Comment Of The Day - Pondering eBay
... it's also a great opportunity for eBay to extend the use of PayPal across the largest collection of content, subcription, and shopping properties on the web.
these days, the value of eBay is more & more based on the value of PayPal... and depending on how much promotion PayPal gets on Yahoo properties, that value could be increased substantially.
[full disclosure: i used to work for PayPal]
Posted by: Dave McClure | May 27, 2006 8:44:17 PM
Dave's comment was seconded by several others in the comments to my Yahoo Extends Their Network post.
So it got me thinking about eBay and what it is becoming. Clearly eBay is still the dominant marketplace on the web and nothing quite compares to it when it comes to buying and selling stuff online. But eBay's stock is down sharply from the mid $40s at the start of 2006 and got as low as $30 before getting a nice bump on the Yahoo! deal. The stock is still not cheap, but it does trade at 24x the 2005 operating cash flow which is a far cry from where it has traded in the past and suggests that there may be value in eBay if it has a coherent strategy for where its headed.
But as the comment I started this post points out, eBay has something of tremendous value in PayPal, its transaction payment system which seems to be growing stronger every day. As Dave and Steve point out in the comments, getting Yahoo! to standardize on PayPal is a big deal and one I should not have glossed over in my initial post on the deal.
It seems that a smart strategy for eBay would be to focus on all the services that enable a marketplace to function, like search, payment, reputation, marketing, and so on, and recognize that overtime the web will become the marketplace but eBay can continue to dominate the services that allow transactions to happen.
I am not sure that Skype is a perfect fit in that strategic model, but I've certainly heard a number of arguments that it is a perfect fit.
Either way, a "distributed eBay" model is an interesting one and PayPal is the asset I'd want to start with if I had to execute that strategy.