Braintree CEO, Bill Ready (left) and PayPal president David Marcus.

Published: September 30th, 2014

Online commerce soulmates eBay and PayPal are splitting in 2015 after a 12-year relationship, CEO John Donahoe has announced.

The news comes after a protracted battle with activist investor Charles Icahn over whether to spin off PayPal as an independent company, but Donahoe said that wasn’t a factor. With payment competitors like Apple Inc. looming on the horizon, Donahoe told the Wall Street Journal the company sees “the value of focus.”

PayPal was launched in 1999 and acquired by eBay for $1.5 billion in 2002, making the online payment service the default choice for users of the auction site. PayPal has more than 150 million users.

eBay stock rose on the announcement. Icahn called the announcement “responsible.” And eMarketer Inc. analyst Bryan Yeager said in an e-mail interview that the split positions PayPal well in an online sales market of which it holds almost a one-sixth share.

The break from eBay will provide more autonomy for PayPal as competition increases in the mobile payment space, particularly with Apple Pay and other emerging online wallet providers, according to Yeager.

eMarketer says the retail e-commerce market in the U.S. (excluding travel sales) was almost $265 billion in 2013, and the research firm projects it will reach $305 billion this year.

E-commerce is becoming increasingly mobile. eMarketer estimates that 16 per cent of e-commerce sales in the U.S.–$42 billion–came from tablets and mobile phones in 2013. eMarketer projects more than $58 billion in mobile sales for 2014.

Proximity payments–using a smart phone to make a physical, point-of-sale transaction–look to be the highest growth opportunity for anline sales. According to eMarketer, while mobile proximity payments will amount to $3.5 billion in 2014, that number will skyrocket to $118 billion by 2018. Today, the 16 million U.S. mobile proximity payment users spend about $220 each per year. eMarketer predicts 57 million users will spend more than $2,000 a year each in mobile proximity payments by 2018.



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