July 9-10, 2013
San Francisco, CA

Tickets On Sale Now

PayPal’s killing the cash register and offering free credit, debit, check, and PayPal processing to qualifying U.S. businesses that adopt its PayPal Here solution — for the rest of 2013.

In other words, PayPal is all in.

PayPal Here, which offers a triangle dongle to compete with a certain rival’s Square, offers a mobile dongle that you can attach to smartphones or tablets to take payments on the go. But it’s also now a pre-integrated solution for existing point-of-sale machines from multiple vendors such as ERPLY, Leaf, Leapset, NCR Silver, ShopKeep, and Vend.

Source: PayPal

PayPal’s triangle

“The cash register has been a familiar sight for generations, but it’s time to replace it with a modern solution,” PayPal says.

While PayPal was late to this particular game, it has quickly added partners like Home Depot and Abercrombie & Fitch, and, after being available just in North America for some time, recently entered the UK. And the company absolutely crushes all other competitors — including Google, MasterCard, and Visa — in consumer awareness for its digital wallet services.

But the real juice in this latest program is the free payment processing for the rest of the year. That’s huge to merchants who are looking to squeeze a few extra percentage points of profit out of typically skinny retail margins. Payment processors can easily take one to three percent of a company’s gross sales, right off the top.

Merchants can also skip the cash register upgrade and simply go directly to an iPad solution with PayPal Here running as an app, in which case PayPal Here can connect wirelessly to a cash drawer and printer.

July 9-10, 2013
San Francisco, CA

Tickets On Sale Now

eBay reported its first quarter 2013 results today, with income increasing 19 percent to $677 million on revenue of $3.748 billion.

Q1 was solid for eBay, pretty much in line with expectations, although revenue was down a little from analyst expectations. The stock, however, is down almost 3 percent in after-hours trading, as the company’s outlook for Q2 is in the 61 cents to 63 cents per share range. Analysts were hoping for 66 cents.

The future of eBay is mobile payments, however, and for investors willing to overlook some short-term pain, there may be some long-term gain as PayPal transaction volume increased a strong 21 percent in the last quarter, and PayPal merchant services jumped 25 percent.

Source: MarketWatch

eBay stock is down almost 3 percent.

By the numbers:

• PayPal users: up 5 million to 128 million
• PayPal at point of sale: now in almost 20,000 retail locations in the U.S.
• eBay marketplace customers: up 3.9 million to 116 million
• eBay transaction volume: up 13 percent to $18 billion
• Total “enabled commerce volume”: up 19 percent to $49 billion

Analysts had expected 62 cents a share of revenue, with total revenue of $3.77 billion, although the “whisper number” was 64 cents per share. eBay missed that number, hitting $0.63 per diluted share.

eBay had beaten its earnings whisper numbers in each of the last four quarters.

“We had a strong first quarter, with accelerating user growth across both Marketplaces and PayPal,” CEO John Donahoe said in a statement. “Technology is creating a commerce revolution, and we are in the forefront with strong mobile leadership and a focus on helping retailers and brands engage consumers anytime, anywhere.”

eBay’s original raison d’etre, auctions, is decreasing in importance to the company as net revenue, while still growing, was up comparatively less, 13 percent, and gross merchandising volume — the value of goods being sold via eBay Marketplaces — was up by the same number. In addition, GSI Commerce, eBay’s e-commerce solutions for enterprise division, had increased sales of 13 percent.

PayPal accounted for 41 percent of eBay revenue, a number that has been growing in the past, and the company expects it to continue to rise.

eBay has big plans for the future.

In a note to investors in March, eBay says it plans to enable $300 billion of global commerce by 2015, up from $175 billion in 2012, and expects revenues to grow by 50 percent by 2015 as PayPal continues to be the growth driver.

photo credit: OnInnovation via photopin cc

Why now?

Jeep’s Twitter account recently told the world that the iconic brand had been “sold to Cadillac.” And Burger King’s account started mysteriously promoting McDonalds. Two high-profile hacks in less than a week means, apparently, that Twitter had to take some action.

The hacks were due to phishing attacks, or sending out emails that look legitimate but, sadly, are not.

“There’s no shortage of bad actors sending emails that appear to come from a Twitter.com address in order to trick you into giving away key details about your Twitter account, or other personal information,” Twitter’s “postmaster” Josh Aberant posted this morning on the company’s blog.

Twitter sends out a lot of emails. If you opt into email notifications for new follows, mentions, and direct messages (little hint: don’t), you potentially get hundreds of emails a week. The problem is: how do you know the email in your inbox is from Twitter?

To make that determination easier, Twitter has adopted DMARC technology, an email authentication protocol initially developed by PayPal in 2007. Essentially, it helps receiving mailservers know, with a reasonable level of assurance, that an email’s reported sender is accurate, not spoofed, and not forged. Which then allows the mailserver to delete forged email before it ever reaches your inbox.

Facebook already uses DMARC and is listed as one of the founding contributors to the open specification, as is LinkedIn. Other organizations that use DMARC include Google (Gmail), Microsoft (Hotmail/Outlook), Yahoo (Yahoo Mail), AOL, and Comcast.

A note for emailers:

If you don’t use Gmail or one of the other email providers listed above, you may not be protected. It might be a good time to ask your mail service provider if they support DMARC.

photo credit: Stian Eikeland via photopin cc

July 9-10, 2013
San Francisco, CA

Tickets On Sale Now

The good news, if you’re PayPal, is that almost three quarters of Americans know about you and your digital wallet solution. The bad news is that under half of them really understand what a digital wallet is.

