Ebay Vertical integration essays

Ebay Vertical integration essays On October 3, 2002, the online payment system PayPal was purchased by online auction giant eBay. PayPal had quickly emerged as the premier online payment program, thrashing in market control over eBays own subsidiary, Billpoint. According to eBay CEO Meg Whitman, the PayPal acquisition will help both customers and the companys bottom line by speeding up the payment process. Her reference to the bottom line may have stemmed from the fact that eBays sluggish Billpoint had been losing $10 to $15 million per year. PayPal offers better online account services for monetary transactions, primarily because of its credit card security features. EBay, like other online services, is known for its ease of use and few channels it requires customers to go through to get their products. This forward integration helps solidify eBays efforts to increase their customers ease of use and strengthens their ability to limit any competitors ability to compete on the online payment market. From the surface, it appears that this acquisition will help eBay tremendously. PayPal was (and still is) a young company with incredible potential for financial services. At the time of the article, the author estimated that of eBays 55 million users, 20 million also used PayPal. EBay was in a position to observe the growth of the company and see the advantages its patrons had in using the online account service. The hard part is to put a price on such a young company. The $1.5 billion buyout included $17 million in acquisition costs. EBay expected that net revenues from the payment segment, including revenues from Billpoint, will be approximately $300-310 million in its first year. While PayPal had been in legal trouble before, but eBay could not predict the potential problems it might face. Because of PayPals youth, the financial regulatory laws were not clear cut as to w ...