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EBay pins hope on local services to drive mobile growth

By
October 17, 2013

Mobile-enabled local services played a bigger role in the mobile strategies of eBay and PayPal during the third quarter and will be a big focus for the company heading into the holidays and next year.

The growing focus on local services was one of the key takeaways from yesterday’s eBay conference call with analysts to discuss the company’s third quarter results. An EBay executive said the company is focusing on innovating in local with new experiences such as its same-day delivery service eBay Now or buy online and pick up in store while PayPal has introduced check-in and order ahead capabilities at many retail locations via its mobile app.

“EBay continued to see strong growth in mobile with 2.4 million new users acquired through mobile in Q3,” said John Donahoe, CEO of eBay, San Jose, CA.

“EBay also continued to innovate in local with expanded coverage of eBay Now in the San Francisco Bay area and in New York,” he said.

“And in time for the holidays, eBay Now plans to launch in Chicago and Dallas and will go global in 2014 with a planned launch in London.”

Mobile and local
Mobile enables both ecommerce sales via eBay’s roster of applications as well as payments via PayPal’s multitude of mobile offerings.

Mobile continues to be a driving force for eBay, which saw a 75 percent increase in mobile-enabled commerce volume during the third quarter.

EBay reiterated its prediction that its total mobile commerce volume for the year will be $20 billion while PayPal’s total mobile payments volume will also be $20 billion.

Local services and other mobile offerings are helping the company attract new customers, with 36 percent of new customers for the both PayPal and eBay Marketplaces in the third quarter acquired via mobile.

Overall, PayPal’s payment volume grew 25 percent in the quarter for a total of $44 billion. PayPal gained 5 million active registered accounts and ended the quarter with 137 million, up 17 percent.

Growing competition
Key developments from PayPal in the third quarter include the launch of a revamped consumer app for iOS and Android, giving users in the U.S. and Australia order-ahead and pay-at-table capabilities. The app also now enables users in the U.S., Britain, Canada and Australia to check-in and pay with the PayPal digital wallet at thousands of retail locations.

Overall, EBay’s revenue for the third quarter increased 14 percent to $3.9 billion while  total commerce volume grew 21 percent for a total of $52 billion.

Local services is one way PayPal is trying to differentiate itself as competition grows in the payments space.

PayPal faces growing competition on a number of fronts, including from Amazon, which recently launched its Login and Pay service that will enable customers to pay for purchases on other retailers’ ecommerce sites using their Amazon account information.

Despite Amazon’s significant customer file, PayPal has been in this space for a lot longer and is well trusted by customers . Also, retailers are wary of Amazon, which they see as a competitor.

Broader reach
Amazon and eBay are competing on other fronts as well, with eBay recently announcing it will offer free two-day shipping to customers of Levis, Aeropostale and Sports Authority.

Competition is also growing in the proximity payments space, where PayPal, Google, Isis, Square and others are all trying to gain a foothold in what is expected to be a significantly large market for consumers using their mobile phones to pay for in-store purchases. More established payments players such as retailers and banks are also ramping up their mobile payments offerings.

PayPal continues to broaden its reach as it looks to shore up its position in mobile payments.

For example, PayPal recently got behind QR codes as authentication method for in-store payments made via its mobile application (see story).  

Last month, PayPal introduced a new Bluetooth device called the PayPal Beacon that will allow consumers to check in at stores and pay for purchases without even touching their phone (see story).  

In September, eBay also announced plans to acquire payment platform Braintree, which powers payments for leading mobile apps such as Uber, OpenTable and Airbnb as well as bringing innovative mobile technology such as the Venmo person-to-person payments app (see story).  

The payments company also continues to push into mobile POS for restaurants and small businesses.

Overall, mobile payments have not grown as quickly as expected this year, in part because there is growing competition and no clear winners yet, making it confusing for both retailers and consumers to pick a solution.

For example, in June Gartner revised its forecast downward for mobile payments volume by more than 40 percent.

PayPal is hoping for a big boost from the upcoming Thanksgiving holiday weekend. Last year, PayPal saw a 193 percent increase in mobile payment volume on Black Friday while eBay saw a 153 percent increase in mobile commerce volume.

“PayPal is well established in eCommerce and eBay’s recent acquisition of Braintree will help reinforce PayPal’s position in mCommerce,” said Denée Carrington, a senior analyst at Forrester Research, Cambridge, MA. “Not only does PayPal have a sizable head start over Amazon with mCommerce merchant adoption, but many merchants view Amazon with a wary eye.

“So Amazon has an uphill battle to convince merchants that using the Amazon Login and Pay service is in that merchant’s best interest,” she said.

“PayPal is better positioned to take advantage of the growth in mobile payments.  Although the majority of mobile payments today is mCommerce, the greatest growth will be in proximity or in-store payments, a space Amazon has not yet entered and one where PayPal is investing significantly to improve their wallet experience and coverage.”

Final Take
Chantal Tode is associate editor on Mobile Commerce Daily, New York

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