- For the first time in a while, PayPal is on the defense in a category that it has long held dominance in.
- PayPal addresses Apple pay by launching an anti-Apple payment ad campaign, and by accepting bitcoin payments.
- eBay launched a mobile ad marketplace in which it may generate $1.2-$1.5 billion in annual revenue eventually, on top of the fees it generates from transactions.
- Going forward, PayPal will develop a better strategy for monetizing mobile commerce volume, but it will take a while for these developments to unfold.
eBay (NASDAQ:EBAY) has responded in a multitude of ways over the last couple of weeks to address competition from Apple. PayPal launched an advertisement campaign, began accepting Bitcoins, and welcomed ads onto its eBay mobile application. These efforts by eBay may address competition from Apple’s competing mobile payment service. While not a comprehensive strategy, it does help, and it at least communicates to investors that eBay will react to competition.
PayPal Responds To Apple Payments
The ad that PayPal launched makes a sort of indirect reference to Apple’s recent run-in with hackers, who were able to access and distribute nude selfies of celebrities. The ad to the left was PayPal’s full page newspaper ad.
The newspaper ad generated some media attention, but it’s unlikely to illicit much of a response from consumers, as Apple has a two-step authentication system. A consumer will be required to use their thumbprint sensor to make payments with the device, and will also be required to input a pin upon turning on the device.
I think PayPal’s strategy of accepting Bitcoins as a payment alternative may give it a competitive advantage. Furthermore Bitcoin is becoming increasingly popular, as it’s the currency of choice for those who want to make financial transaction on the deep web.
Also, businesses are starting to become more aware of crypto currency. To accept Bitcoins you have to set-up digital wallets, which works out well for PayPal. Furthermore, Bitcoin isn’t the only crypto currency that the company can accept. There are other currencies that are starting to emerge, such as Litecoin (the silver equivalent of crypto currencies).
According to Zacks:
This could be a big move by PayPal as Bitcoin enjoys wide acceptance and enormous popularity. According to a website tracking the digital money’s use, CoinDesk, approximately 63,000 businesses handle Bitcoins and have set up more than 5 million digital wallets to keep their holdings. Recently, Expedia announced that it will allow users to pay for hotel accommodations using Bitcoins.
The growing acceptance of Bitcoins may be PayPal’s saving grace as it’s going to be difficult for merchant networks to replicate crypto currency payments. Since Apple is tied to merchant networks, the company will absorb the benefit of offline commerce volume, and commerce volume tied to actual currencies like for example: the dollar, euro, yen, and etc.
Finally, eBay’s mobile application will now have ads. According to eBay:
As one of the only ad-targeting platforms to naturally possess first-party data, we have enormous insight into user interests and intent based on actual shopping and purchase behavior. In fact, eBay tracks over 290 million hours of shopping activity each month.4 We harness the power of this data to help our advertising partners reach their ideal audience anytime, anywhere and on any device.
eBay has 152.5 million active buyers, i.e. active users, and of that amount I approximate that 40-50% are active mobile users. Therefore, the monthly active mobile user figure is 61 million to 75 million. Facebook generated $20.48 per user over the trailing twelve month period. It’s perhaps feasible, given eBay’s current user base, to generate an additional $1.2 billion to $1.53 billion in revenue on an annual basis. In fiscal year 2013, eBay generated $16 billion in revenue on a consolidated basis. So an additional $1.2-$1.5 billion in annual revenue may have meaningful impact on both top and bottom line results.
eBay is doing whatever it can to deliver sales and earnings growth. The company has launched an anti-Apple payment campaign, has started accepting bitcoins via PayPal, and will serve ads on the eBay marketplace application. PayPal will need to roll out more features and services in order to remain competitive with Alibaba in the marketplace segment and Apple in the payment segment.
For now, the stock has been able to find some support at $60. It’s not clear how PayPal will expand its presence in offline payments considering Apple’s advantage both in terms of hardware and integration. But there are ways in which PayPal can address its offline payment strategy going forward, and it will take a while to see these developments unfold. However, there’s no doubt that PayPal will take aggressive steps to remain relevant in the mobile commerce space.