eBay Inc. CFO Bob Swan recently spoke at the Goldman Sachs Technology and Internet Conference in San Francisco where he offered insight into the current dynamics of eBay and PayPal and previewed what’s ahead for the two companies as they separate into wholly independent businesses. Below are a few topics he touched on during his interview:
Synergies created during eBay’s evolution will be preserved
Lately there’s been an uptick in large technology companies – such as HP, Symantec and eBay – announcing plans to split up, as companies adapt to address a shifting technology environment.
eBay, which plans to separate its payments and marketplaces business, is midway through its separation process into two independent, publicly traded companies and is targeting the second-half of this year to complete the transformation.
There’s a lot involved in the separation process, as noted by Swan during the Goldman Sachs conference, “Over the years since eBay bought PayPal 12 or 13 years ago, each has made the other business stronger. And now we’re going through the process of separating them to ensure they have the strategic flexibility to operate on their own while preserving a lot of the synergies that have been created over the years…So that process entails a lot of work.”
Digitization of the economy is creating opportunities for both businesses
The advantage for both eBay and PayPal is that – while they are operating in fast-paced and competitive environments – they’re both starting from positions of strength.
A key point that Swan highlighted was that, “In the advent of mobile, if your historical strength has been in the online world, it’s a great place to be. Whether you are in commerce or whether you’re in payments, the reality is the digitization of the economy is a massive tailwind for both businesses.”
eBay is an $83 billion global platform with 155 million active buyers. It has one of the most of powerful brands in the world, a proven business model and a track record of enabling merchants of all sizes to grow and win around the globe. PayPal is generating $228 billion of global payments volume and continuing to deliver innovative product experiences and growth in the double digits.
eBay and PayPal will capitalize on financial flexibility to make strategic business investments
The driving force behind the planned separation is to enable both businesses to enhance their strategic focus, move faster and increase their flexibility to succeed in their respective markets.
As noted during the company’s Q4 2014 earnings, eBay is looking at a $10 trillion dollar opportunity in an evolving market. Swan told conference attendees to expect eBay CEO-designee Devin Wenig and the Marketplaces business to more quickly capitalize under its new cost structure.
“Devin is starting with a strong platform and a business model built on technology and data not assets. So, following the separation, he will now have the ability to expand and grow without having to deploy a bunch of capital into either inventory or warehouses,” Swan explained.
On the payments side, PayPal remains a market leading payments business with $228 billion in global payment volume. According to a recent study, PayPal “has the highest mobile payment awareness and consideration,” with 73 percent of respondents indicating that they would use PayPal for their next mobile purchase.
“PayPal has incredible opportunities for growth and Dan comes in and says we need to accelerate the pace of innovation and get things through the pipeline faster,” added Swan. “In addition to what Dan is really focused on, he is extending PayPal’s served market with new feature functionality and new sources of merchants.”
You can expect two more agile and focused organizations
Following the transformation, Swan promised two more agile and streamlined organizations that can better take advantage of their competitive opportunities:
“For Devin, and for the eBay business, sharper focus, fewer things and an incredible intensity on the customers that love shopping on eBay. It’s using technology and data to facilitate the competitiveness of sellers and fostering a platform where consumers can find great deals and anything in the world— new, used.”
On the PayPal side, the business will be focused on building on their momentum to capitalize on the incredible growth opportunities across the payment space as whole.
“That includes extending our reach by going beyond, not just e-commerce and commerce, but into the shared economy. We acquired Braintree roughly a year ago and it’s got a wonderful reach into the shared economy which expands PayPal’s reach even more…”
As eBay and PayPal move closer to their separation, the industry and key stakeholders should expect to hear more about the futures of eBay and PayPal from CEO-elects Devin Wenig and Dan Schulman, respectively.