In the introductory “eBay is for winners” series post, we covered eBay’s latest balance sheet and their brand name business: the eBay.com marketplace.
Believe it or not, eBay.com may not be the e-commerce giant’s most valuable holdings. I believe that title goes to Paypal, eBay’s global online payment account. In less than 5 years, over 114 million customers opened a Paypal account along with 3 million firms deciding to do business as well. eBay.com when complemented with Paypal is an unstoppable force in the online business marketplace.
The force isn’t stopping anytime soon either. Paypal has surprised all naysayers with outstanding numbers:
- 44% Year over Year account growth
- 37% Year over Year payment volume growth
Last year alone, Paypal handled over $8.4 billion in online transactions. This number should double in two years assuming Paypal can sustain its current payment volume growth. $3.1 billion was transferred using Paypal in the 06 2nd quarter alone. The foreign Paypal bug is beginning to catch on in Asia where tremendous growth opportunities lie. Paypal plans to double its market expansion from 55 to 103 markets worldwide. Of these 103 markets, Paypal will support 10 additional currencies, raising the number of available currencies to 17 from 7.
This will reap big rewards in the future mainly because:
1. Paypal is expanding
Expansion into Asia (mainly India), South America, and southern Africa where multiple developing economies are located will build a stronger market share. Merchants and consumers will need a reliable, highly transferable payment account to handle transactions, foreign trade, and wages/salaries. Whereas Western Union only handles larger sums of money, Paypal is great for sending all sums of money, even just few dollars
2. Paypal can increase their lending activities
I expect to see more credit cards, debit cards, loans, and various banking services from Paypal in the future.
3. Paypal has launched mobile payments
Now customers can conduct transactions and send money on their mobile phone. By increasing the accessibility to your money, Paypal makes it easier for customers to spend, save, and send more money. More money translates into more transactions fees, thus increasing eBay’s top and bottom lines.
Lastly, I like eBay’s investment in Paypal is because there’s a more room to run. If you didn’t know already, I always try to invest for the long-term and to leave short-term trading to those speculative day traders. eBay is a solid long-term investment because all of their businesses have room to grow. As of 2005, eBay controlled 5% of the global e-commerce market. That leaves eBay the opportunity to pursue the other 95% of the global e-commerce market. I expect online shopping to grow because the rest of the world is beginning to catch on to America’s “I Want It Now” syndrome. The hype is only going to get bigger along with eBay’s profits.
While his background is mostly related to trading stocks, he recently gained interest in real estate crowdfunding with Fundrise.