Just as the gifts start to get better, marriage enters its fifteenth year. But just when PayPal and eBay should have thrown brand-new crystals at each other, the auction site and online marketplace thought it was time to move on.
Yesterday, eBay said it would not renew PayPal’s deal to be the back-end services provider. Instead, it would be partnering with Adyen, a younger company. Most people won’t have heard of it, but the Dutch company is going public this year after making $178 million in 2016. That sounds good, but hold in mind that PayPal made $11 billion at the same time.
eBay CEO Devin Wenig told reporters, “We think we can offer a more seamless knowledge while giving buyers and sellers more payment and payout options.”
Given how easy it was to use PayPal as it was, that doesn’t tell the whole story. PayPal will remain a payment option on eBay, but it will be hidden out of the way. This may be because eBay’s power users are happy with things the way they are.
“After the current eBay-PayPal agreement ended in 2020, PayPal will remain a payment choice for shoppers on eBay, but it won’t be prominently featured before debit and credit card options as it is today,” the company said, adding that “PayPal will stop to process card payments for eBay at that time.”
Instead, those options will be given by Adyen. You won’t see any Adyen logos, but they will handle the funds in the background. Recode thinks that eBay may have agreed to some equity share as part of the deal, but the company hasn’t said publicly about the details. They’ve just said that PayPal is out, and Adyen is in.
eBay used to own PayPal. In 2003, eBay paid $1.5 billion to buy the company. But, by 2015, it was too big for its shoes, so it split into a separate company. That seems the right choice since eBay is now worth $42 billion, and PayPal is worth $102 billion.
Even though PayPal’s price dropped 10% when eBay decided to go its way, the company is still doing pretty well. And PayPal leaders told The Wall Street Journal that the company doesn’t need the site much anymore. The Journal reports that “executives added that PayPal’s eBay volume was growing more slowly than its non-eBay volume,” adding that they mentioned recent deals with Disney, Dillard’s Inc., and QVC as softening the blow significantly. The fact that they made 59% more money in the last quarter of 2017 shows that they’re right on the mark, even if eBay’s rejection is hard.