The really, really bad news?

No digital wallet vendor besides PayPal has even 50 percent awareness. Forty-one percent of Internet-using Americans have heard of Google Wallet, but only 13 percent know about MasterCard’s PayPass wallet, and even fewer know about Square’s, Visa’s, or other vendors’ solutions.

If ComScore’s recently released digital wallet study highlights one thing, it’s that it is still the very early days for digital wallets. And that if you’re not PayPal or, to some degree, Google, almost no one knows what you’re doing.

“Low awareness, understanding of benefits, and availability among retailers are among the key barriers to adoption of digital wallets,” Andrea Jacobs, ComScore Payments Practice Leader, said in a statement about the 2,000-person study.

While half of respondents have used PayPal, only 8 percent have used Google Wallet. Three percent of American Internet users have tried MasterCard’s digital wallet solution, with the numbers going down from there for Square, Visa, Isis, Lemon Wallet, and LevelUp.

The problem is not just with use — it’s also with education. Unfortunately, digital wallet companies suck at explaining their product.

According to ComScore, most consumers just don’t really know what a digital wallet is and what benefits it can provide. And even after being shown websites of digital wallet vendors, people still showed an average comprehension of just 45 percent.

PayPal, of course, has a major advantage in that it has been the default go-to online payments option for online purchases not consummated with a credit card for over a decade, and the company is working hard to parlay that advantage into a dominant position in the mobile digital wallet space.

Google has made some major strides in the digital wallet space, but its intentions and plans are obscure, to say the least. The latest move for Google Wallet appears to be a morphing credit card that can be a Visa, MasterCard, or American Express card depending on how you want to pay, with some additional person-to-person PayPal-like capabilities. One huge advantage for the search and advertising giant, however, is that its brand awareness is sky-high, which was probably a major help in this survey and will be a major help as Google rolls out its solution more broadly.

While the digital wallet market seems like it’s PayPal’s to lose, the reality is that it is still very early days, and payments giants like MasterCard and Visa can release new solutions to hundreds of millions of consumers very, very quickly.

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July 9-10, 2013
San Francisco, CA

Tickets On Sale Now

eBay reported its Q4 financials for 2012 today. The company earned $751 million on $4 billion worth of sales in the last three months. Full-year revenues were $14.1 billion, with a net income of $2.6 billion.

That’s up 18 percent year-over-year for the fourth quarter, and it’s up 21 percent for the full 2012 earnings.

“We had a great finish to an excellent year, with fourth quarter results exceeding our expectations,” eBay president and CEO John Donahoe said in a statement. “eBay Marketplaces in particular had a terrific fourth quarter, with growth in the U.S. accelerating three points, outpacing ecommerce.”

Source: Google Finance

eBay stock today

Key payments division PayPal, which has been a critical revenue driver for eBay in previous quarters, continues to do well, with payment volume up 24 percent … which, given PayPal’s fairly linear revenue structure, means that earnings were also up 24 percent.

PayPal clients sent nearly $24 billion to each other in 2012 — 250 percent more than in 2011 — and PayPal reported adding two million accounts a month in the fourth quarter, which the company says is PayPal’s fastest growth ever.

PayPal’s growth is important for eBay, as mobile payments is an increasingly growing market. PayPal put mobile commerce first explicitly in July of 2012, when mobile boss Hill Ferguson was elevated to VP of global product and saw a huge jump in mobile payments this past Thanksgiving. The company also teamed up with NCR to attack Square just a few days ago.

eBay as a whole generated $2.6 billion of cash flow in excess of expenses in the past year and is now sitting on a nice little nest egg of $11.5 billion in cash, cash equivalents, and non-equity investments. Not exactly Apple-sized, but certainly nothing to sniff at.

And for 2013?

eBay expects to earn $16-16.5 billion and make between $2.23 and $2.29 per share. The company’s stock is up $0.40 on the day.

photo credit: Ryan Fanshaw Photography via photopin cc

July 9-10, 2013
San Francisco, CA

Tickets On Sale Now

After properly stuffing themselves with copious amounts of turkey, cranberry sauce, sweet potatoes, dressing, and pumpkin pie, eBay saw a ton of people reach for their mobile devices to make some form of payment.

Overall, eBay had a 133 percent increase (compared to the previous year) in mobile transaction for the holiday. It’s online transaction service PayPal also saw a jump of 173 percent in global mobile payments for Thanksgiving 2012, compared to the previous year.

The most popular time to shop on mobile devices with PayPal during the holiday was between 12 p.m. and 1 p.m. (PT). Coincidentally, this was also the most popular time for people to upload Turkey day-related photos to Instagram.

The most popular cities using PayPal, according to the company, were Houston at No. 1, followed by Los Angeles, Chicago, Miami, and New York.

EBay predicted it would see a huge boost in mobile transactions for the holiday season in its Q3 earnings report. So that, combined with the growing number of people using mobile devices in general makes this particular piece of news pretty unsurprising.

Did you do any shopping from your smartphone or tablet yesterday? Let us know in the comment section below.

July 9-10, 2013
San Francisco, CA

Tickets On Sale Now

Google Wallet, which just recently made big changes to support Visa, American Express, and Discover cards, is now apparently making even bigger changes. As in, back to the future changes.

