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Ebay and PayPal to Split as Mobile Payment Takes Off

In an effort to capitalize on growth opportunities in the highly competitive mobile commerce and payments markets, eBay Inc. announced Tuesday that it approved a plan to separate its eBay and PayPal businesses into independent publicly traded entities.

A company review found that the benefits of existing relationships between eBay and PayPal would naturally decline over time as consumers increase their online and mobile buying power. EMarketer Inc. estimates that mobile payments in the U.S. could climb from $3.5 billion this year to $118 billion by 2018. For more than a decade the businesses have mutually benefited from being part of one company, however, with the changing retail landscape and new technology, like Square and Stitch Inc., which Apple pegged to launch Apple Pay, each business is facing its own set of challenges and competition.

Collectively, the eBay Marketplaces and eBay Enterprise businesses handled approximately $85 billion of gross merchandise volume and sales last year—a 13 percent year over year increase spurred on by eBay’s mobile efforts. The company has an installed mobile base of 200 million apps, generating $20 billion in mobile volume.

Devin Wenig, currently president of eBay Marketplaces, will become CEO of the new eBay company and will lead the eBay Marketplaces and eBay Enterprise businesses. President and CEO of eBay Inc. John Donahoe said, “Since joining eBay three years ago, Devin has proven to be an exceptional global leader and operating executive. He is steadily enhancing eBay’s unique assets and capabilities and creating new commerce experiences to ensure long-term growth and commerce leadership. He will make a fantastic CEO of eBay.”

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The company has tapped Dan Schulman, formerly president of American Express’ Enterprise Growth Group, to be president of PayPal, effective immediately. Schulman brings his experience leading complex technology business, driving sustainable growth and delivering compelling experiences for customers, Donahoe said.

PayPal facilitates one in every six dollars spent online today, with more than 152 million active registered accounts. Accounts increased 15 percent year-over-year last quarter, while revenue over the last 12 months climbed 19 percent to $7.2 billion. It is the No. 1 payments processor for business to consumer exports for Chinese merchants. And boosted by acquisitions like Braintree and One Touch, a single touch payment program, PayPal expects to process 1 billion mobile transactions in 2014.

The separation is on track to be completed in the second half of 2015.

Donahoe said, “eBay and PayPal will be sharper and stronger, and more focused and competitive as leading, standalone companies in their respective markets.” He added, “As independent companies, eBay and PayPal will enjoy added flexibility to pursue new market and partnership opportunities. And we are confident following a thorough assessment of the relationships between eBay and PayPal that operating agreements can maintain synergies going forward.” He added, “Our board and management team believe that putting eBay and PayPal on independent paths in 2015 is best for each business and will create additional value for our shareholders.”