Last September. eBay announced eBay would split into two public traded companies, one for marketplace eBay and the other for payment solution Paypal after months resistance to activist shareholders. The spinoff is expected to be completed in the second half of 2015. The current eBay CEO John Donahoe will step down as the company’s top operating executive and join one or both of the boards of the two new companies. Post-separation, top eBay exec Devin Wenig — currently president of the eBay Marketplaces unit — will run eBay and newly hired former American Express exec Dan Schulman will become CEO of PayPal.
After split, both eBay and Paypal will see new opportunities and new challenges. For example, paypal can finally do business with many eBay competitors, such as Amazon or Alibaba. Ebay transactions currently accounting for one third of Paypal business dropping from 50% a couple years ago are expected to continue to slide after this spinoff. Of course eBay will no longer be committed to bring more customers to Paypal. So what is the impact on our eBay sellers?
Well, it is still difficult to predict? I'd like to discuss some possibilities that our eBay sellers may benefit from this split. This split may change eBay strategy about product ranking in Best Match. How? We are selling a lot of hair accessories on eBay. Unfortunately, our business was dramatically dropped due to emerging Chinese sellers. If you search " hair claw", 3/4 of listings in the first few pages are auctions listings and most of them start $0.01 plus free shipping. If you watched those auctions, you found that most of those auctions ended about 50-80 cents. Thinking about the fees (ebay 9%, paypal 30 cents+4%), you are wondering how they are making any money. Most of those transactions will end up item not received or poor quality items. For high quality items, they are most likely ended in 10 pages away and our eBay buyers may not see them. Those bad buyer expereince will eventually damage eBay reputation. Three years ago, eBay had 2/3 fixed price listings and only 1/3 auction listings. So why does eBay change listing strategy- put more auctions in the Best Match? That is because of eBay fee structures. For example, if seller A sell $0.50 in auction for a hair claw, ebay will receive $0.50*9% + $ 0.30 + 0.50*4%= $0.37 fee. Seller B sell $2.00 in fixed price listing for a hair claw, ebay will get $2*9% + $0.30 + $2*4%= $0.56. It seems eBay gets more money from Seller B than from Seller A for each hair claw sale. However, item at 50 cents sells almost 10 times faster than sells at $2.00. Therefore, eBay want to more those autctions listing in Best Match because no matter what final price is, Paypal will receive at least 30cents ( even the auction ended at $0.01 plus free shipping), which is a quick money. Of course, sellers are clever too. They start to look for cheap items sell on eBay. You know where eBay is going to head in this bad cycle. Split of eBay and Paypal can be a possibility to break this cycle. Without benefiting from 30 cents from Paypal transactions, eBay may change its strategy to bring more fixed price listing in Best Match. We will see what eBay is going to do in fixing this hole.
Another benefit may be more flexible in payment methods. Since eBay will no longer have commitment for Paypal, it may allow more payment solutions for its transactions. That is especially welcome in some countries where Paypal is not very popular. That is also opening a new market for eBay sellers.
Those possible benefits all depend on what ebay is going to do next. We will observe the changes in next few months during or after this spinoff process.