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Why eBay keeps acquiring strategic companies to grow its business

Puneet Sikka

eBay shows strong growth but the competition is rising (Part 7 of 8)

(Continued from Part 6)

eBay has made a number of acquisitions

eBay (EBAY) has made a number of acquisitions over the last few years in order to grow its business and ward off competition. eBay’s Marketplace business not only faces competition from online retailers such as Amazon, but also from traditional retailers such as Wal-Mart Stores (WMT) and Best Buy (BBY). In the payments processing market, the company’s Paypal business competes with new players such as Google (GOOG) Wallet. As the below chart shows, eBay’s most notable acquisitions are Bill Me Later for $1.2 billion, Braintree for $800 million, Stubhub for $310 million, Zong for $240 million, and GittiGidiyor for $218 million.

Bill Me Later helps eBay increase its volume growth by providing financing choices to consumers

eBay acquired Bill Me Later in November 2008 for a valuation of $1.2 billion. Bill Me Later is a company that facilitates credit services offered by unaffiliated banks. It offers consumers a line of revolving credit through Comenity Capital Bank and allows purchases online without using a credit card. During the conference call to announce Q1 earnings, eBay’s management discussed the advantage of having Bill Me Later in its portfolio of products, saying, “Credit is still a relatively new flywheel and in its early stages of growth. It allows eBay to increase its volume growth by providing financing choice to consumers and opportunities to merchants. In addition, it improves the Company’s ability to manage its transaction expense.”

eBay’s integrating Braintree with Paypal to make mobile payments seamless

In September 2013, eBay acquired Braintree for $800 million, which is a payments company that supplies technology to process mobile credit card transactions. Braintree’s Venmo app helps people to instantly wire money to their friends’ bank accounts from their phones. eBay plans to integrate Braintree’s technology with Paypal to provide seamless payment offering to mobile users. Management mentioned, “So Braintree’s growth rates are very significant and it’s been certainly met or exceeded our expectations in terms of its growth. And the reason of that is that it has 100% share of checkout on the leading mobile apps, apps like Goober or apps like Airbnb. So and — we’re also excited about some of the products that we’re now developing by combining PayPal and Braintree together, we think we can provide experiences on the mobile phone that just make payment seamless. So before you answer the specific, Bob, I just want to say how thrilled we are to have Braintree as part of our Company.”

Continue to Part 8

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