Paypal and the speed of change

Escrito el 29 Junio 2006 por Ricardo Pérez Garrido en English, Internet

eBay is not the only Internet company facing strong competition from Google. But today everyone will be talking about them. The rumors about an online payment service -Chekout- to be released today have been everywhere for days now, and today we will see a number of analysis, of all sorts, related to the effect that this move will have on the current winner in this field, PayPal, and its parent company, eBay.

The first impact has been a 5% drop in the stock price of eBay yesterday. The second one has been the immediate creation of “momentum” around the opening act of this new service. The name of the game is again trust: is it enough to trust a company with your information search needs to give them also an insight on what you buy over the net?

For PayPal, running fast its integration with Yahoo and at the same time with Skype/eBay is the preferred path to face the push by Google. The ability to link their adwords system with payment using a centralized system can be crucial. And again, the value of “having all your info on one single container” should give the customer some rewards. But this is a service with a couple of customers, the buyer and the seller, so besides better search and advertising experiences, Google provides focused marketing, and adds a revenue stream related to transactions of goods, not ads.

Experiments from other companies offering to have all your transaction data in one single point come immediately to mind. In this case the “don’t be evil” motto could be helpful, but the privacy issues that some services, like Gmail, have raised before will surely return. The ability to combine offers fast, and get the customer’s attention towards your offer is still the key, also in this market. The difference might be the speed of change. MySpace or YouTube are examples of how many users’ needs are untapped, and how fast word-of-mouth works these days. The problem comes when trying to find a revenue stream. Google is betting, as they did before, on charging not the final customer, but the other side of the equation. They will be fighting against a service that has gained name, reputation and trust using the same “hey, this really works”, approach. And now a community of information seekers might be changed into a community of buyers and sellers. Or they will just have to decide what is the most convenient way to do what they already do with different tools. YouTube and Flickr took a marginal activity to the mainstream, at these speed, maybe we will se social commerce evolve and expand faster than eBay, I mean, faster than before.


David Standen 30 Noviembre 2006 - 12:54

Slightly off the subject, this raises what to me is one of the most interesting aspects of the internet. Namely, the fact that the internet responds more quickly to market demands than do businesses. Look at PayPal for example. Why the amazing success? Ok, sure, it’s an easy way to safely purchase things online. But is that all? Certainly not. Not an ex-pat like myself, PayPal offers a service that the large international banks still fail to provide for their customers: the quick, inexpensive, and userfriendly platform to transfer money internationally.

Now why did it take PayPal to offer us this service? Clearly CitiBank or HSBC or Credit Swiss, etc. should have thought of this sooner? In fact, wouldn’t we be more comfortable having this service offered through our own bank? Persnally, I’d be willing to transfer my bank account to an institution offering this kind of “international” character. However, banks, even the large ones, are still international in name only.

I have been a client of HSBC in the UK for many years. I don’t use the account very much, but it does have a balance. If I went down the street to an HSBC office in Madrid to withdraw money, I’d be refused. My account is in the UK, not Spain. I therefore, have no access to my money. I have to make an international bank transfer, regardless of the fact that i’m a client. In other words, HSBC (or any other bank for that matter) is international FOR THEM, the corporation, but not FOR ME, the client.

PayPal however, reacted to the CUSTOMER need, by creating a platform that practically ignores political boarders (from a client point of view). The process of sending money to someone in the US or UK is virtually the same as sending money down the street to someone in Spain.

Now this is only one example, but this trend can be seen all over the internet. Apple Computers is now selling more music than most retailers and the list goes on.

In the past, we used to look at market leaders to see what they were doing to meet customer needs and demands. We used to try to “follow” the marketing trends of Fortune 500 companies and/or pay huge sums of money for comsumer reports. These days, our time may very well be better spent haveing a browse around the internet. As the internet appears to identify and react to the market years before the corporations even understands that there’s an issue.

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