Ebay has purchased the online payment services company PayPal for a reported $1.5 billion USD. The purchase was made using stock swaps based on the July 5, 2002 value of PayPal’s stock and is still subject to the stockholder approval and the regulators.
While the acquisition appears to solidify Ebay’s online services, it also presents a problem with respect to the amount charged for transaction fees as well as the quality of service. Until now, Ebay was forced to advertise its BillPoint system heavily even providing direct links on its web pages once an auction had been completed.
Currently PayPal has 16 million subscribers and is by and far the largest player in the game. Other companies such as BidPay and even Ebay’s own BillPoint system are hard pressed to match the ease of use and the tools which PayPal offers to its customers. Paypal clearly had taken a lead in the online world and looked like it would continue to dominate the market if it were not for its legal problems with users claiming lack of resolution and attention on the part of PayPal.
While it is not likely that the problems will disappear, it is apparent that Ebay’s greater funding and staffing may in the long term help to minimize the legal problems or even bring resolution to them.