Many analysts were all but cackling over the recent exchange of blows between eBay and Google. It can be funny to see two large companies acting like a pair of schoolyard bullies to each other. But this isn’t elementary school, it’s business -- and warrants closer examination.
It was pretty amazing, first to see eBay get all huffy about Google trying to steal its thunder by holding a party in the same town at the same time, and second to see Google blink in response to what eBay did about it. But there’s a lot more going on here; this rivalry has a long history, so to understand the current moves, we need to take a closer look and even go back in time. As you’ll see, if eBay and Google were two people instead of two e-commerce companies, a psychologist might go crazy trying to figure them out.
To start with, let’s go all the way back to 2002. Relatively new search engine Google was cool then, but barely a contender when compared to its current position in the market. Online auction site eBay, on the other hand, was already known as the place to go for, well, just about anything; people called it the world’s biggest garage sale, for a good reason. The only problem was that most garage sales only take cash; how do you pay for something online when the seller can’t accept credit cards?
At that point, there were a number of online payment services ready and waiting to fill in the gap. The most prominent was PayPal, but eBay came late to the game with its own, which it tried to promote. It couldn’t forbid its customers from using PayPal because too many customers were using it already. By 2002 eBay finally took to heart the old saying “If you can’t beat them, buy them,” and purchased PayPal, quietly retiring its own online payment service.
Let’s take a quick look at eBay and PayPal today, because you’ll need to understand the latter’s importance to the former to get the most out of this trip down memory lane. PayPal now boasts 143 million user accounts throughout the world -- there are still some countries in which you can’t use PayPal, but not very many, and I wouldn’t be surprised if plans to bring those countries into the fold are solidly in the works. PayPal brought in $1.4 billion in revenue for eBay last year, making up more than 20 percent of the $6 billion the online auction giant made in 2006.
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