Remember how digital wallets were supposed to be all about losing those bulky physical wallets and resultant ass bulges, and just using a nice clean app on the same mobile computer you sometimes use to talk to your mom?

Not any more.

Source: Android Police

Google credit card?

According to a leaked report at AndroidPolice, Google Wallet has pivoted into an actual credit card. But not your daddy’s credit card.

This one morphs into a Visa card when you want to pay with Visa, a MasterCard when you want pay with MasterCard, and so on. Simply set the payment processor of your choice in the Google Wallet app, and the smart credit card shifts identities. Given the fact that the update last month that added Visa also moved Google Wallet users’ payment credentials to the cloud, it could be the case that payment selection is made at the server level.

The idea, apparently, is to leapfrog the lagging adoption curve at the point of sale and device level — still no NFC support from Cupertino — and go back to the tried and true, with a twist.

Apparently, PayPal-like person-to-person transfers and money balances are also going to be part of the new and improved Google Wallet.

I’ve asked Google for confirmation or comment, and so far, it’s a definite “no comment.”

If true, this is interesting and weird and possibly genius, although when I first heard it I thought it was the stupidest thing ever.

Saying I’ll put that on Google may just be the stepping stone we need to transition to the coming more virtual world. And it would give Google Wallet instant viability on iPhone in addition to its Android home turf.

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July 9-10, 2013
San Francisco, CA

Tickets On Sale Now

PayPal president David Marcus announced layoffs in his division this week with a tone-deaf line about delighting customers and providing great experiences.

Never mind the 325 employees and 120 contractors who are going home without jobs this evening, and who could be facing months of unemployment, family stress, financial hardship, and more. Our focus is on the customers!

And that’s just two weeks after Paypal’s corporate parent, eBay, said the payments division was knocking it out of the park, with revenue up 23 percent compared to the previous year.

Marcus is a decent guy, according to at least two VentureBeat reporters who have talked to him. I don’t think he’s cruel or unusual among his peers: He is certainly not the first tech executive to handle layoffs in such a cavalier manner, and he won’t be the last. For example, last week Salesforce laid off 100 people in its Marketing Cloud division and led its statement to the press with bold words about how it “is the undisputed leader in social marketing.” This, just a few days after rolling out new features for Marketing Cloud and claiming that 55 of the Fortune 100 are using the service.

The playbook seems to be: Announce a new product. Tell the world how it’s raking in money hand over fist. Then quietly let go a chunk of the people who made it happen.

This approach does nothing to endear companies to their customers. More immediately, it runs the risk of demoralizing the remaining employees. Sadly, it’s all too common in tech companies and is a sign that the industry is getting seriously out of touch with the rest of the world.

Now, I get it. Not every company can boast that its revenue and profit graphs go straight up and to the right. It’s a rare company that doesn’t run into financial difficulties and have to lay people off at some point. Fortunately, many of the people eBay let go are in product and technology roles, which means many of them will likely find new work quickly, assuming they’re based in Silicon Valley, where software engineers and product managers are in high demand.

But really, people, there’s a good way to do this and a tacky way. For a chief executive to focus on the customers and not the people he’s laying off is insensitive at best.

At worst, it telegraphs the message that the tech industry can afford to be cavalier about jobs. Laid off? Get another one! If you’re lucky, it’ll be one where there’s a chef to cook you lunch every day or a policy for unlimited time off. Can’t get hired? Just start a company! Just make sure it’s one that delights its customers.

You have to wonder how PayPal’s customers in other parts of the world, where unemployment often floats well above the U.S.’s 7.8 percent nationwide average, feel about that kind of attitude.

Maybe they don’t care — many customers don’t pay that much attention to how a company conducts itself. But everything a company does reflects, subtly or not, on its brand. A move like this casts PayPal in exactly the same light as the banks and credit card companies it competes with: impersonal and concerned only with profits.

I submit that a better way to announce layoffs is with humility and with an acknowledgement that, somewhere along the line, the company and its executives screwed up. Let the responsible execs take a cut in pay, and make that part of the announcement. (I asked eBay if Marcus was taking a pay cut, but got no answer.) Apologize to those who lost their jobs, talk about how you’re helping them find their next gig, and thank them for their contribution.

Then talk about how you’re still committed to deliver amazing experiences to your customers.

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July 9-10, 2013
San Francisco, CA

Tickets On Sale Now

Who starts an announcement that he’s tossing 445 people’s jobs into the meat grinder with this kind of introduction?

“Delighting our customers every day with great, simple products and experiences is a priority for me, and for everyone at PayPal.”

PayPal chief executive David Marcus, that’s who.

A few short months after reporting $3.4 billion in revenue — a 23 percent increase — and nearly $700 million in revenue, almost half of it due to the surging PayPal division, eBay is axing 325 employees and 120 contractors from that very same unit.

The press release calls it a restructuring, which eBay says is necessary to simplify and speed up how products are developed. As part of that restructuring, Marcus says that PayPal has consolidated nine product groups into one and is refocusing teams around products, not projects.

I can only suppose those 470 people were in charge of slowing things down.

Interestingly, the laid-off personnel were primarily in product and technology roles, according to Marcus. PayPal, while growing, is in a major fight over who will control the future of digital payments with players such as Google, Square, and, potentially, Apple, as well as the credit card companies and other incumbents. You’d think technologists and product managers might come in handy for such a battle.

