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1

PayPal
2
Description of the Industry or market segment

• PayPal
• was founded in 1998, and owned by the eBay
  Company since 2002
• Allows individuals or businesses to make or
  receive online payments.
• Utilizes existing infrastructures such as bank
  accounts, credit, and debit cards along with
  security systems to enable secure and immediate
  electronic payments.
• Is an alternative to traditional credit card
  transactions, and offers the assurance that
  third-party transactions allow.

3
Mission and Vision

• Paypals Mission is to Build the webs most
  convenient, secure, cost-effective payment
  solution.
• PayPals Vision is To become a global standard
  for online payments.

4
History

• The company, originally called Field Link, was
  founded by Max Levchin, an online security
  specialist, and Peter Thiel, a hedge fund manager
  in 1998. Levchin and Thiel joined forces,
  received 3 million in funding from the Nokia
  Corporation for this venture, which offered
  encryption software for handhelds.
• Launched PayPal in October of 1999 with six
  employees.
• Between January and August 2000, PayPal surged
  from 12,000 accounts to 2.7 million.
• June 2000, PayPal introduced accounts for
  businesses. By the end of 2001, more than
  one-fifth of PayPal's 12.8 million accounts were
  business accounts.
• July 2000 approximately 2 million eBay listings
  accepted PayPal payments, five times as many as
  BillPoint Inc., eBay's payment service. By the
  following October, PayPal was being used to pay
  for 25 percent of all eBay transactions. The
  company had grown to 500 employees who were
  processing over 120,000 transactions, worth in
  total about 6 million, every day.
• In 2002 PayPal purchased by eBay, the operator of
  its main competitor, Billpoint for 1.5 billion
  in eBay stock, which gave eBay more control, and
  increased the profit made from each transaction
  from 7 to 10 percent. eBay subsequently closed
  its Billpoint operation, and announced that
  PayPal cease to be available for online gambling.
  EBay elected to let PayPal continue to operate
  in the area of online pornography, which unlike
  gambling, was legal.
• In 2003, PayPal discontinued the offer of its
  services on adult-content websites, citing high
  fraud rates. By this time PayPal successfully
  addressed many of its customer service problems.

5
Relative Placement Within the Industry

• PayPal is the leading provider of payment
  services in the small business market.

6
Management

• Matthew J. Bannick - Senior Vice PresidentMary
  M. Hentges - Vice President, FinanceAlex E.
  Kazim - Vice President, MarketingScott Thompson
  - Senior Vice President, Chief Technical
  OfficerSalvatore J. Giambanco - Vice President,
  Human Resources and AdministrationJohn D. Muller
  - Head of Legal DepartmentAmy E. Rowe - Vice
  President, ProductionKen A. Miller -
  DirectorRyan D. Downs - Vice President,
  Operations

7
Competition

• Western Union launched MoneyZap in 2000, which
  had a fee structure similar to PayPal
• Citibank, in partnership with AOL and Microsoft,
  introduced c2it. c2it charged higher fees than
  PayPal, at 2 per transaction, and was unable to
  cut into PayPal's customer base.
• eBay had also attempted challenge PayPal with
  Billpoint Inc., but
• By the end of 2001, PayPal was firmly in the lead
  of the online payments market, holding a 65
  percent share market.

8
Marketing Challenges faced by the Company

• PayPal may be considered as a bank in certain
  jurisdictions, and therefore may be forced to
  configure its business activities accordingly.
• Essential for PayPal to be in control of fraud
  problems to avoid negative security perception
  with customers.
• Potential competing offerings by credit card
  companies may increase to get a piece of the
  PayPal pie.
• Google getting into the fray with a
  yet-to-be-released product.

9
Technologies employed

• Innovative electronic payment system utilizing
  email, bank account information, credit card
  information, and a proprietary fraud protection
  system to facilitate ecommerce transactions.

10
Determination of relative success
Paypal has grown approximately 6 fold from 2001
to 2005 (projected to year end), currently
representing over 26M in total payment volume by
over 87 Million users globally
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Identify Value Bubble Components
Attracting (Building Traffic) Widely advertised
on eBay site and other channels, stressing
attractive features including No monthly fees
No setup fees No gateway fees
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Identify Value Bubble Components

• Engaging (Building Loyalty) by offering free
  eBay and merchant tools.
• Retaining (Strengthening the Relationship) by
  offering excellent functionality and antifraud
  systems at no extra cost, and only charging fees
  when transaction is completed, financial
  confidentiality is strictly maintained.
• Learning (Building the Database) facilitating
  repeat use by customers through retention of key
  information.
• Relating (Data-Driven Interactions) Facilitate
  documentation and tracking of transactions.

13
The Customerization model

• The company would not benefit in the way that a
  company with multiple goods and services
  offerings that could be specifically configured
  to an individual customer.

14
Questions for the Audience

• Would you as a customer feel more secure in
  paying for a product with a regular internet
  credit card transaction, or PayPal?
• Do you feel that as a merchant, offering PayPal
  would increase sales?
• Is fraud more or less common with PayPal or other
  forms of electronic money transaction?
• Is is important for eBay to offer PayPal to its
  customers?