PayPal And eBay Splitting Into Two Companies, And What That Means For You

Kevin Bostic

A 12-year internet marriage is coming to an end. It was announced Tuesday as eBay revealed that it plans to spin off PayPal into a separate company in late 2015. What will the eBay-PayPal split mean for you?

eBay snapped up PayPal in 2002 during a wave of dot-com consolidations, paying $1.5 billion for PayPal and tucking PayPal into its own operations. The move gave eBay a ready-built payment system for its main online auction business.

As The Washington Post notes, the move made a lot of sense at the time, with PayPal needing customers to use its payment services and eBay in need of an easy way for people to pay for auction items.

Over time, though, PayPal has moved more into mobile payments, picking up Braintree and its One Touch product and relying heavily on PayPal’s existing mobile app. As TechCrunch points out, that means that PayPal has been less focused on web-based payments of the sort that eBay facilitates and more on in-person mobile transactions. In short, the two have grown apart as the mobile revolution has swept over consumer technology.

As a result, eBay and PayPal will become separate companies some time next year, each with its own new CEO. PayPal President Dan Schulman will take over that company, while eBay Marketplaces President will head up operations there.

PayPal’s departure will mean the loss of a considerable amount of revenue for eBay, as PayPal’s 152 million active accounts facilitated about $203 billion in payments over the last year. eBay will remain a sizable presence on the web, as it does about $20 billion in annual mobile sales volume, and representatives for the firm say that the move will allow both eBay and PayPal to be “sharper and stronger, and more focused and competitive.”

What will the split mean for you? As an eBay customer, it seems unlikely that too much will change. Even with the PayPal separation, eBay will likely remain closely linked with its former subsidiary, and PayPal will probably remain a reliable payment and credit option for eBay auctions.

PayPal users could see some favorable developments as a result of the split. PayPal will finally stand on its own in the payment segment, and that will likely mean increased competition, which may mean lower fees as PayPal tries to fend off newly emergent rivals such as Apple’s Apple Pay. PayPal executives intimated as much when discussing the split, saying that it will make PayPal “more nimble” and better able to respond to challenges.

If you’re an eBay investor, the news is already paying off for you. Morning trading following the announcement of the PayPal spinoff found eBay shares up nearly seven percent to $56.16.

[Lead image via The eBay Shop.]