EBay to buy Braintree to boost PayPal's mobile presence

Tue Oct 1, 2013 1:12pm EDT

The results of a Google image search on Ebay are shown on a monitor in this photo illustration in Encinitas, California, April 16, 2013. REUTERS/Mike Blake

The results of a Google image search on Ebay are shown on a monitor in this photo illustration in Encinitas, California, April 16, 2013.

Credit: Reuters/Mike Blake

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(Reuters) - Ebay Inc will buy payment gateway Braintree for about $800 million to strengthen its PayPal unit's presence on mobile devices and take out a rapidly growing rival.

PayPal, the dominant online provider of payment services, has been trying to fend off a clutch of fast-rising competitors such as Braintree, Intuit Inc's GoPayment and Twitter founder Jack Dorsey's Square Inc.

The deal gives Ebay access to Braintree's Venmo, an app that lets consumers make payments on smartphones and tablets, an area in which EBay wants to be more involved.

"We believe that this deal makes reasonable sense strategically as it expands PayPal's distribution and removes a competitor," RBC Capital Markets analyst Mark Mahaney said.

Shares of EBay, 40 percent of whose revenue last year came from PayPal, rose as much as 4.4 percent on the Nasdaq on Thursday.

PayPal, with its 120 million users, has dominated online payment services for about a decade. But its growth has moderated in recent years, partly as a result of increased competition on mobile devices from smaller but nimbler rivals.

Hill Ferguson, EBay's vice president of global product, did not rule out more acquisitions to boost PayPal's mobile presence. "Anything's possible," he said in an interview.

PayPal bought mobile app developer Duff Research in March to add to its technology expertise.

The company has also been expanding into the much larger offline market, working on ways to convince customers to pay through PayPal accounts instead of credit cards or debit cards.

Research firm IDC had last year forecast that worldwide purchases over mobile devices would exceed $1 trillion by 2017. (link.reuters.com/heq43v)

The volume was about $163 billion in 2012, Gartner said.

Braintree, whose clients include online hotel booking service Airbnb and online restaurant booking service OpenTable Inc, expects to process about $12 billion in payment volume this year.

"It was rapidly becoming a potential threat to PayPal," Benchmark Co analyst Daniel Kurnos told Reuters.

Braintree, backed by venture capital firm Accel Partners among others, provides merchant accounts, payment gateway, billing and credit card storage.

Chief Executive Bill Ready Will lead Braintree, with more than 180 employees, as a separate service within PayPal.

EBay said the deal, expected to close late in the fourth quarter, will have a negative impact of 1 cent per share on its 2013 adjusted earnings.

The company's shares, which have risen about 5 percent in the last three months, were up 4.2 percent at $56.50 on Thursday afternoon.

(Reporting by Chandni Doulatramani in Bangalore; Editing by Sreejiraj Eluvangal and Joyjeet Das)

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Comments (1)
NetSales wrote:
Ebay’s tactics towards small sellers: In 2008 John Donahoe (CEO) made it clear he wanted to move away from a flea market operation to brand name big box retailers. With numerous policies that were enacted to eliminate small sellers (chief among these the flawed DSR system) he has been succeeding with a vengeance. 1) The DSR system adversely impacts small sellers more swiftly and egregiously then it does the favored big box and high volume retailers. 2) 15,000 small sellers were axed by ebay on August 6, 2013. 3) The automatic five-star DSR glitch/malfunction that ebay has admitted not fixing was responsible for at least some those purged getting purged because many were only out of compliance by one DSR star 3) The elimination of the policy compliance feature on the seller dashboard. If anybody thinks that was not purposefully done to hurt small sellers, I have some acreage on the moon I will sell you 4) ebay’s latest user agreement update that goes into effect October 26 granting itself permission to hide sellers’ listings. The majority of sellers on the ebay discussion boards think ebay has already been hiding sellers’ listings 5) Ebay’s numerous moves in past user agreement opt ins or opt outs to try to insulate or protect itself from class action lawsuits 6) this new managed returns issue (see new user agreement) 7) the fee hikes 8) the misuse/abuse of the DSR system to rob good decent sellers of TRS status and discounts they would get.

Oct 05, 2013 12:32pm EDT  --  Report as abuse
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