Live at eBay's Analyst Day–Is the Company Future-Proofed?
It’s bright and early in San Jose, and we’re here visiting eBay’s world headquarters to hear CEO John Donahoe talk about how he’s future-proofed the business.
The e-commerce and payments giant has got a host of challengers close on its heals, from new entrants such as Groupon to dozens of challengers on the PayPal side of the business.
Follow us here for live updates from Donahoe’s opening remarks, as well as updates from members of the PayPal team.
8:07 am: eMoney is here live in San Jose. We hear we are the only blogger, so be sure to read here for all of the latest updates from eBay’s analyst day. (Even though, we were relegated to the rear of the room).
8:09 am: First up, there’s a video illustrating “the future of money.” We already anticipated that this would be a PayPal “lovefest.”
8:11 am: Good morning, John. He’s kicking off his keynote with a flashback to the last analyst day two years ago. Today, we are a different eBay.
8:12 am: John: We are making significant investments to drive our growth, and building a strong management team to strengthen our future.
8:13 am: John: All of us are on the cusp of a very exciting time, creating new opportunities for eBay–more than we would have imagined two years ago. We have the assets to compete, win and lead.
8:14 am: What does the future look like? Technologies are dramatically affecting how we connect, shop and pay. The new rules of retail are being written today. Four trends: Mobile, local, social and digital.
8:15 am: Last year, in 2010, consumers moved more than $2 billion on mobile phones, and we expect that to double this year.
8:15 am: Mobile is also influencing local. This is where eBay is trying to make a play with its recent acquisition of Milo.com, which has a database of local inventory.
8:16 am: John: Social is the third trend. With Facebook and other networks, innovation is emerging. We are still in the early days. Social today is where mobile was a couple years ago. (Does that mean, like very little revenues? Yup!)
8:17 am: John: These four trends are creating an inflection point. We’ll see more change in the next three years than we did over the last five to 10 years.
8:18 am: John is talking about how complex retail is getting now that consumers can price-comparison shop on their mobile phones while in the store.
John: Our company is expanding our opportunity enormously.
8:20 am: John: We are no longer thinking about e-commerce–it’s just commerce. We are firmly in the center of this environment.
8:21 am: What’s the future? It has to do with platforms and technology. John says we aren’t a retailer and we don’t compete with sellers or merchants. This gives us a unique position that’s increasingly powerful in this new environment.
8:22 am: John: Today, eBay is with consumers all day, seven days a week on any connected device, which is different than in the past when consumers had to go home in order to use their services.
8:23 am: Today, our target market is all merchants, sole proprietors, large merchants–both online and offline.
8:24 am: John says today’s meeting serves to provide a three-year snapshot of the company from eBay to PayPal.
Here’s the money quote that shows its payment division is the company’s darling. “PayPal has new opportunities in credit, digital and mobile. It has strong momentum and potential. I said a few years ago that PayPal had the potential to become bigger than eBay. That has the potential over the next three to five years.”
8:27 am: John also had a nice, but less enthusiastic, message about its marketplaces business: “We expect the eBay marketplaces unit to return sustainable growth over the long term.”
8:29 am: John: We are combining the power of commerce and payments capabilities to create an open commerce platform. This will address the changing dynamics of the market to help merchants scale, innovate and compete, and once again, we don’t compete with them.
Today’s takeaway: We are starting to play offense in the company. The commerce landscape is changing dramatically, and we are entering a new retail environment, and we are well positioned.
8:32 am: Next up, PayPal’s President Scott Thompson takes the stage, delighting us with his thick Boston accent!
8:33 am: Thompson: We expect to double the size of our business over the next three years from $3.4 billion in 2010 to between $6 and $7 billion. And, we expect to meet our goals in 2011 of $4.2 billion.
8:35 am: Thompson: We are going into 2011 with lots of momentum. As the world goes more and more online, PayPal is well positioned because we bridge the internet and global financial networks.
8:36 am: A slide shows four aspects that makes PayPal stronger than the competition: Technology, fraud expertise, closed-loop data and global connections. In particular, Thompson said its fraud protection is unmatched.
8:38 am: Thompson: There’s been more change in payments in the last 10 years than in the last century. We were the first to introduce mobile payments in 2006, the first to do micropayments, and the first truly open payments platform. In the past 18 months, that platform has managed $1 billion in transactions, and today, there are more than 15,000 new apps on X.com.
PayPal wants to be the “wallet in the cloud,” online or offline.
8:40 am: Thompson addresses all the growing competition, coming from multiple sides, including companies like Boku and Zong, or point of sales providers like Square. But “no one has the depth in experience that we have, and a lot of them partner with us.”
8:43 am: Thompson: No one could have imagined the world would move online as quickly as it has. About half of the internet users are coming from developing access, markets that PayPal is just starting to explore.”
8:44 am: Thompson reiterates the message of “the wallet in the cloud.”
It’s complex stuff, the margin for error is zero. You have to have security, fraud management and global connections — everything we’ve been building for the past 12 years.
8:45 am: Thompson: By end of this year, you’ll see PayPal at point of sale. If PayPal gets just 1 percent of retail sales, it will double the size of its business.
8:47 am: Thompson is talking up his management team, but doesn’t mention the recent departure of Osama Bedier to Google.
