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The future of PayPal was never about eBay, but when the popular payment service’s former parent ripped off the band aid on Wednesday, it sure hurt. Good morning, Aaron in for Adam on this Thursday morning of suffering PayPal stockholders.
The announcement, under the innocuous sounding headline “eBay to Intermediate Payments on its Marketplace Platform,” overshadowed the holiday quarter earnings reports from both companies. The auction site said Dutch payments processor Adyen would become its primary provider behind the scenes, replacing PayPal. PayPal will remain as an option for customers to pay, alongside a growing line up of alternatives, at least until July, 2023, eBay said. The end result should be more profits for eBay (“we can capture significantly better economics,” as CEO Devin Wenig put it) and its shares jumped 11% in premarket trading on Thursday.
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But alongside an earnings report with a somewhat disappointing 2018 forecast, the decision sent shares of PayPal down 6% (though that still leaves the stock price at about double where it stood a year ago).
For eBay users, the decision is a clear win. Sellers will see higher proceeds from sales as transaction fees drop. And buyers will have a wider choice of options on the new, more open eBay payments platform (bitcoin, anyone?). The company is still somewhat restricted in what it can offer in the financial realm under its original agreement with PayPal but that deal expires in June, 2020.
At PayPal, obviously it hurts to see a once dependable stream of revenue disappear. But eBay has been a decreasing part of the business since the company split off almost three years ago—transactions from the site represent only about 13% of PayPal’s total volume, down from about 21% at the time of the spinoff. That will drop to 4% over the next few years, CEO Dan Schulman noted on call with analysts, saying eBay’s decision was long anticipated at PayPal. Customers choosing to pay with PayPal, the part of the eBay business that remains, is far more profitable than the backend processing volume that is moving to Adyen, he argued.
How much the move hurts PayPal over the long term is up for debate. Adyen becomes a more serious competitor for processing business as it gains scale. And eBay could have renewed the original five year agreement instead of letting it expire in 2020, as it now plans. But PayPal owns fast-growing payments app Venmo and has been cutting deals to provide payments services to more retailers so it still has plenty of other growth opportunities. They’re just not top of mind for investors today.
Head spinning. It was a very busy day for tech companies on Wall Street, with earnings reports galore. One way to measure the impact was in the stock prices of the companies that reported. Not a lot of big moves. In premarket trading on Thursday morning:
- Facebook: +2%
- Microsoft: -1%
- AT&T: +4%
- Qualcomm: -1%
- Alibaba: -4%
Want more detail on the results? Facebook’s revenue jumped 47% to almost $13 billion, beating analyst expectations. Microsoft said its fiscal second quarter revenue grew 12% to $28.92 billion, also beating analyst expectations. AT&T added 2.2 million new U.S. customers and forecast adjusted earnings per share this year of $3.50, better than Wall Street expected. Qualcomm’s revenue rose just 1% to $6.1 billion as its feud with Apple continued to hurt. At Alibaba, revenue grew 56% to $13.2 billion.
Dasvidaniya. Twitter said 1.4 million people in the U.S. interacted with Russian-linked accounts spreading propaganda during the 2016 election, more than double the number of users the site initially notified last week.
Up, up, and away. Google knows a lot about what’s happening with air flights. Now it’s adding some of that intelligence to its Flights app, including predictions of which future flights will be delayed.
Gumby phone. After four years of rumors, prototypes and leaks, Samsung confirmed on Wednesday that it will finally bring out some phones with bendable and folding screens this year. The technology could allow ordinary-sized phones to include displays 7 inches or larger.
Fading away. After the New York Times blew the lid off fake Twitter followers linked to the firm Devumi this week, more than a million of the non-existent social creations have disappeared. Singer Clay Aiken, actor John Leguizamo, and reality TV star Lisa Rinna are among the celebs whose Twitter follower counts have plunged.
FOOD FOR THOUGHT
Bitcoin just finished its worst month in several year, but what’s behind all the price volatility? It may be more than just the ebb and flow of market demand, according to New York Times reporter Nathaniel Popper. A currency exchange called Bitfinex issued its own digital coin, Tether, that has been used to make large and possibly suspicious purchases of bitcoin and other cryptocurrencies, Popper reports:
In recent months, however, many investors have been raising alarm bells about Tether. Hundreds of millions of dollars worth of new Tether were created; almost always when the prices of other virtual currencies were heading down. The Tether were used on the Bitfinex exchange to make big purchases of Bitcoin and other tokens, helping push their prices back up, according to multiple analyses of data from Bitfinex. “This became more and more concerning, because every time the markets went down, you have seen the same thing happen,” said Joey Krug, the co-chief investment officer at Pantera Capital, which runs several virtual currency hedge funds. “It could mean that a lot of the rally over December and January might not have been real.”
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People Spend Less Time on Facebook After News Feed Changes By Tom Huddleston Jr.
Symantec CEO: Cybercrime Shows No Signs of Slowing Down By Susie Gharib
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Commentary: This New Technology Will Crack the Blockchain Like an Egg By Natalie Fratto
BEFORE YOU GO
I was in overcast Seattle on Wednesday morning when the super moon eclipse was happening and thus saw nothing but a blurry, bright circle behind clouds. But there are plenty of beautiful pictures around the web, and TIME has a great compilation.