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1- PayPal internet   business models  text and cases Steven Young ELC498
Overview <ul><ul><li>PayPal: </li></ul></ul><ul><ul><li>Fue fundada en 1998, y comprada por </li></ul></ul><ul><ul><li>was...
Description of the Industry or market segment <ul><li>The market segment in which this business belongs according to our t...
Mission and Vision <ul><li>Paypal’s Mission is to “Build the web’s most convenient, secure, cost-effective payment solutio...
History <ul><li>The company, originally called Field Link, was founded by Max Levchin, an online security specialist, and ...
Relative Placement Within the Industry <ul><li>PayPal is the leading provider of payment services in the small business ma...
Management <ul><li>Matthew J. Bannick - Senior Vice President Mary M. Hentges - Vice President, Finance Alex E. Kazim - Vi...
Competition <ul><li>Western Union launched MoneyZap in 2000, which had a fee structure similar to PayPal </li></ul><ul><li...
Challenges faced by the Company <ul><li>PayPal may be considered as a bank in certain jurisdictions, and therefore may be ...
Value Proposition <ul><li>Offer innovative electronic payment system utilizing email, bank account information, credit car...
Measures of Success 1- Paypal has grown approximately 6 fold from 2001 to 2005 (projected to year end), currently represen...
Value Proposition 1- PayPal offers : • No monthly fees  • No setup fees  • No gateway fees
Value Proposition <ul><li>Free eBay and merchant tools. </li></ul><ul><li>Excellent functionality and antifraud systems at...
Analysis <ul><li>Economies of scale </li></ul><ul><li>High </li></ul><ul><li>Networks effects </li></ul><ul><li>Low for co...
GBF <ul><li>After identification of this need (both for customers and merchants) it was important to Get it Right Fast. </...
Questions for the Audience <ul><li>Would you as a customer feel more secure in paying for a product with a “regular” inter...
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Pay paljuguete

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  1. 1. 1- PayPal internet business models text and cases Steven Young ELC498
  2. 2. Overview <ul><ul><li>PayPal: </li></ul></ul><ul><ul><li>Fue fundada en 1998, y comprada por </li></ul></ul><ul><ul><li>was founded in 1998, and owned by the eBay Company since 2002 </li></ul></ul><ul><ul><li>Allows individuals or businesses to make or receive online payments. </li></ul></ul><ul><ul><li>Utilizes existing infrastructures such as bank accounts, credit, and debit cards along with security systems to enable secure and immediate electronic payments. </li></ul></ul><ul><ul><li>Is an alternative to “traditional” credit card transactions, and offers the assurance that third-party transactions allow. </li></ul></ul>1-
  3. 3. Description of the Industry or market segment <ul><li>The market segment in which this business belongs according to our text book is the Online Market Maker since it provides the “infrastructure to enable and enhance transactions” (Eisemann text), acting as intermediaries which serve multiple participants. </li></ul>1-
  4. 4. Mission and Vision <ul><li>Paypal’s Mission is to “Build the web’s most convenient, secure, cost-effective payment solution. </li></ul><ul><li>PayPal’s Vision is “To become a global standard for online payments.” </li></ul>1-
  5. 5. History <ul><li>The company, originally called Field Link, was founded by Max Levchin, an online security specialist, and Peter Thiel, a hedge fund manager in 1998. Levchin and Thiel joined forces, received $3 million in funding from the Nokia Corporation for this venture, which offered encryption software for handhelds. </li></ul><ul><li>Launched PayPal in October of 1999 with six employees. </li></ul><ul><li>Between January and August 2000, PayPal surged from 12,000 accounts to 2.7 million. </li></ul><ul><li>June 2000, PayPal introduced accounts for businesses. By the end of 2001, more than one-fifth of PayPal's 12.8 million accounts were business accounts. </li></ul><ul><li>July 2000 approximately 2 million eBay listings accepted PayPal payments, five times as many as BillPoint Inc., eBay's payment service. By the following October, PayPal was being used to pay for 25 percent of all eBay transactions. The company had grown to 500 employees who were processing