Job losses and layoffs are a fact of life in the corporate world. But it’s more than a little troubling to see a successful, profitable, growing company toss almost 500 people aside. And it’s more than a little annoying to see a press release detailing that jettison start with the word “delighting.”

The release ends with the obligatory ode to future corporate glory:

Moving forward, I’m confident these changes will make PayPal even better and stronger. Our customers can expect faster innovation and great products and experiences that make their lives simpler. That’s our commitment — every day.

For the former PayPal workers, it’s got to be wonderful to be told that your absence will make your company “better and stronger.” And if you’re a PayPal user, are you delighted?

Updated 3:25pm Pacific: We updated the number of workers losing their jobs to reflect the number in eBay’s press release.

via Business Insider

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July 9-10, 2013
San Francisco, CA

Tickets On Sale Now

Forget dine and dash. Try dash and dine.

A new iPhone application called Storific, launched Monday, provides hungry consumers with a mobile way to skip the hassle of in-restaurant ordering and waiting and instead find, order, and pay for food before pick-up or dine-in.

People can use Storific to check out menus, place orders, pay through a PayPal wallet, and get notified when orders are ready for pick up. The application also encourages sharing, includes a social tab for checking out friends’ orders, and integrates with Facebook.

The overall Storific experience has been fine-tuned for consumer convenience and is being marketed as a cross between mobile pay startup Square and social check-in service Foursquare. Storific also caters to small and local businesses by offering them a more affordable ordering option than the ones provided by juggernauts GrubHub and Seamless.

“The restaurant owner wastes a lot of time taking orders,” Storific CEO and founder Michael Cohen told VentureBeat. “We’ve worked with [restaurant owners] to completely remove the ordering process and give customers a chance to order ahead and not have to wait in line.”

Paris-based Storific, which first got its start with a web-based version of an ordering app in December 2010, works in roughly 80 locations in the U.S. and Europe. The company has an exclusive arrangement with PayPal, which means that all payments are processed by the eBay-owned payments provider. The partnership keeps costs down for participating businesses — PayPal charges them its standard transaction fees — and means that merchants will see app sales deposited in their PayPal accounts immediately.

Cohen believes the PayPal integration will make Storific an attractive choice for local merchants with small budgets. Restaurants don’t want to hand over their entire customer base to companies like GrubHub or Seamless, he said, because they’ll lose a hefty percentage of sales on commission fees.

“We are a new kind of ordering kiosk. It’s really targeted to be in place, in the store, and be promoted by every local business, because we only charge the PayPal fee,” Cohen said.

The application has promise, but it also has issues. It’s lunchtime, and I’m hungry, so I launch Storific and find a few places nearby accepting mobile orders. Great. But wait. I see a “Paused” icon listed next to a few venues and notice that I actually can’t order anything at all. What gives?

Storific allows participating restaurants to “pause” mobile orders when they’re inundated with business. That’s great for them, but it destroys the experience for me, the I-need-to-eat-right-now consumer who doesn’t want to play the refresh game and will just sacrifice convenience for immediate gratification.

But Cohen insists that local restaurants are excited about the service and that many new merchants have signed up to participate since the company went live with the app this morning. The more options, the more likely consumers will be to give the application a test run.

Storific has offices in Paris and Bordeaux. The startup has raised $300,000 in seed funding and is actively raising a Series A round to grow its U.S. presence.

July 9-10, 2013
San Francisco, CA

Tickets On Sale Now

VANCOUVER, British Columbia — Dave McClure is one of the most prominent angel investors in Silicon Valley — and possibly the world. His accelerator, 500 Startups, will fund its 500th company sometime this year. And no, in answer to “all the stupid questions,” 500 Startups will not shut its doors after reaching that number.

He may also take the prize for most F-bombs per sentence of any investor.

I caught up with McClure at the GROW 2012 conference in Vancouver yesterday and spent a few minutes asking him whatever popped into my head. Here’s the interview.

VentureBeat: What’s your favorite startup right now?

Dave McClure: Favorite startup right now that I’m not an investor in … if AngelList is considered a startup, that would be my favorite.

VentureBeat: Gotcha — I know you’ve got a passion for AngelList. I heard that today.

Dave McClure: Totally! Actually, full disclosure, I’m an advisor.

Favorite startup in our portfolio — all my children are beautiful [Laughs] — right now, recent favorite I would say probably Refer.ly. Danielle Morrill — I’m really psyched about what she’s doing. Some older ones that I love: MindSnacks, AppStack, Dulio, SendGrid.

VentureBeat: What’s the hottest space to invest in right now?

Dave McClure: [Laughs] That’s such a lame-ass fucking question.

VentureBeat: Yes, it is! [Laughs] But I’m still asking it.

Dave McClure: Hottest space that I think is interesting would be education, particularly like ages 3-10.

VentureBeat: Most clueless founder question you ever got?

Dave McClure: Oh, that’s like … that could be its own show!

Hmm … most clueless founder question … I don’t want to be too harsh, but understanding basic shit that’s on Venture Hacks or AngelList or something like that. There’s a lot of available information online … basic term sheet stuff or valuation.

VentureBeat: What are the three most important things for startups to get right?

Dave McClure: Customers, problem, and don’t spend too much time on it.

VentureBeat: Best investment ever?

Dave McClure: I think right now that looks like Wildfire, an investment I made when I was at Facebook Fund, and it looks like a 40-times or 50-times return … $350 million exit.

VentureBeat: The biggest cause of startup failure?

Dave McClure: Taking too long to ship or not listening to customers.

