Why the Smart Money is On PayPal

Of all of the titans of the Web industry right now, few have put themselves in as enviable a position as PayPal.

Apple has skyrocketing stock values and two of the hottestselling products ever made. Google and Facebook have more website visitors than most countries have citizens — not to mention all of their personal data. And Amazon has set the bar so high in e-commerce that it controls much of the movement throughout the industry.

The same was true for e-commerce pioneer eBay just a few years back, but its auction marketplace has been gradually fading into the background of the company’s operations. Enter PayPal, the online payments service purchased by eBay in 2002 — and which is rapidly becoming its most lucrative property. In fact, each of the aforementioned companies are either forging new relationships with PayPal or sweating the possibility of competing with it in the future.

In the third quarter of 2010, PayPal accounted for 37 percent of eBay’s overall revenue, compared with 23 percent five years ago. PayPal’s revenues have increased 22 percent in the last year while the revenues from eBay’s retail operations have increased by just 3 percent. With mobile payments on the verge of erupting into a multibillion dollar industry in the next few years, analysts predict that PayPal’s revenues will overtake those from eBay’s marketplace by 2014.

The good news for the rest of the commercial Web is that PayPal is a highly accessible partner for anyone who operates an online business. The company recently announced a handful of new products in the mobile and payments spaces that opportunistic Web professionals should consider:

• PayPal for Digital Goods — a micropayments solution that lets consumers pay for digital goods such as games, music and videos in as little as two clicks, without ever having to leave a publisher’s site. The new solution will be integrated by Facebook to make PayPal the social network’s new digital goods payment method, offering users the fastest, safest and most cost-effective solution for sending and receiving micropayments of under $12. Other companies signed on to use PayPal to monetize the growing opportunity in digital goods include Justin.tv, Ustream, FT.com, Autosport.com, Ooyala, Plimus and Tagged.

• Mobile Express Checkout — A mobile payments system that will initially be available on Apple’s iPhone. Mobile Express Checkout will work across apps and eventually across platforms. Merchant partners such as Starbucks have reported doubledigit sales growth on their mobile stores since adding the feature in beta testing, and PayPal says the product is easy to use for existing merchants who currently use Express Checkout on their Web stores.

• Titanium+Commerce — In partnership with Appcelerator — the makers of the cross-platform mobile development tool, Titanium — Pay- Pal launched this mobile commerce product in the beta development stage at its PayPal X Conference in the fall. It is a developer toolkit that will allow merchants to build cross-platform apps with assorted mobile commerce features that can hook directly into PayPal for payment and processing.

• Mobile Payments Library — A new functionality targeting subscription businesses that will enable preapproved, chain and split mobile payments to be processed through PayPal accounts.

• Mobile Location for iOS — A mobile app that uses geo-location technology to help users find businesses that accept PayPal for payments. The participating merchants can send consumers daily deals, coupons and other promotions through their phones. Initially, the app will have support for the iPhone, but Android and Blackberry support is forthcoming.

• T-commerce—The “T” stands for television — that’s right, television commerce. This product is under development, but the idea is to give consumers access to their digital wallets through a Buy button on their TV remote controls so that they can buy product they see on Internet-connected television. Stay tuned. As some of the most influential companies on the Web are realizing, PayPal is a partner worth having right now.

About the Author: Linc Wonham is Website Magazine's associate editor.