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Analyzing PayPal’s Split with eBay (and Apple’s Role)

In todays news, eBay announced that their partnership with PayPal is ending due to a board decision to create a more directed focus for PayPal, rather than maintaining their merger with the giant, eBay. The primary impetus behind PayPal’s split is the introduction of Apple Pay, along with the general rise of competitors in the digital wallet industry. The general idea of this split is to allow for PayPal to be able to compete with Apple Pay and e-commerce in general, but also to expand their power with the inclusion of stocks and expansion into mobile payments as well as physical stores (expanding from the web alone). Apple Pay’s expected boost in power is due to, as said in TheVerge article, “incumbent credit card companies like Visa, MasterCard, Discover and American Express working hand-in-glove with the biggest name in technology” (See Source 1).

This recent split relates to network topics discussed in class in that eBay and PayPal previously had a matching where the power of the social network favored eBay (seeing as eBay was the parent company). With the split with eBay however, PayPal, now as an independent company, has had a rise in power (due to their ownership of stocks(soon), etc) and thus the values for the matching between eBay and PayPal have shifted to favor PayPal significantly, leaving eBay floundering/powerless in the e-commerce market. Looking at the broader network connection/ties in the emerging digital wallet/e-commerce market, PayPal and Apple are now competitors and currently have no matching between them (they aren’t allies in this WAR). However, Apple’s given upper hand (due to physical stores, and mobile integration) has shifted a lot of the power in the general e-commerce network in its favor (Apple will/already has many potential customers). It will be interesting to see if Apple’s rise in power leaves PayPal floundering, of if PayPal’s independence will lead to its market expansion.





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September 2014