Is the eBay PayPal split really about Apple Pay?
There was a lot of talk and coverage last week concerning the split of PayPal from eBay. It’s not surprising that so many commentators are covering the story as it follows in the wake of the Alibaba IPO last week and the shake up of the mobile payment that Apple might create with Apple Pay – to which we covered PayPals response to Apple Pay a few weeks ago in this same editorial space.
For those of you who have not been covering the story, eBay CEO John Donahoe announced last tuesday that PayPal will be split into its own publicly-traded company. The official statement said that “eBay and PayPal will be sharper and stronger, and more focused and competitive as leading, standalone companies in their respective markets. As independent companies, eBay and PayPal will enjoy added flexibility to pursue new market and partnership opportunities. And we are confident following a thorough assessment of the relationships between eBay and PayPal that operating agreements can maintain synergies going forward. Our board and management team believe that putting eBay and PayPal on independent paths in 2015 is best for each business and will create additional value for our shareholders.”
So, in essence, eBay Inc plans to spin off PayPal, its fast-growing payments business, giving in to activist investor Carl Icahn's argument for a leaner company better equipped to compete in the competitive mobile payments market. eBay's shares rose as much as 8% after the company said it would spin off PayPal as a publicly traded company in the second half of 2015, a transaction that will be tax-free to shareholders.
eBay Chief Executive John Donahoe had previously resisted Icahn's proposal, saying PayPal was integral to eBay's business, and vice versa. PayPal admits that it still faces competition from Google Inc's Google Wallet and a number of other vendors and with Apple about to enter the mobile payments market - things could get very tough for the online payment company. "On PayPal, investors will still contemplate the risk of PayPal directly competing with Apple Pay and Google Wallet, which will likely add some uncertainty to PayPal's standalone valuation," Piper Jaffray senior research analyst Gene Munster wrote. PayPal's chief executive after the spinoff will be Dan Schulman, former head of American Express Co's online and mobile payment business.
In the payments market, though, the questions are focused on PayPal and whether an independent PayPal—or a PayPal that is slated to be independent, assuming it’s not acquired before the end of next year, is more or less attractive to do business with. Is it better for PayPal to have a little more freedom to sell to people who don’t like eBay? Or will it weaken PayPal, which might happen if eBay pulls some or all of its business from PayPal and gives it to various rivals?
Wall Street analyst Marshall Hargrave also put out a research note and made a curious comment, that he saw something very different than the payments hyper activity that most others saw. “The payments business is slowing down and now looks like the ideal time to sell off PayPal. This could also be a ploy to see what types of buyers or partnerships the company can drum up for PayPal. However, there are concerns where eBay accounts for over a quarter of PayPal’s transactions. That’s a large number of eBay customers that use PayPal to complete their transactions. PayPal is the mobile payment system, which services payments for eBay customers, and it makes sense to isolate the value of PayPal from eBay’s stock price. Thus, it’s likely that eBay is being valued at less than the sum of its separate parts, and a spin-off such as this would enhance the value of eBay as a whole.”
“Everyone is out to eat PayPal’s lunch,” said Jordan McKee, a senior analyst for mobile payments at 451 Research. “Now more than ever, PayPal needs to innovate, be nimble and move fast to fend off these competitive threats.”
The same could go for the airline and airport market when speaking about their adoption of beacon technology, they need to ‘innovate, be nimble and move fast to fend off these competitive threats’. First there was the report that Miami International airport has become the first airport to use an open approach to deploying Bluetooth beacons across its footprint. The beacons — located at entrances, check-in, gates, baggage claim and valet parking zones — can be used by a wide range of airport service providers including airlines and retailers, rather than being tied to one particular provider. The airport is using Sita’s Common-Use Beacon Registry (something we also covered on Contactless Intelligence earlier this year) to deliver the service to partners and passengers, allowing a wide range of providers to make shared use of the Bluetooth Low Energy (BLE) beacons it has deployed. “The passenger experience at Miami Airport is our number one concern and iBeacon technology allows us make it even better,” Miami International Airport’s spokesperson Maurice Jenkins explained. “We have installed beacons throughout the airport and made them available to all our stakeholders. Now we invite airlines and our other partners to invent new ways to make the passenger experience at Miami even better.”
Joining easyJet in the use of iBeacon technology is the Dutch airline KLM. Passengers travelling with KLM from Amsterdam’s Schiphol Airport can now use the airline’s app to get a map of the airport that shows the route they need to take to their gate and the time required to get to there. “Customer feedback, especially on social media, has told us that passengers – even experienced travellers – often worry about transferring to another flight,” Martijn van der Zee, SVP of ecommerce at Air France KLM was reported as saying in NFC World. “67% of our passengers at Amsterdam Airport Schiphol are transfer passengers. KLM aims to improve customers’ travel experience with this service.”
However, before we become too caught up in the beacon bonanza, beacon platform inMarket has performed a case study to find out how effective beacons really are. Since launching its M2M solution in January, inMarket can report that in-store beacon engagements achieve a 45% interaction rate, or 5x higher than traditional push messages that occur without location context (9%). The study also found that customer engagement significantly decreases when platforms ‘oversaturate’; inMarket's says that if a customer received more than one push notification from a beacon platform in the same store, app usage among existing users declines by 313 percent. The same goes if the notifications customers received were irrelevant: the beacon app gets deleted. “These stats clarify that beacons are a powerful tool that can alter the user experience depending on how they are deployed. Blanketing people with pop-ups on their phone is a sure-fire way to lose an audience, but reaching the right person with helpful info at the perfect time causes enormous lift. Simply deploying beacons is not enough, and misusing beacons can have the opposite of the intended effect,” said inMarket CEO Todd Dipaola.
We are going to be looking at this topic in one of the sections of the Contactless Intelligence conference next year (28th - 29th April 2015) but in the meantime, I know that some of you out there have opinions on the subject. Let me (and our readers) know what they are because this topic is about to get much, much hotter!
Until next week,
Steve Atkins
Contactless Intelligence
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