VentureBeat: What’s the startup you thought was stupid but ended up rocking?

Dave McClure: Boy, there’s a long list of fuck-ups I’ve made in not investing … stupid is kinda harsh … probably AirBnB, because they had the cereal box thing, and I’m just, like, I’m not getting it.

VentureBeat: You’re in Vancouver quite often. What’s the best thing about Vancouver?

Dave McClure: This view is fucking amazing … we’re looking out at Vancouver harbor right now, which is gorgeous, astonishing.

VentureBeat: What’s the thing that pisses you off most about the recent Twitter API changes?

Dave McClure: Ahh … haven’t been following it too closely and I don’t think it’s necessarily irrational … it’s just like they decided to make some relatively hardcore decisions on how their developer community operates, which is quite different from how it used to operate.

Understandably, I know a lot of people are pissed off, but understandably, I think they need to figure the business model also. Maybe not my choice, but … I get it.

VentureBeat: What’s the most important thing you learned when you were at PayPal?

Dave McClure: Offline anything is expensive. Online is much cheaper usually to do almost anything.

VentureBeat: What’s the one thing you want a do-over on?

Dave McClure: Last 20 years? [Laughs].

Ahh … probably the opportunity to invest in Fab, Uber, LivingSocial, AirBnb … all those I had very significant opportunities with the founders — at least most of those I know personally — and totally fucked that up. [Laughs]

Image credit: John Koetsier

It’s a little ironic that PayPal originally began life as a way to beam money between Palm Pilots, way back in the mists of dot-com time: 1998. For the past decade it’s been more known as the desktop payments company for buyers and sellers.

But with the massive move to mobile due to smartphones and tablets, PayPal has been forced to refocus.

Part of the company’s response was the elevation of Hill Ferguson, formerly leading the mobile team, to vice president of global product at PayPal. It’s a clear signal that mobile is the future of the company. Another was the acquisition of mobile payments company Card.io just last week.

Source: John Koetsier

Hill Ferguson

VentureBeat spoke to Ferguson at our recent MobileBeat conference.

“The great thing about mobile products is that it forces a simplification of the agenda in everything you do,” says Ferguson. “That’s true for our company as well.”

Ferguson looks at the facts: In 1990 the country had 100 million PCs. A decade later, and we’re at a billion … but we’ve got 10 billion mobile connected devices: smartphones, tablets, feature phones, other internet-connected gadgets for communication and music and business.

That means mobile comes first, and when you do mobile first it forces you to focus on the things your customers want most from you, Ferguson says. And that helps some companies who are not known for being simple: on the mobile web, simplicity is a sheer necessity.

That brings to mind, of course, one great disadvantage for PayPal: because the company owns none of the ecosystems on which mobile happens, payment is more challenging than for others. Google Play and Apple iTunes, for example, mean that those two giants can implement single-click purchasing.

“Our version is 2-click,” says Ferguson. “We don’t actually own the ecosystem like Google Play or Apple … we have 1 step of authenticating the user and then a step on confirming the payment.”

One click or two, PayPal is doing a lot of work to take what is mostly online offline: a partnership with Starbucks, and another with Home Depot, which enable users to buy coffee or countertops with their PayPal accounts. And PayPal Here, a Square competitor, has seen strong demand so far, says Ferguson.

“The heart of small business is with us, and they’ve been waiting for this product,” he says.

One real advantage for PayPal is that its global business has given it not only 100 million active users, but also good visibility into emerging market needs, as well as mature markets. In emerging markets the phone may be a person’s only computer, while in mature markets the smartphone has become the ultimately most personal computer.

“In Latin America and south-east Asia, you’re seeing smartphones starting to penetrate,” says Ferguson. “But feature phones are still big, and PayPal is used to top up cell phone minutes. And the behaviors of each are converging rapidly.”

Ferguson isn’t particularly worried about Square: Though that company can facilitate very personal commerce — put it on Bob’s bill — he says it is not going to work very well at Safeway.

And Apple and Google? Ferguson sees them as fantastic potential partners, doing highly complementary things.

“And,” he says, “if they want to complete, they have some assets to play that game.”

Image credit: John Koetsier

eBay met high expectations for its second quarter earnings today with revenue, net income, and user growth up double digits from last year.

The company reported a revenue of $3.4 billion, up 23% compared to the same period in 2011. eBay also brought in $692 million in net income, with share prices coming in at $.53 per share, up from the $.22 per share last year.

“This was eBay’s strongest quarter of year over year organic … growth since 2006,” said eBay CEO John Donahoe on the earnings call. “eBay is revitalized.”

PayPal was a major driver of this performance, reporting that its revenue increased 26% year over year to around $1.4 billion and 113.2 million active accounts. That’s nearly 42 percent of eBay’s overall revenue. eBay attributes this to the fact that PayPal now appears in more places on the website, and that buyers are using the “Bill Me Later” function more, which is based on PayPal. PayPal also announced today that it is rolling out a point-of-sale service for retailers to use in stores. In just over four weeks, Abercrombie & Fitch beta-tested and began rolling out PayPal at more than 900 locations across the U.S.

Mobile was a major contributor to the growth with 600,000 new customers making their first purchase through eBay’s mobile apps. PayPal Here, eBay’s answer to Square’s mobile payments dongle has also been doing well. PayPal Here is officially open to all markets for anyone interested in signing up. Though it doesn’t affect the second quarter, PayPal announced yesterday that it acquired Card.io, a mobile app that reads credit card information using a smartphone’s camera.

