Ebay and PayPal to Split
Video by Grace DeWitt
EBay announced the approval of a plan to split from global payment system PayPal Tuesday. The two will be operating as independent publicly traded companies in 2015, as decided by eBay’s Board of Directors.
EBay purchased PayPal for $1.8 billion in 2002.
“For more than a decade eBay and PayPal have mutually benefited from being part of one company, creating substantial shareholder value,” said eBay President and CEO John Donahoe in a statement released by the company earlier this morning. “However, a thorough strategic review with our board shows that keeping eBay and PayPal together beyond 2015 clearly becomes less advantageous to each business strategically and competitively. The industry landscape is changing, and each business faces different competitive opportunities and challenges.”
“When I buy things online and it says 'PayPal,' I feel very secure that my information won’t be sent out,” said Anna On, USC Leventhal student.
The split will bring in new leadership for both companies. Ebay President and CEO John Donahoe will help with the transition but will be replaced by Devin Wenig, current head of Ebay marketplaces. Dan Schulman, former president of American Express, will serve as Paypal’s new president.
Pressure from activist investor Carl Icahn, who owns just over 30 million shares in the company, and growing competition, such as Apple’s Apple Pay and Alibaba’s Alipay, were the driving forces for the split.
In September 2013, eBay acquired Braintree, a Chicago-based e-commerce service provider, to help expand PayPal’s capabilities. Braintree operates Venmo, a free mobile payment application launched in March 2012, which has become popular among some USC students.
“I wouldn’t be surprised if Venmo became an alternative online payment source,” said Pierre-Edouard Nicolas, USC Gould School of Law Student. "It could be the new PayPal, who knows.”
Venmo easily allows students to securely pay friends through their smartphones for everything from meals out to movie tickets. Some even use the app to pay rent and utilities. The service is free when money is routed through bank accounts or debit cards.
