After eBay's acquisition of PayPal twelve years ago, the decision has been made to once again split the two entities out. Clearly, the management team believes that PayPal and eBay would benefit from heading their separate ways.
eBay bought PayPal in 2002 for £905m. eBay's annual revenues still outstrip PayPal, but the rate of growth has drastically changed in recent years. PayPal's revenues are growing 19 per cent annually, nearly double that of the online auction juggernaut.
Chief Executive John Donahoe said the decision to split the two companies came as a result of an in depth strategic review. Donahoe said:
"The industry landscape is changing and each business faces different competitive opportunities and challenges…eBay and PayPal will be sharper and stronger, and more focused and competitive as leading, standalone companies in their respective markets."
It seems a wise decision too. The partnership has become less relevant, and that gap continues to grow wider as PayPal explore the mobile payments market even more. It certainly looks like PayPal is keen to distance itself and its reputation away from eBay.
Security is of the highest importance when it comes to delivering an online or mobile payments solution. And unfortunately for eBay, it has not been a strong year on that front. eBay suffered a massively hack earlier this year, when thousands of users' accounts were compromised. And the press for eBay has not improved in recent months either with more negative reports, such as the hosting of fraudulent sellers on their site.
PayPal, with its newly appointed chief Executive, Dan Schulman will hope to distance itself from such security concerns as they delve deeper into the alternate and mobile payments.
By Matthew Taylor