“Mobile is impacting a significant portion of eBay’s business,” said Donahoe. “Mobile shoppers and mobile payers are three to four times more valuable than Web only.”

Another factor is the recent partnership between PayPal and major Japanese venture capital firm Softbank to create “PayPal Japan.” This new focus on Japan is intended to help the adoption of e-payments in Asia, and hopefully grow small businesses in the region.

Despite analyst expectations of low profits this quarter, due to the issues engulfing Europe and a slow downing the Asian market, the outlook for eBay was high after eBay stock hit a five-year high in April. eBay has long been the world’s largest online marketplace, with millions of buyers and sellers operating through the website. eBay products and companies include eBay Marketplace, Media Marketplace, PayPal, Half.com, MicroPlace, Shopping.com, Rent.com, Stubhub and various online classifieds.

For its third quarter, eBay expected to bring up to $3.4 billion in revenue, and a diluted share estimate of $0.42 – $0.44 a share. For 2012 overall, the company expects revenue to sit between $13.8 billion to $14.1 billion.

I’m talking, of course, about PayPal, the “subsidiary” that now accounts for well over a third of eBay’s total revenue — and gaining.

Since the deal completed, PayPal has moved more than half a trillion dollars in payments and grown from 23 million regular users to over 110 million. VentureBeat spoke to PayPal’s senior director of global communications, Anuj Nayar, about the anniversary.

Source: eBay

PayPal revenue as a percentage of eBay revenue

“There’s very few of these acquisitions that are universally seen as a success story,” Nayar said. “But eBay buying PayPal was maybe the most successful acquisition in Silicon Valley history. PayPal now accounts for 38 percent of the total company’s revenue.”

The purchase price was $1.5 billion dollars, but not a penny was actually paid. Instead, the deal was a tax-free stock-for-stock exchange: .39 eBay shares for every PayPal share.

In return, PayPal has generated about $20 billion in revenue for eBay over the past decade. In fact, this year alone PayPal expects to process more than three times the initial purchase amount — $7 billion — in mobile payments alone.

There’s some irony there, as Nayar notes:

“In 1998 the original business model was to move money between two Palm Pilots … and the online payments was a side business.” Now, he says with a trace of humor, “the hot new thing is to use your mobile phone as a wallet.”

Source: Dipity.com

It all started on a Palm Pilot?

Money on a mobile device is essentially how PayPal began. And a recent re-organization by PayPal president David Marcus has refocused the company on mobile, putting former mobile chief Hill Ferguson in charge of all PayPal product groups.

It’s a needed change, says Nayar.

“The payments market is getting more and more competitive … every morning I check VentureBeat and there’s another digital wallet company starting up. We are definitely doubling down on accelerating innovation.”

Of course, it’s not just small startups challenging PayPal.

As we reported late in June, competitors include Facebook, Google, and Apple. None of those are competitors to be taken lightly. One owns the world’s largest social graph, and the other two have a stranglehold on the mobile devices that hundreds of millions of people currently  use … and billions more probably soon will.

Nayar knows PayPal is in for the fight of its life but likes the company’s chances.

“There’s a very different level of consumers buying in when you’re talking about your money. You need scale and you need trust.”

PayPal will need to grow both of these to have a future decade as successful as its past decade.

A brief history of PayPal:

• 1998: Peter Thiel and Max Levchin develop a service named PayPal as a secure way to beam money between Palm Pilots
• 1999: Nokia Ventures and Deutsche Bank “beam” Peter Thiel $4.5 million in venture funding from a Palm Pilot
• 2000: PayPal enables eBay payments
• 2001: PayPal goes public on the NASDAQ
• 2002: eBay acquires PayPal for $1.5 billion and begins to integrate PayPal into eBay
• 2004: PayPal launches its first API and introduces Web Services
• 2005: PayPal introduces micropayments
• 2010: PayPal launches the new Send Money application for mobile devices, processes $750 million in mobile payments
• 2011: PayPal processes $4 billion in mobile payment volume for the year
• 2012: PayPal partners with Home depot: can be used for payments at 2000 stores

Image credit: Sebastian Kaulitzki/ShutterStock

Facebook’s very quiet announcement last week that it is dropping Facebook Credits in favor of local currency pricing was likely the quietest declaration of war the world has seen. The notice, made on the company’s developer blog, means Facebook is taking on payments providers PayPal, Google Wallet, and, perhaps preemptively, Apple’s iTunes.

Plink co-founder Peter Vogel argues as much in an editorial he penned for TechCrunch this weekend, writing that he still expects “Facebook to become a dominant player in the Payments space, similar to a PayPal.” Steven Weiss at the Daily Beast opined about it a month ago, and super-angel Dave McClure predicted this as far back as 2010.

In fact, years ago, rumors of a Facebook “wallet” product preceded the launch of the Credits platform that is now being transformed into a full localized standard-currency payments platform.

What, you might ask, would Facebook need a localized standard-currency payments platform for?

Well, the stated reasons are in fact very good ones. In a post aimed at app developers, this is what Facebook is said:

… we hope to simplify the purchase experience, give you more flexibility, and make it easier to reach a global audience of Facebook users who want a way to pay for your apps and games in their local currency.

With local pricing, you will be able to set more granular and consistent prices for non-US users and price the same item differently on a market-by-market basis.

