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Is eBay Planning to Spin Off PayPal?

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August 25, 2014

Is eBay Planning to Spin Off PayPal?

By Steve Anderson
Contributing TMCnet Writer

Shopping on eBay is a fairly familiar experience for a lot of users. Hit the site, find something worth buying, bid until the bidding's won, and then pay for the item via PayPal (News - Alert). It was an arrangement that works well for most everybody, but a new report suggests that that arrangement may actually be changed in the not too distant future. As early as next year, according to the report, eBay (News - Alert) may spin off PayPal.

Reports suggest that eBay has already told several individuals about this potential spinoff, particularly those who were being considered for the CEO position at PayPal which recently came open when David Marcus left back in June. Marcus went on to Facebook (News - Alert), at last report, and now PayPal's top slot is open. But it may not be part of eBay for long, and that's got some wondering just what's going on, especially given that there's no word about the mechanics of such a split, and a recent conflict over whether or not it should be done in the highest portions of eBay's management.

A PayPal spinoff, at last report, would represent a huge change for eBay, particularly in the face of reports that investor Carl Icahn has been eager to see eBay split off from PayPal. But current eBay CEO John Donahoe has been actively resisting such a move, saying that PayPal is integral to eBay operations, so a split just wouldn't make sense. Icahn, meanwhile, reportedly backed off in April, saying that the time wasn't right for such a split after all. Now, a few months after the fact, comes word that eBay is looking to do what Icahn suggested be done all along, but even he backed off on earlier.

A strange idea, but some are looking at the idea and thinking that maybe PayPal would see greater growth without such strong ties to eBay. Indeed, more online retailers might end up accepting PayPal, according to some reports, without the immediate link to eBay that may leave other retailers nervous. That's not out of line, really, and actually represents an important point; many retailers aren't set up to take PayPal, which honestly doesn't make much sense. After all, the same payment platform that allows a user to buy a mint-condition comic book or old scuba gear would go just as well buying the many other things that can be had for purchase online. PayPal should have a percentage of as many sites as possible. But then, it's not hard for other retailers to wonder why handing over a cut of sales to a company that may end up rolling over said retailers is a good idea. It's akin to slitting one's own throat. But PayPal has been increasingly accommodating of other businesses, including adding an option for loyalty cards to the PayPal mobile app. So it could be said that PayPal has already been working to court other businesses, and may spin off from eBay in a bid to attract more users to the newly-expanded line of services.

A spun-off PayPal may not be such a bad idea, but would it be enough? Would people still wonder if eBay is still involved, and voice many of the same objections? A lot of this depends on the ultimate framework of the split, so it's going to be the kind of thing that needs to be watched closely to see just where it goes from here. This could be a very smart idea for PayPal, or a disaster for eBay.

Edited by Rory J. Thompson

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