Monday, August 06, 2012
PayPal allows eBay to ride the wave of mobile shopping
A long time ago, during the first dot-com boom, an acquaintance gave me some advice: invest in the companies that create the Internet’s infrastructure, not the ones that use it. It was good advice. I bought Cisco and it did very nicely. And maybe that accounts for why companies like eBay and Amazon are still going strong today. They too have become part of the Internet’s infrastructure.
Right now, eBay is a classic case of the comeback kid. Recent earnings suggest that the company has rebounded from the nadir of its first loss as a public company in 2007. Funnily enough, the key to eBay’s current success lies with an acquisition the company made back in 2002: PayPal.
PayPal has proved to be a good long-term bet for eBay. The online payment system has become integral to many Web sites, but increasingly facilitates eBay’s one-click payment solution for mobile. If there is one thing that mobile users would rather avoid, it is filling out lengthy forms. So a safe, simple and convenient solution helps overcome any reticence about making a purchase from a smartphone.
According to Kyle Spencer on Seeking Alpha, PayPal’s revenue increased 26 percent year over year, driven primarily by increased penetration on eBay, as well as continued merchant and consumer adoption and strong growth in Bill Me Later.
With mobile commerce steadily increasing, eBay looks to be sitting pretty for the foreseeable future, but there could be a more radical development ahead.
In the same post on Seeking Alpha, Kyle raises another interesting prospect. He acknowledges that Facebook is struggling to lift the amount of money it is able to make from each of its users, and proposes a radical solution. Instead of making advertising the primary focus of revenue generation, why not team up with PayPal and make Facebook the one-stop shop for online commerce? Kyle states:
The simplest way to monetize Facebook is to forget indirect monetization (advertising) and monetize Facebook directly. Half a billion people are already using Facebook to log onto other sites, to comment on articles, or register a product. It's the universal log in ID we all use. It comes with photo identification. The leap from there to "Buy With Facebook" is a small one.
Kyle acknowledges that to make this vision a reality, Facebook will need to overcome its current issues regarding privacy. And what better way to do that than team up with PayPal? It is definitely an interesting idea.
So what other Internet companies can you think of that have survived the last decade? Did they do so because they were integral to the Internet’s infrastructure, or for some other reason? And what about that Facebook/PayPal combo? Please share your thoughts.
This entry was posted on Monday, August 06, 2012
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