Scott Loftesness - Glenbrook Partners

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.

What do you think? Share your thoughts in the comments below! Or, send me a private email!

2 Responses to “The PayPal Juggernaut”

  1. Joel F says:

    Just saw a relevant post about this Apple/Google/Paypal fight at Techcrunch: http://techcrunch.com/2011/03/06/payments-apple-google/

  2. Great post! I think the answer is yes, they (cloud wallets) could be! How else to describe Visa’s Payclick service except a acknowledgement that they are (might be) being left behind in e-Com and therefore potentially out for a growing share of commerce. The platforms provide both the merchant and the consumer a cross-retailer, cross-payment method flexibility while being a trusted point for generalizing one-click buying which is so important in many mobile use cases. The platforms could also start to provide some interesting tools for repeat customers, both on the merchant side (allowing them to leverage data on the platform) and consumers (spending/merchant based rules and preferences?). Lot’s of value potentially for merchants and users too…

    I think another point is PayPal wants to be a platform and wants to help both sides of the market. With Apple and Google you have to wonder if they’re interest in the distribution as well as the payments will cause distraction and conflict… In the same way that no retailer wants to have Amazon providing the one-click, and Spotify probably won’t want to process payments via Apple. It works for digital content perhaps, but as things get more physical it will be interesting how these play out – payment wise and data wise.

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