eBay to PayPal: “It’s not you, it’s me”

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Corporate spin offs or split ups hardly signify doom and gloom. PayPal and eBay are plan-ning to split up because they are more profitable as separate entities. In general, splitting a firm can help focus management and maximize shareholder value.

In the case of eBay and PayPal, the costs of maintaining a unified business model dwarfed their benefits. A large por-tion of PayPal's payment volume comes through third parties, which are often merchants that compete with eBay and are reluctant to indirectly benefit a competitor. Additionally, PayPal no longer needs eBay to pay for its accessories. PayPal depended on eBay for 50% of its payments in 2009, but it now obtains just 30% of its payments from eBay. If anything,

eBay is holding PayPal back, considering that PayPal’s revenue figure is growing at 19% com-pared to eBay’s 10%. The breakup will finally happen next year and make both parties better off. In agreeing to the breakup, eBay is telling PayPal, “It’s not you. It’s me.”

- WI