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First Impressions: A Separate PayPal and eBay

Fresh off the news of the PayPal spin-off, MPD CEO Karen Webster caught up with eight CEOs and investors from across the payments ecosystem to get their views, literally, within hours of hearing the news. We got their views on what PayPal will be able to do as a separate company that it can’t do as part of eBay (new partnerships) and why now (a hotly intensive payments landscape) and what they’d say to new President/CEO Dan Schulman (execute). Listen in on this series of short podcasts.

Ralph DangelmaierCEO,BlueSnap “They’re both going to have to get much more creative.”Ralph Danglemaier is pretty sure that everyone at the soon to be amicably divorced eBay and PayPal had a great day today .E-Bay can look forward to the giant pile of money it is about to rake in as PayPal’s sole owner. Apart from the money, a separation from PayPal frees eBay up to work with its competitors – a flexibility that could key for eBay as it faces off with eCommerce giant Alibaba on its home turf.PayPal, according to Dangelmaier, will get an even more interesting and unique opportunity, the chance to be a young company on the move again. After a few years where “innovation slowed a bit,” PayPal gets a chance to really reinvent itself.

“It’s not going to be easy. They’ve lost a lot of talent and gathering merchant complaints about being hard to work with that they have to overcome. But they are going to have a crack at being the nimble creative IPO.”

Today’s announcement did leave both Dangelmaier and Webster scratching their head on one thing—given the speed that payments seems to be evolving lately, why on earth does it take almost a year for PayPal to get its IPO show on the road?

Chris GardnerCo-Founder,Paydiant “PayPal is dead serious about having a seat at the table.”Paydiant CEO Chris Gardner wasn’t surprised at the news that PayPal is spinning off and will go public. “They’ve been looking more and more like the growth engine in that entity. And it’s always been a little weird to have this big honking payments company that is beholden to a big honking retailer.”The change came quickly—“it was a battle less than a year ago,” but one that was probably inevitable after “that hurricane that swept through Cupertino,” and the emergence of Alibaba as a publicly traded company in such a large and dramatic way in the US.The challenge now? PayPal has to find a way to offer consumers a real reason to trade their swipe for a tap or a click on a phone. Gardner says for all intents and purposes PayPal is just the fifth payment network in the U.S, and now has to use all its new flexibility to help develop a user experience that keeps users engaged in using their PayPal accounts.
 MielkeChief Strategy and Product Officer,

Vantiv

“A whole new universe of partnerships is opening up for PayPal right now.”Daniela Mielke is an ex strategy exec at PayPal, and had a mixed perspective on the announcement that it’sspinning off to go public on its own, as there are an almost equal number of reason for the companies to stay together or break apart right now.What’s compelling going forward is what PayPal can now do that it couldn’t anymore.“A whole new universe of partnerships is opening up for PayPal right now.”

Mielke also note that it has become increasingly clear that tech giants and not traditional firms will be guiding the next chapter of the history of payments and that eBay just wasn’t large enough to really make PayPal that kind of competitor.​

Paul PurcellPartner,Continental Advisors “I think that people are grossly underestimating the value of the two networks together.”Paul Purcell is openly a fan of the eBay-PayPal marriage and thinks people are underestimating what being part of a package brought the two companies together.“I think this was an action that was necessitated by external forces that they were unable to be overcome,” Purcell told Karen Webster in their chat about the most recent chapter of the book on the payments industry world being turned on its head. Purcell then speculated that this, to him, felt more like the actions of investor rights advocates than core PayPal or eBay afficianados.He thinks the companies can make it as individual units, especially PayPal, but ultimately Purcell thinks they bring more to the table together as a unit and doesn’t understand why they would break-up a relationship that is an important piece of leverage for both.

“Alipay is part of Alibaba is a good thing, but PayPal is part of eBay is a bad thing?” Purcell wondered.

Payments is ever shifting and seems particularly suited to thwarting predictions of all kinds, but Purcell said that if forced to take a guess (with a gun to his head) his suspects five years down the line PayPal will be in talks with another buyer, likely a company that has been trying and failing to break into payments.

Mark SoleCEO,Sipree “Watch out because PayPal is a substantial force to be reckoned with.”Mark Sole started his payments career working with PayPal and was genuinely excited about what a future freed from eBay could mean for PayPal. He thinks with its well established user base and technological prowess (particularly when paired with Braintree) PayPal is perhaps worth being just a little bit afraid of.“It speaks to how rapidly the payments space is changing,” Sole told Karen Webster in their PayPal spin-off news post mortem. He thinks its rapidly shifting payments playing field means there will never be a single “winner” in emerging from the game, but that PayPal now has the ability to pursue the market more broadly and with a more targeted focus on being a major competitor.“We’re going to have lots of actors that are critical components that are going to have to work with some degree of interoperability or you will just find winner take most.”​​

Matt Witheiler Partner, Flybridge Capital Partners “I think PayPal’s the big winner in this.”Matt Witheiler was both shocked and completely unsurprised by the announced PayPal eBay split at the same time. He thinks it’s the right move, especially for PayPal which no longer needs the home base of a commerce operation like eBay. Witheiler told Karen Webster that the web just isn’t the same place it was when eBay bought PayPal almost 15 years ago. As other payments operations are growing quickly and already big players like Apple are entering, the time is right for PayPal to split off.Then again, he also opened his conversation with Webster noting how entirely surprising this turn of events was, given the history of the issue in 2014.“I think its crazy especially given that a little under 8 months ago eBay was swearing up and down it would never happen and yet it has come to pass so I’m a little surprised just like everybody is but I think it makes a ton of sense.“

He’s not sure the split is good equally, he thinks PayPal is ready to stand on its own whereas eBay might struggle with 40 percent of its revenue walking out the door. Still he thinks it will offer both companies an opportunity to be more flexible and creative in their pursuits going forward.​

Michael RolphCoFounder and COO,YoYo “Certainly not surprised, it was only a matter of time.”Like many who heard the news on this side of the pond, U.K. payment’s company YoYo’s co-Founder and COO Michael Rolph wasn’t shocked by the announced split-off, and instead took it as a rather predictable evolution for both companies.The interesting part, according to Rolph, will be to see how PayPal will manage to acquire new users without eBay behind it, and how it will manage to bring more merchants along. Up until now, PayPal has had eBay to rely on to provide its users a definitive space to use their digital wallets—now it will have to stand on its own​.
Dan RosenPartner,

Commerce Ventures

“More questions than answers”Like most people reacting to the news, VC Dan Rosen greeted this morning’s announcement with rapt interest and an overwhelming desire to find out more.“It’s pretty fascinating not just in light of Apple Pay but really in the wake of an extremely successful IPO by Alibaba, which I have to imagine plays into this change of course,” Rosen told Karen Webster in a pre-dawn chat from the West Coast shortly after the news dropped. “As recently as early June, obviously David Marcus left PayPal. Presumably because there weren’t plans to spin off PayPal, so obviously a humungous course change over the course of four months. “What about the next several months as PayPal moves towards its own IPO? Rosen says both companies now have an opportunity to define or possibly redefine their essential mission. Will eBay move toward traditional e-commerce or more fully develop as a marketplace for many sellers is one question Rosen has. As for PayPal, Rosen is waiting to see if the time has come for the online payments option to move more fully to become anpayments issuer in the full sense of the word.

In both cases, there are no answers today, but Rosen thinks the types of talent and acquisitions both pursue as the split approaches will give out some important clues.

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