eBay was a pioneer. From being a mere seller of Pez dispensers, it paved the way for e-commerce. eBay was an innovator—it allowed people who wanted to host garage sales to have their very own online storefronts. It enabled small businesses to reach customers that wouldn’t have been possible and niche sellers and collectors to have a go-to platform. eBay turned into a retail powerhouse.
To make things easier for both buyers and sellers, eBay looked for a convenient way to handle transactions. These were the challenges back then: a lot of customers didn’t own credit cards or didn’t want to give out card information online. Paypal, which was a new player in the industry back in 2002, seemed to be the solution, thus eBay bought the company for $1.5 billion. It proved to be a worthwhile investment, as Paypal worked wonders for eBay.
Fast forward to today, eBay and Paypal now have roughly the same revenue. Each earns around $8 billion annually. While Paypal has caught up with its “big brother”, eBay‘s business seems to have slowed down. This is due to the eBay’s stiff competition. Both Amazon and Craigslist cut into its markets; and with social media and SEO, some businesses choose not to put up storefronts on eBay anymore. With those, eBay is no longer the same.
The then game changer’s revenue has now been declining for two consecutive quarters. This is considered as a growth stall, which is something fewer than 7% of companies recover from. It’s definitely a cause for concern because this means that the company has missed the market shift in which the competition capitalized on. If this trend goes on, things would go from bad to worse for eBay.
In contrast, Paypal has flourished into an industry leader and has even become a huge threat to traditional banks. The trailblazer in the processing of digital payments is experiencing an unprecedented boom, and its line of services just keeps on expanding and expanding. In fact, Paypal is now valued at $47 billion, which is a far cry from eBay’s worth of $34 billion.
Paypal’s future looks bright. eBay, on the other hand, is now scrambling for a new solution.
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