The PayPal Juggernaut
A couple of weeks ago, eBay held an Analyst Day where eBay senior management shared their thinking about the future of the changing commerce landscape – and how they’re thinking about taking the “e” out of eCommerce. (Click here for the PDF of the presentation.)
What’s this taking out the “e” business all about? It’s about the influence of mobile on integrating online and offline commerce together). At Glenbrook, we call this notion the “Commerce Context” – simply stated, the commerce context is where you are enabled to transact and buy stuff. With the rapid adoption of smart phones, our personal commerce contexts are rapidly expanding to places where we don’t have to stand in line at a checkout counter or at our desk in front of a computer screen! These new mobile devices put commerce in our hands.
Increasingly, I’m hearing savvy web developers say their first priority today is designing for the mobile experience (both using mobile apps on the devices and web sites tailored for the mobile experience. A lower priority is designing for the traditional web browser experience. So mobile is big, and getting much bigger very fast. We’re moving rapidly from eCommerce to just Commerce – literally done anywhere you want to be.
PayPal’s a significant beneficiary of this shift. A bit over ten years old, PayPal’s management was forecasting 2011 revenue of about $4.2 billion at the Analyst Day – also noting its margins would be increasing as well. Last year, PayPal reported handling $92 billion in total payment volume, growing at a 24% compound rate over the last three years. PayPal forecast that to grow to over $125 billion by 2013 – yielding 2013 revenues between $6 – 7 billion. You can quickly do the math and see the kind of revenue PayPal is generating from every dollar of payment volume it processes.
It’s quite a story. As a “payments geek”, I continue to admire how PayPal is exploiting the global (e)Commerce opportunity in innovative ways. PayPal is perhaps the best example of a new platform play in payments – as it continues to accelerate in growing its share of payments.
But, alas, PayPal’s not alone. At the recent iPad 2 announcement, Apple CEO Steve Jobs highlighted that Apple has over 200 MM payment cards on file – perhaps the largest such collection on the planet? (PayPal’s number of active accounts at the end of 2010 was 94 MM). Amazon has another large collection of consumer card credentials on file as, I suspect, does Google – and perhaps others? Might these “cloud wallets” be new enablers for easier payments? I’m sure time will tell.