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PayPal’s impending spin-off adds uncertainty to mobile payments, mcommerce landscapes

PayPal’s impending spinoff from eBay could potentially present a purchase opportunity for major online retailers such as Amazon and Alibaba, which may shift the mcommerce market into large conglomerates’ hands even more.

EBay’s fourth quarter earnings marginally topped expectations, despite its outlook for the coming year falling short, prompting the company to announce plans to cut its workforce by seven percent. As eBay prepares to cut PayPal from its marketplace division later this year, experts caution that a potential acquisition by a major retailer could have a significant impact on mcommerce and retail.

“If Amazon were to buy eBay, it would add the ‘private sale auction model’ arrow to its quiver,” said Wilson Kerr, vice president of business development and commerce at Unbound Commerce, Boston. “This would be a massive deal, but the retail sector would not necessarily be affected.

“If PayPal were to be acquired by Amazon, however, this would be much more impactful. PayPal has 150M+ users and, more importantly, is integrated into the checkout flows of the vast majority of online retailer ecommerce and mobile sites,” he said.

“An Amazon-owned PayPal would put the fox right in the henhouse, as most retailers see Amazon as a margin-busting behemoth they compete against, rather than a partner they’d want facilitating their transactions.”

Company restructuring
During its Q4 earnings report, eBay announced 2015 to be a year of important transition for the firm as it prepares its split with PayPal. However, eBay CEO John J. Donahue admitted that PayPal drove strong commerce during the 2014 holiday season, resulting in the addition of nearly 5 million new active accounts.

PayPal has also been gaining traction in recent months, and unveiled a new mobile application for BlackBerry (see story). It is likely attempting to establish itself as a major third-party mobile payment option for users of all devices.

EBay will also be pushing more of a focus towards mobile in 2015, as Q4 saw mobile commerce volume hit $17 billion and account for 23 percent of enabled commerce volume overall.

Executives were disappointed with eBay’s Marketplaces in Q4, due to events that disrupted the ecosystem, such as password reset and SEO changes. While the company earned 90 cents per share in Q4 as opposed to the projected 89 cents per share, eBay expect to spend more time sharpening its strategic focus.

Executives claim that 2015 may be challenging and result in eBay’s performance softening before stabilization and improvement set in, but believe its great business model will lead the online retailer down the right path.

Potential acquisitions
While rumors of potential PayPal acquisitions are not the cause of its split with eBay, PayPal falling into the hands of another major online retailer could shake things up in the mcommerce and ecommerce spaces.

“The online retail marketplace space and the payment space are two very different animals, with different pressures and opportunities,” Mr. Kerr said. “This is likely the reason for the split.

“It’s also very likely that the internal bean counters have determined these two companies are worth more separately, and a split better-positions one or both for acquisition by an entity interested in online retail or online payments, but not both.”

Reports claim that Wall Street analysts have tapped Alibaba, Amazon and Google as potential acquirers of PayPal. If one of these does make a bid for the payment platform, it would not only throw more support behind major online retailers, but also threaten other third-party mobile payment solutions such as Apple Pay and Softcard.

This week, Amazon announced its decision to drop its mobile wallet, paving the way for another payment platform to make a play for the retail conglomerate (see story).

“It’s certainly too soon to speculate on an acquisition, particularly by Alibaba, who just signed an agreement with Apple,” said Paula Rosenblum, managing partner at Retail Systems Research, Miami.

“The Amazon question is interesting…as Amazon announced it was giving up on its own mobile wallet offering. Still, I think there’d be a huge outcry if Amazon bought eBay,” she said.

“I would imagine there would be some anti-trust issues popping up.”

Final Take
Alex Samuely is an editorial assistant on Mobile Commerce Daily, New York