July 16th, 2012

3 big reasons Paypal is screwed

After more than a decade, PayPal - the coaster of the Internet that has had a downhill ride with the wind at its back pretty much since acquisition - is finally under serious threat.

It may not be showing up in PayPal's numbers yet. Indeed, by the time you start to see these things on the balance sheet, the damage is irreversible. The question is whether it can still be reversed now. I'm arguing no for three big reasons.

The first is the decreasing relevance of eBay. PayPal was never founded to be merely the payment arm of eBay, but eBay was so dominant in ecommerce at the time and the need for digital payments on the platform was so great that that became the bulk of the business.

But Amazon has long since outdone eBay and every year eBay seems to get more stale and less relevant to younger digital natives. Expectations today are of a UI about a billion times more sophisticated than eBay. Has anyone under 30 ever bid on something on eBay? Sure PayPal is used widely outside of eBay now- as proven by the fact that it's the biggest part of the business now. But that's still its bedrock. Being inside an aging Web giant never helped anyone innovate.

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