling vision about Mobile Messaging,” said Marcus in his post. “At first, I didn’t know whether another big company gig was a good thing for me, but Mark’s enthusiasm, and the unparalleled reach and consumer engagement of the Facebook platform ultimately won me over.”

Marcus wrote that he realized his passion is one of building products “that hopefully matter to a lot of people.”

Marcus earned $6.04 million at EBay in 2013, including salary, stock, option awards and other incentive pay, according to data compiled by Bloomberg.

(An earlier version of this story was corrected to show that PayPal processed $180 billion in payment volume in 2013, not $180 million.)

To contact the reporters on this story: Brian Womack in San Francisco atbwomack1@bloomberg.net; Sarah Frier in San Francisco at sfrier1@bloomberg.net

To contact the editors responsible for this story: Pui-Wing Tam at ptam13@bloomberg.netReed Stevenson