Ebay Vertical integration
On October 3, 2002, the online payment system PayPal was purchased by online auction giant eBay. PayPal had quickly emerged as the premier online payment program, thrashing in market control over eBay's own subsidiary, Billpoint. According to eBay CEO Meg Whitman, "the PayPal acquisition will help both customers and the company's bottom line by speeding up the payment process." Her reference to the bottom line may have stemmed from the fact that eBay's sluggish Billpoint had been losing $10 to $15 million per year. PayPal offers better online account services for monetary transactions, primarily because of its credit card security features. EBay, like other online services, is known for its ease of use and few channels it requires customers to go through to get their products. This forward integration helps solidify eBay's efforts to increase their customer's ease of use and strengthens their ability to
EBay strives to stay at the forefront of IT breakthroughs that will help satisfy the customer's needs. At the time of the article, the author estimated that of eBay's 55 million users, 20 million also used PayPal. Because of PayPal's youth, the financial regulatory laws were not clear cut as to what their patent rights were and where to set its limitations. PayPal was (and still is) a young company with incredible potential for financial services. After dot-com businesses went big then faded away, eBay held strong. While PayPal had been in legal trouble before, but eBay could not predict the potential problems it might face. Rising revenues and positive feedback from eBay's own customers signaled long-term growth potential, rather than PayPal simply being another chapter in failed online companies. From the beginning, eBay has fought to provide a strategic consolidation of the fragmented auction business. From the surface, it appears that this acquisition will help eBay tremendously. The acquisition of PayPal only promotes their desire to round out their services to better fit their customers' needs. 5 billion buyout included $17 million in acquisition costs. It may take time to see if the expensive buyout was worth it, but the capabilities of the PayPal program coupled with the growing need for online payment services makes things look optimistic. With this objective in mind, eBay phased out its gaming sector, which only accounted for 10-15% of PayPal's revenue.
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Acceptance Essays