Those are great reasons. Pricing a game on Facebook at 10 credits costs an American about a buck, which might take the average person a few minutes to earn. But the same game costs someone in Mexico almost 14 pesos … which takes the average person a couple of hours to earn. Local currency pricing can reduce that discrepancy.

But other reasons likely exist as well.

Local currency pricing is essential if the company wants to go beyond the Facebook platform and offer payment functionality online around the web — and, potentially, offline everywhere we currently use cash or credit.

McClure believed it back in 2010, saying that “in 2015 the default login & payment method(s) on the web will be Facebook Connect, Google Gmail, or Apple iTunes.”

The login part has already happened, at least for Facebook and to some extent your Google account. The iTunes part may have received a significant boost a couple of weeks ago at Apple’s developer conference where Passbook was unveiled with wallet-lite capabilities, in conjunction with an Apple announcement that the company has 400 million customer accounts with credit cards.

As frequent VentureBeat contributor Rocky Agrawal pointed out, Apple’s Passbook is scary for PayPal, which has only 100 million customer accounts. But Facebook could be threatening for both PayPal and Apple. In his editorial, Vogel said, “Facebook is PayPal on steroids, with the strength of a billion members.”

That’s more than double the number of current iTunes paying customers.

Facebook, which doesn’t quite yet but soon will have a billion members, already has a leading position in the identity wars. As everyone who has ever had to show a driver’s license or punch in a PIN code when using a credit card can attest, identity is the key challenge in the payments space. And now Facebook is trading a proprietary, closed, and virtual currency — Facebook Credits — for real, actual, and local currencies.

Perhaps only Mark Zuckerberg knows where this is going, but my prediction is that the payments space is going to get much more interesting before it gets boring.

And that Facebook’s monetization options just grew significantly.

Image credit: Cash/ShutterStock, globe/ShutterStock, keyboard/ShutterStock

July 9-10, 2013
San Francisco, CA

Tickets On Sale Now

Shop at Home Depot stores and your home won’t be the only thing getting a renovation. The way you pay, thanks to an expanded partnership with payments provider PayPal, may never look the same.

In two weeks time, the home improvement chain will start accepting PayPal payments at all of its nearly 2,000 stores in the U.S., PayPal vice president of retail and prepaid products Don Kingsborough announced Tuesday.

The PayPal store checkout program, initially tested at a handful of Home Depot stores, allows consumers to pay with their PayPal accounts at checkout. PayPal account holders need only activate the feature online to begin paying via PayPal, using their mobile phone number and a pin number, when shopping at Home Depot stores (and soon other locations too). Shoppers are also issued a PayPal payment card (it looks similar to a credit card) that they can alternatively use.

PayPal, the payments subsidiary of e-commerce giant eBay, is helping its parent company evolve from an auction site into a commerce platform that caters to consumers hybrid online and offline shopping needs.

“We are a different eBay today, no longer just an e-commerce leader but a stronger, more diverse global commerce company shaping the future of shopping and payments,” eBay president and CEO John Donahoe said during eBay’s most recent earnings call. “We intend to make shopping more locally convenient and more globally accessible.”

PayPal closed out the fourth quarter of 2011 with 106.3 million active registered accounts.

“I believe that you’re going to see more change in how consumers shop and pay … in the next three years, than we’ve seen in the last 20 years,” eBay president and CEO John Donahoe said today at the Digital Life Design conference in Munich.

Donahoe, interviewed at DLD by Accel Europe partner Sonali De Rycker, added that 2012 will be an “inflection point in retail, shopping, and paying.”

Why is that? Consumers, he said, are blurring the line between offline and online shopping at a “stunningly fast” rate. For half the retail transactions last year, the consumer accessed the web at some point during the shopping experience, he explained. As a result, Donahoe said, some of the world’s largest retailers have asked eBay for help in competing in this “multichannel world,” as he calls it.

Donahoe talked extensively about eBay’s role as a friend to the retailer — criticizing Amazon’s competitive approach without specifically naming the company — and how through the acquisitions of GSI, RedLaser, and Milo, along with payments solution PayPal, eBay has transformed itself from an auction site to an open commerce platform (X.commerce). The auction side of eBay’s business, he added, now represents just 10 percent of the overall business.

“We’re enablers,” Donahoe said. “The real winners are going to be retailers … the retailers that adapt a multichannel shopping experience.”

Donahoe also reiterated statements made during eBay’s latest earning calls, saying that consumers, not retailers, are driving innovation in retail. The shift in the amount of money spent in the fourth quarter at physical stores to that spent via mobile devices was stunning, he said. “We’re providing mobile capabilities that consumers are grabbing … but the consumer is in charge here.”

eBay made $11 billion in revenue in 2011 and closed out the year with an especially strong fourth quarter thanks in no small part to its mobile applications. eBay’s mobile applications, Donahoe said, have been downloaded more than 65 million times and accounted for $5 billion in sales volume.

[Image via Hubert Burda Media/Flickr]

Disclosure: The Digital Life Design conference paid my way to Munich. VentureBeat’s coverage of the conference remains objective and independent.

Partnering with The Home Depot, PayPal tested its state-of-the-art Touchstone technology in over 51 store locations. Customers are able to pay by just entering their mobile number and PIN or swiping a PayPal credit card at checkout.

“We’ve reached a critical milestone in PayPal History,” said West Stringfellow, PayPal Emerging Opportunities in a press release from eBay. “The Home Depot is our first major stride in bringing the PayPal vision to life.”

