Although rumored to still take place next year, eBay has now made the expected announcement. The online retailer will be spinning off PayPal into its own independent company. This is being poised as a strategy to keep the two brands separate and more lucrative in 2015, when its board predict that the association between the two would start to become a liability rather than a benefit.
This move might not make much sense except to business-minded individuals. After all, both brands are flourishing in their respective markets and both have mutually benefited from each other. eBay uses PayPal as an in-house payment system while PayPal was able to ride on eBay’s brand during its growing years. That said, eBay’s board of directors have assessed the future and saw that by next year, that bond might actually do more harm than good.
That may actually make some sense, especially from the mobile payments vantage point. This is market that is continually growing and is expected to boom now that Apple is a key player. PayPal, which has long been the de facto brand in digital payments, might be able to better match that growth spurt if left on its own. In fact, there might have been cases where businesses shied away from adopting PayPal because of its association with eBay, especially retailers that would be afraid of some bias from a giant competitor. Thus, PayPal will be able move and make decisions faster if it doesn’t have to go through eBay first. How this split benefits eBay in the long run is something left for more speculation.
Consumers will most likely have nothing to worry about, as PayPal has practically been its own brand from the perspective. eBay expects that the transaction will be complete by 2015. The two companies will still maintain ties, but this time through operating agreements rather than organizational structure. Dan Schulman, former president of American Express’ Enterprise Growth Group, was named PayPal president and will become CEO-designee of the newly independent PayPal.