over 120,000 transactions, worth in total about $6 million, every day. </li></ul><ul><li>In 2002 PayPal purchased by eBay, the operator of its main competitor, Billpoint for $1.5 billion in eBay stock, which gave eBay more control, and increased the profit made from each transaction from 7 to 10 percent. eBay subsequently closed its Billpoint operation, and announced that PayPal cease to be available for online gambling. EBay elected to let PayPal continue to operate in the area of online pornography, which unlike gambling, was legal. </li></ul><ul><li>In 2003, PayPal discontinued the offer of its services on adult-content websites, citing high fraud rates. By this time PayPal successfully addressed many of its customer service problems. </li></ul>1-
  6. 6. Relative Placement Within the Industry <ul><li>PayPal is the leading provider of payment services in the small business market. </li></ul>1-
  7. 7. Management <ul><li>Matthew J. Bannick - Senior Vice President Mary M. Hentges - Vice President, Finance Alex E. Kazim - Vice President, Marketing Scott Thompson - Senior Vice President, Chief Technical Officer Salvatore J. Giambanco - Vice President, Human Resources and Administration John D. Muller - Head of Legal Department Amy E. Rowe - Vice President, Production Ken A. Miller - Director Ryan D. Downs - Vice President, Operations </li></ul>1-
  8. 8. Competition <ul><li>Western Union launched MoneyZap in 2000, which had a fee structure similar to PayPal </li></ul><ul><li>Citibank, in partnership with AOL and Microsoft, introduced c2it. c2it charged higher fees than PayPal, at $2 per transaction, and was unable to cut into PayPal's customer base. </li></ul><ul><li>eBay had also attempted challenge PayPal with Billpoint Inc., but </li></ul><ul><li>By the end of 2001, PayPal was firmly in the lead of the online payments market, holding a 65 percent share market. </li></ul>1-
  9. 9. Challenges faced by the Company <ul><li>PayPal may be considered as a bank in certain jurisdictions, and therefore may be forced to configure its business activities accordingly. </li></ul><ul><li>Essential for PayPal to be in control of fraud problems to avoid negative security perception with customers. </li></ul><ul><li>Potential competing offerings by credit card companies may increase to get a piece of the PayPal pie. </li></ul><ul><li>Google getting into the fray with a yet-to-be-released product. </li></ul>1-
  10. 10. Value Proposition <ul><li>Offer innovative electronic payment system utilizing email, bank account information, credit card information, and a proprietary fraud protection system to facilitate ecommerce transactions. </li></ul>1-
  11. 11. Measures of Success 1- Paypal has grown approximately 6 fold from 2001 to 2005 (projected to year end), currently representing over $26B in total payment volume by over 87 Million users globally
  12. 12. Value Proposition 1- PayPal offers : • No monthly fees • No setup fees • No gateway fees
  13. 13. Value Proposition <ul><li>Free eBay and merchant tools. </li></ul><ul><li>Excellent functionality and antifraud systems at no extra cost, and only charging fees when transaction is completed, financial confidentiality is strictly maintained. </li></ul><ul><li>Facilitating repeat use by customers by retaining key information. </li></ul><ul><li>Providing documentation and tracking of transactions. </li></ul>1-
  14. 14. Analysis <ul><li>Economies of scale </li></ul><ul><li>High </li></ul><ul><li>Networks effects </li></ul><ul><li>Low for consumer, high for merchants </li></ul><ul><li>Customer acquisition costs (eBay </li></ul><ul><li>Low </li></ul><ul><li>Customer retention rate </li></ul><ul><li>High </li></ul>1-
  15. 15. GBF <ul><li>After identification of this need (both for customers and merchants) it was important to Get it Right Fast. </li></ul>1-
  16. 16. Questions for the Audience <ul><li>Would you as a customer feel more secure in paying for a product with a “regular” internet credit card transaction, or PayPal? </li></ul><ul><li>Do you feel that as a merchant, offering PayPal would increase sales? </li></ul><ul><li>Is fraud more or less common with PayPal or other forms of electronic money transaction? </li></ul><ul><li>Is is important for eBay to offer PayPal to its customers? </li></ul>1-

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