PayPal Spinoff: Might A Google Bid Be Rivalled By Microsoft?

When you think about it, there wasn't a whole lot of common sense behind the decision to put PayPal inside the eBay corporate structure, was there?

It made every last bit of sense to incorporate the technology so people can pay for items without having to log in to a separate service on a different window -- but actually having the company within eBay's walls never quite struck me as a sensible idea.

The main reason became very clear when eBay suffered a hack attack, which it handled incredibly badly. People found out about the development on the news and were told by friend on Facebook to change their password long before eBay eventually got around to holding its hands up and emailing clients to suggest they change log in details. The two words, "horse" and "bolted," sprang immediately to mind.

Of course, PayPayl was unaffected -- but you can't help but wonder whether its brand image and the trust new customers might place in it was damaged. If you were signing up for an online wallet would you have opted for eBay's immediately after it was making headlines for all the wrong reasons?

Perhaps placing it within the corporate wall of eBay gave the payment mechanism respectability and helped it grow to a point where it overshadows its parent. I can't help but think this could have been achieved with the strap line "an eBay company," particularly as eBay accounts for around a third of the payments it process each day. Two in three of its payments are processed beyond its parent company, and that proportion is growing, so a spin-off makes sense.

So now, talk will turn to what will happen with PayPal when it's out on its own. Will it be bought? Well, there will certainly be those who wouldn't mind cashing in their investment. The spin-off is widely being seen as being prompted by at least one very powerful vocal shareholder who wanted the business to be independent, forging its own way in the digital payments world.

Suitors are already being discussed. When you're talking tech and an asking price that could reach tens of billions of dollars ($60bn has been plucked out of the air by some commentators), then you can bet Google's name will crop up. Alibaba, which has recently launched the world's largest tech company float in New York, has similarly been mentioned.

It's worth mentioning, however, that PayPal is mostly used online. Despite having an app on every platform, its desktop dominance is not carried over to mobile payments, so maybe there's a mobile brand out there waiting to snap up PayPal to launch an equivalent of Apple Pay?

If you're wondering why a mobile maker might not simply offer the app rather than feel obliged to own the company, you might well want to consider the commissions that Apple Pay will be charging on mobile payments which are soon set to top $100bn in the USA alone. 

As payments move from the desktop to the mobile there are a lot of 2 per cent payment commissions out there somebody is going to enjoy and it would make sense that a mobile maker wouldn't Apple have too huge a slice of the pie. 

So, while people are throwing names in to the ring, why not run with Google but also throw in Microsoft, or even Samsung?

Mind you, if it came to it and the asking price was really around the $60bn mark, that might too big a fish for anyone else to swallow, particularly when mobile payments are still at such as early state that you could probably take one per cent of that figure and have a very good basis to build and roll out a mobile payment platform of your own.

When PayPal is spun-off next year, it's going to be interesting to see if someone tries to swallow it up or whether it's simple too huge a whale to be landed.

2 comments about "PayPal Spinoff: Might A Google Bid Be Rivalled By Microsoft?".
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  1. Gwyneth Llewelyn from Beta Technologies, October 2, 2014 at 4:06 p.m.

    Interesting what-if scenario. Microsoft would certainly be an interested party, since, as far as I know, they don't have (yet) a consumer-ready payment service. But of course Google and Alibaba might be interested in acquiring their biggest competitor — or the Russian Yandex.Money might be interested too.

    One thing is for certain. PayPal has been around for years (and so have many other payment services, coming and going...). Apple enters the market of payment services, and — like it happened in the past, every time they announce something — it completely shakes up the whole market, throws it upside down, and starts getting everybody to see it as 'the next biggest thing'. Like so many analysts have said in the past, Apple often doesn't have innovative products, and often not even very good ones, they just aggressive marketing and create things that 'suddenly' everybody wants to use. We saw that happening with the iPod — with iTunes — the iPhone as the first 'smartphone' that everybody (and not merely some corporate freaks) wanted to own — and the idea that there could be a huge marketplace for selling apps online... and the push to do the same for desktop apps as well. Now it's payment services. Apple never was in that market, and, as said, PayPal has been around 'forever', as well as tons of other services. But suddenly — in spite of having hundreds of millions of users — they all become 'relevant'. Suddenly everybody wants to enter the payment gateway bandwagon. Why? Because Apple is in it, even though it cannot possibly have but a few thousands of users...

    It's interesting. I'm also curious to see what happens with 'health services'. Now that Apple has show how they want to enter that market, all giants want a share of it as well. Last year I didn't even had the remotest clue that 'health' was a market where the computer industry thought it was worth exploring...

  2. Brian Nakamoto from Tightrope Interactive, Inc., October 2, 2014 at 6:45 p.m.

    @Gwyneth, the iPhone wasn't the first smartphone, but it was definitely a huge departure from any other smartphone at the time with its 100%, capacitive, multi-touch screen (large for 2007) interface powered by a modern mobile OS that featured a desktop-class web browser.

    Apple trumped the other MP3 players with the iPod by using 1.8" hard drives to cram 5GB into a pocketable form factor, which was pretty amazing in 2001. The iPod's software, the way it worked seamlessly with iTunes, and its ability to sync 1,000 songs quickly with FireWire also set it apart from the competition at the time.

    If aggressive marketing is all that's needed to be like Apple, then Zune would still be around, and Nokia's mobile division wouldn't be owned by Microsoft (because the KIN née Danger would still be around too).

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