PayPal will be bigger than eBay.com, CEO says

PASADENA, Calif.--PayPal is just over a third of eBay's revenue at the moment, but the online payment service will ultimately be bigger than the company's flagship e-commerce site, its chief executive said Thursday.

"PayPal is a business that will be bigger than eBay," CEO John Donahoe said in a talk at the Fortune Brainstorm: Tech conference here. However, he said that shift will take four to six years.

eBay CEO John Donahoe speaks at Fortune's Brainstorm: Tech conference on Thursday

(Credit: Ina Fried/CNET)

Donahoe's comments came just as the company announced that it is opening up its PayPal platform to third-party developers. "There is this opportunity for an explosion of growth."

Among the uses, Donahoe said we are not that far off from the day where a restaurant beams a bill to your mobile device and you pay via PayPal.

Asked about Facebook's long-rumored payment service, Donahoe noted that online payments require a company to be part financial services outfit and part Internet concern. Those that have been one, but not the other, have failed, he said.

"People will find a much better solution building on top of the PayPal platform," he said.

Donahoe, who has been CEO about 15 months, said the company is a leader that is adjusting to shifts in the market. "We're making the tough changes we need to make," he said. "We need to evolve on an auctions site to an e-commerce site."

There is plenty of room for e-commerce to grow, Donahoe said, noting that only 5 percent of sales are online as compared to in stores. That could eventually grow fourfold, he said. "What portion of everything you buy will you ultimately buy online?" Donahoe said.

He said eBay has already come a long way. "We still get referred to as an online auctioneer, but we have moved way beyond that.

Right now, eBay gets about half its money from eBay.com, with half of that auction-based sales and half from fixed-price sales.

As for the core auction business, eBay plans to announce a number of changes next week. Among those, Donahoe said that the company will expand the "eBay Bucks" loyalty program it has been piloting as well as offering telephone support to more buyers.

Given that PayPal may eventually eclipse eBay.com in sales, moderator Adam Lashinsky asked if the company should change its name.

"That's the least thing I worry about," Donahoe said. "We'll probably hire some big fancy consultant who will give us some strange name," he quipped.

Corrected at 2:31 p.m. PDT: The last name of eBay's CEO was misspelled. His name is John Donahoe.

[eg6motion]

They keep raising their fees and it def will get bigger... that or another site will emerge with more reasonable listing fees.

[Renegade Knight]

Bingo. I've been dusting off the ol' checkbook and thanked for it. Entirely because of fee's.

[lightningrob]

Me want pay with cell phone. Me no like pennies.

[Renegade Knight]

"He said eBay has already come a long way. "We still get referred to as an online auctioneer, but we have moved way beyond that. "

True enough. It's hard to find an actual acution anymore on the auction site. It's like trying to watch a video on MTV.

[magglord]

paypal is a ripp-off company anyway....... read the fine print

[krosafcheg]

Here's a real Wharton thought on eBay sucking - you made it bloated! Go login and deal with the ads and the clunky interface. The user to user interference, 52 spam email from eBay itself, I mean really, who wants to deal with this? People have slowly but surely been fed up with the clusterF, the rate increases and have went elsewhere. Personally, I dumped eBay after the ads and revamped interface and went to Craigslist. I predict two things - Google killing them with payments and someone burying eBay, just like myspace fell asleep at the wheel with Facebook peddling right next to them. The same idiots doing mortgage bundling are cut from the same cloth of these bozo's now running eBay.

[Bob_Taylor_ATL]

I find it so refreshing to read when people speak their minds! I'll ditto krosafcheg's sentiments with perhaps a little sugar coating... To the big execs at all these BigCo's who are paying themselves big compensation and think they can keep their small business and consumer customers satisfied despite their big ego backed incompetence.... keep up the good work! The arrogance of market leading technology and transaction services providers today is appalling, but right in line with their lack of understanding or care for their customer's needs.

The beauty in economic models is elasticity of demand. No matter how great a technology or service you have managed to get your management hands on, there will be smaller, leaner businesses who will come in and provide the same service(s), at a lower price, and with customer care. While the eBay execs are evolving from an auction service to an e-commerce business, my recommendation to it's shareholders is simply, beware. The fact that your executives must manage your company to maximize (your) shareholder wealth first and foremost, is your systemic risk. The BigCo publicly owned business model is broken. It's fat, slow, and non customer centric.

I once saw a CEO poll (large companies) that put customer needs and satisfaction at an average of #7 on their (CEO's) priority lists. That didn't astound me, rather it helped to confirm that these guys have a lot more to worry about with the big bucks they get paid, than us little ole customers. Technology is cheap now fellas (and fellow lady execs), and you may not have many customers left by the time you get around to making us a priority.

[windooor7]

ebay is becoming very expensive. ebay account is like having a phone bill. wether you sell or not some how you end up paying. Amazon is home! but they need to reduce the restrictions of what can be sold . good is goods.

[thefilebunch]

eBay died several years ago. It is just another e-commerce site and there are many more that are better. PayPal will die a similar death. magglord said it best; read the fine print. It is a terrible service.

[joninmass]

Paypal sucks, they restrict your account for no reason and then they want you to fax them your life story. One of my friends did a transfer from her friends paypal account to another friends paypal account and then next thing you know,,, bang!! both accounts were restricted!! Die Paypal,, youre going down.

[horsemama]

How laughable. I have no doubt at all that Paypal will one day be bigger than eBay but it will be because eBay's business fell off, not because Paypal's grew. Donahoe is doing everything he can to kill eBay. Odd how he is announcing its upcoming demise under the guise of foreseeing Paypal outgrowing it.

I've been boycotting for almost a year and a half now. Along with thousands of other sellers-who-were-also-buyers that Donahoe ran off last year.

How loud is that noise now, John-boy?

[joninmass]

look up paypalsucks.com. Youll see stories from peopke who had lawsuits and bad experiences from paypal.