eBay acquired PayPal in 2002. They remained connected until mid-2015. At that time, PayPal became a separate company. By 2017, PayPal was cited as the fifth most authentic company in the world by Cohn and Wolfe. The split has not been a very good decision for eBay. Why? After decoupling PayPal outperforms eBay. And by a lot! Let’s see why.


Whose Business Model Is Better: After Decoupling PayPal Outperforms eBay

When founded in 1995, eBay was a true online innovator. Over the years, it popularized bidding. As well as sales from customer to customer. A lot of merchandise was pre-owned. Its auction business model worked well for several years. Then, due to declining in interest in bidding by consumers, eBay shifted to more of a fixed-price business. In either case, it generated revenue from commissions paid by sellers. The popularity of Amazon and the increased interest in online selling by discounters such as Walmart and Target impacted eBay. 

At the time of its acquisition by eBay, PayPal represented an earlier-stage business model than its acquirer. But, things sure changed after the spinoff. Because secure online and mobile payment systems surged. And PayPal dominated with small sellers.

To examine the relative performance since the spinoff, we turn to Felix Richter, writing for Statista:

With payment volume climbing to $277 billion in fourth quarter 2020, PayPal ended the year with a total payment volume of $936 billion. Bringing the $1 trillion mark within touching distance for 2021. “PayPal delivered record performance in 2020 as businesses of all sizes digitized in the wake of the pandemic.” According to the company’s CEO Dan Schulam,  revenue and net income soared in 2020. In its first year under newly-appointed CEO Jamie Iannone, eBay also reported the strongest growth in years. Although still trailing its former payment arm, eBay exceeded expectations in 2020..

Ever since spinning PayPal off into a separate company in 2015, eBay struggled to keep up with its rivals’ growth. While also being outgrown by its former payment division. Between Q4 2015 and Q4 2020, eBay’s gross merchandise volume, i.e. the total value of all goods sold on eBay’s marketplace, grew by just 21 percent. Meanwhile PayPal’s total payment volume grew by 240 percent, propelling the company’s market capitalization to $295 billion, while eBay’s stood at $40 billion as of February 3, 2021.


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