PayPal has officially split from eBay this morning. Investors will be able to purchase separate PayPal stocks. The company is currently valued at $40 Billion. This split doesn’t bode well for eBay, and now the company will be left alone to compete with the likes of Amazon.
This breakup was a long time company as the two companies couldn’t see eye-to-eye, and now that it’s here it’s safe to say that eBay is panicking slightly.
Why the High Value
Investors have heard it before: an Internet company that splits from another company is highly valued, so investors would be wise to drop a few dollars. But often those plans don’t pay off. So, why is PayPal any different? There are a myriad of reasons why PayPal is valued at $40 Billion, and why it might be very wise for investors to sink some money into PayPal stocks. One of the top reasons is that PayPal’s mobile division has grown 40% from last year.
Another reason is that PayPal is still the top online payment processing company out there. Even though other companies have tried to compete, most have failed quite miserably. PayPal stands and succeeds and continues to grow, which is part of the reason why the company no longer needs eBay lurking around.
eBay did help out PayPal a long time ago when the company was struggling. But like most children of more responsible parents, PayPal simply outgrew eBay and doesn’t need it anymore. Now, it’s eBay that is suffering. eBay isn’t growing as fast as it once was, so you may see some slowdown from the company shortly. eBay isn’t dead in the water, but consumers aren’t looking to the company as they once were.
The split means that PayPal will be able to work with commerce partners that the company couldn’t work with before because it was under eBay’s wing. So this might mean that you will start seeing more and more “PayPal accepted” signs as you shop online - and you may even be able to pay for something using PayPal when you buy items on Amazon. But PayPal does have some major competitors as well.
PayPal’s biggest competitors right now are Apple and Square. Both of those companies have definitely cornered some of the online market (Square more than Apple), so PayPal is going to have to compete now. It doesn’t seem like PayPal will have a hard time though, since the site is already used by people other than consumers. PayPal is arguably one of the most popular ways for contractors and freelancers to get paid, and that’s not a small slice of the market pie.
So what does this mean for you if you use PayPal? Nothing at the moment. PayPal should be operational as usual, and this means that you will be able to use the service as usual. It would be great if PayPal would lower transaction rates, but none of that talk has happened yet. For now, PayPal remains as it’s always been.