8:48 am: Next up is Ed Eger, PayPal’s SVP and general manager, taking the stage.
8:49 am: It’s Eger first analyst day, illustrating the stronger emphasis on PayPal two years later.
8:50 am: Eger describes the virtuous cycle, which connects the synergies between eBay and payments. It’s an old story, reaching back to the company’s acquisition of PayPal. PayPal grows as eBay adds merchants and buyers, who need to transfer funds. PayPal drives shopping as buyers and sellers can more easily connect.
8:52 am: Eger is showing lots of charts with arrows pointing up and to the right. Yay for phenomenal growth!
8:55 am: Eger says it helps small to medium sized businesses online by providing an easy check-out solution. When PayPal is added, sales go up by 18 percent.
The story is a little different for large businesses. It has big brands like Walmart, Starbucks, Facebook and JetBlue and Delta.
9:01 am: Eger is continuing the sales pitch. Fashion is the next great success story in payments.
9:02 am: Next up, Eger details PayPal’s international presence as it localizes the service around the globe.
Oooh, another chart with an arrow pointing up and to the right. This one is for international revenues.
9:06 am: Eger says that it is adding about one million active users a month, and is trying to make those people more active.
The most highly engaged users are using PayPal more than 100 times a year.
9:08 am: We got an 8 percent lift in sales from consumers who participated in its loyalty program called PayPal Advantage compared to consumers who weren’t participating.
9:09 am: We purchased BillmeLater in 2008. It gives people the flexibility to pay on their terms. It’s only been integrated for awhile, and eBay is now helping to drive 40 percent of its accounts.
9:11 am: Eger is wrapping up his pitch, and says that looking ahead they are going to go after lots of new segments like fashion, government and global adoption.
We expect to out pace the growth of the market, and our core business is getting stronger, and only scratching the surface for what it can do.
9:13 am: Up next is Sam Shrauger, VP of global product and experience. In other words, he’s the innovation guy. “I want to change money. It could be so much better than it is now. Maybe in the future it can be cool. Right now, it’s a pain.”
Digital goods alone is a $20 billion market, and everyone is talking about mobile. It’s a $180 billion market. But as more get access to mobile around the world, it’s poised to explode. Credit is a $5 trillion market, and there’s point of sales.
That’s a lot of dough.
9:15 am: Shrauger also has slides that have big green arrows pointing up and to the right. His pitch right now is all about how BillMeLater and PayPal has lots of overlap, and will create a better credit model for consumers.
9:18 am: Here’s PayPal’s story about digital goods — we are talking music, movies, news, books or games.
Shrauger says traditional payments doesn’t work for digital goods. It’s too clunky and too expensive.
Payments also have to cross borders effortlessly.
9:20 am: Last year, we introduced our solution for digital goods. You don’t have to leave the news article or game in order to pay. Today, PayPal leads the market with $3.4 billion in 2010 by powering payments for leading companies, like Facebook and Zynga.
9:21 am: Now, we’re getting a demo of how you’d pay for one article in the online magazine AutoSport.com.
Just click and you are done. 70-80 percent of PayPal users on AutoSport were new readers.
9:22 am: Now for mobile. What does it take to win in mobile?
We’ve been the digital wallet on the internet for 12 years. The only difference today is that the internet is on the phone. We have some of the leading merchants, like Nike and Overstock that are already using mobile solution. We expect to double our mobile Total Payment Volume this year to $2 billion.
9:24 am: The key to success in mobile is to be technology and platform agnostic. You must support Bluetooth, RFID, NFC, QR Codes. Having one technology is not the answer. Having one digital wallet in the cloud is the answer.
We can do for mobile payments, exactly what we did for online payments.
9:26 am: Other companies are talking about having an open platform, but we’ve been doing it for two years. Open platforms gives us great opportunities.
If you have a smartphone, you are always online. This is changing the way people shop, pay and buy forever.
9:27 am: Sam’s about to show a demo of how its RedLaser app and Milo acquisitions can work together. He’s scanning an Xbox barcode to find out where he can buy one at the cheapest place. You can even buy the Xbox from the app, and then walk into the store and show a barcode to pick it up.
9:31 am: The new reality is that the wallet is obsolete from credit cards to all of the loyalty cards that the average consumer carries around today.
9:31 am: OK, here’s something that will come out this year.
You should be able to decide how you pay for things. Right now, you don’t have that option. If PayPal is tied to your bank account or credit card, the payment is done — it’s too late.
But PayPal will allow you to change the way you paid, deciding afterward to make installments on that Xbox, or to use a credit card instead.
9:35 am: While that’s the consumer-facing side of the business, Shrauger is also demonstrating how it will change for a merchant.
Merchants will be able to send a coupon to their customers, using a short digital form. A consumer will be able to redeem online or from a phone.
9:37 am: Thompson is back on stage: All in all, I hope we’ve painted a dynamic picture of what we’ve accomplished, and what we have coming from PayPal. I believe the need for PayPal services will just continue to grow.
We are expanding our core business, and setting ourselves up for the future. No financials, however, until this afternoon.
That’s it. No major breaking news, but stay tuned for some financial news and forecasts later in the day.
Thanks for reading.