PayPal’s expansion into the offline world could mean competition for Visa and MasterCard. Last year, the company boasted over 350 million users, which surpasses the number of credit card holders for both MasterCard and Visa respectively.

PayPal has additional plans to team up with ABJ Software and partner with other “large and mortar retailers” in the months ahead.

Photo via laihiu/Flickr

July 9-10, 2013
San Francisco, CA

Tickets On Sale Now

eBay’s chief executive John Donahoe has a plan to turn his company around — and it looks like it’s working.

eBay’s revenue rose 5 percent year over year in the fourth quarter, bolstered by increased holiday sales and strong growth in its transaction service PayPal.

The company raked in $2.5 billion in the fourth quarter last year, up from $2.4 billion in 2009. At the same time, eBay dramatically slashed its administrative costs by about 55 percent to $278 million. The company’s total operating expenses were down 21 percent while its marketing and development spending was still up — meaning the company just became more efficient compared to last year.

The company’s PayPal operations have continued very healthy growth, with revenue from PayPal jumping 22 percent to $971 million during the holiday season compared to $796 million during the fourth quarter last year. Transaction activity was up 26 percent to around $27 billion during the holiday season last year compared to the same quarter a year earlier. There were 94.4 million registered PayPal users at the end of the fourth quarter last year.

eBay began focusing on PayPal as its primary tool after Donahoe took the reigns in 2008. The company decided to copy Amazon’s online marketplace model with eBay’s “buy it now” option for most of its auctions in a move to stray a little further from its typical reliance on auctions activity.

As a result, its online auctions activity has stalled to an almost complete halt, growing only 3 percent in the fourth quarter this year compared to the same quarter a year earlier. Auctions activity still brought in a majority of eBay’s revenue, netting the company $1.5 billion.

eBay sold off its voice-over-Internet service Skype last year during the fourth quarter, leading to a write-down of around $1.8 billion. eBay still holds a 30 percent ownership of the voice service. Skype filed for an IPO in August this year. Excluding that write-down, eBay’s profit was up around 24 percent — although it seems like that was largely from Donahoe’s efforts to bring down costs rather than a dramatic increase in revenue.

[Photo: fsse8info]

July 9-10, 2013
San Francisco, CA

Tickets On Sale Now

For the first time in more than a year, eBay has not seen any significant revenue growth from its auctions. That has left PayPal, which continues to grow at a healthy rate, as the flagship revenue stream for the once-leading online auction site, according to its most recent earnings reports released today.

As online retailers like Amazon.com and others have emerged as the dominant force in online marketplaces, auctions have begun to lose some steam. Amazon passed eBay for the first time in raw traffic numbers in 2009, and it hasn’t looked back since. eBay — one of the original online auction and e-commerce sites — has since shifted its focus to its online payment system PayPal with a lot of success. Its revenue from PayPal was up 23 percent this year to $798 million compared to the same quarter last year, when it pulled in $650 million.

Meanwhile, eBay’s auction activities have slowed to a crawl. Revenue from its auction site — which charges a fee to let users post things they’d like to sell — was up a paltry 3 percent when compared to the same quarter last year, from $1.182 billion to $1.186 billion.

The turnaround in eBay’s strategy began when John Donahoe took the reigns in 2008. eBay decided to shift its focus to PayPal and to model Amazon’s online marketplace model with eBay’s “buy it now” option for most of its auctions.

The result? eBay’s net income was up 23 percent this year to about $432 million when compared to about $350 million in the same quarter last year, and its revenue has grown steadily for the past several quarters. It’s no surprise that eBay’s most recent income growth is directly in line with its PayPal operations.

Investors were pretty satisfied with the results. Shares of eBay were up 6.9 percent to $27.42 in extended trading today.

eBay has written off Voice-over-Internet communications provider Skype as a part of its assets — but that communications arm still brought in around $170 million in this same quarter last year. Skype filed for an IPO in August this year. That filing came after eBay finalized the sale of 70 percent of the company in November 2009 to an investment consortium led by Silver Lake Partners.

Scoreloop started on the iPhone, providing social features for iPhone games. But in a diversification move it is spreading to Android, which isn’t as mature as the iPhone. Google still hasn’t fixed payment problems on the Android Market, so developers have had to focus on making money from advertising on free apps, said Marc Gumpinger, chief executive of Scoreloop. The company already lets developers add ads to their games, and it is getting 100,000 new users per day on Android. But with this new method, developers can enable a secure payment system on their own. Users can buy virtual currency with real money to get virtual items in games.

The company, based in Munich, Germany, now provides every part of the equation for helping Android apps make money. It has its own discovery mechanisms for getting apps noticed through friend networks. And now it is adding PayPal and other ways to generate revenue from apps. Game developers no longer have to create their own merchant account to enable the secure payment system.

Hubert Sliwka, head of Gamesoul Studios, said PayPal is the best way to buy content inside games and that he is relieved Scoreloop is now taking care of everything.

Rivals include Aurora Feint and PapayaMobile. Scoreloop is getting more active on Android in part because Apple has made its own move to set up a social gaming network on the iPhone. But Scoreloop believes that Apple’s effort is complementary, as Apple is focused on the front-end interaction with consumers while Scoreloop focuses on the back-end infrastructure. Meanwhile, Google is leaving the territory wide open for companies like Scoreloop on Android.

Scoreloop says it has 200 million users of games that tap its software. The company was founded in 2008.

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