Original URL: http://www.theregister.co.uk/2012/07/18/ebay_paypal/

PayPal is bleeding market share and it's all eBay's fault

Hands up who knows what X.commerce is... yes, that's why

By Matt Asay

Posted in Business, 18th July 2012 09:30 GMT

Open ... and Shut Six years ago, PayPal could claim a 91 per cent market share in the US. Today it's struggling to claim long-term relevance in the surging online payments market, the market it helped to create.

The problem isn't really a matter of functionality, it's a matter of focus and being able to sell its new services clearly and concisely. eBay can salvage its payment biz's dominance, provided it can end the confusion over PayPal and its associated X.commerce platform.

In 2007 PayPal's website proclaimed its goal to "enable any individual or business with an email address to securely, easily and quickly send and receive payments online". By 2010, the eBay subsidiary's mission hadn't changed much: "PayPal is the faster, safer way to pay and get paid online." In 2012, it remains the same.

Unfortunately, that consistent message hasn't kept pace with disruptive competitors, as Pando Daily's Sarah Lacy writes:

PayPal has been suddenly outdone on almost all fronts: Peer-to-peer payments, servicing both companies with high-touch service needs who are better off with Braintree and developer-driven startups who fall for Stripe. And thanks to years of not having to try, it’s unclear whether [PayPal] could reverse it even if they agreed.

Lacy posits that PayPal is soon to implode for three reasons.

First, it is tied to eBay, and eBay's relevance has faded. Second, PayPal has coasted too long in the absence of real competition. And third, the company is suddenly being hit on all sides by serious competitors like Square, Braintree, and Stripe, each of which makes payments much easier than PayPal, albeit for different crowds and in different ways.

Lacy's analysis feels about right, but one thing she doesn't call out is the potential for eBay's X.commerce platform, of which PayPal is an integral part.

X.commerce - comprised of eBay assets PayPal, Magento, and GSI Commerce - promises to "bring together a comprehensive set of commerce-related capabilities and solutions to help business of all sizes, compete and grow".

I've been briefed on X.commerce, and think it has a serious chance to help eBay compete head-to-head with Amazon while fending off payment-point solutions like Stripe. But this isn't going to happen while eBay continues to struggle to clearly define exactly what X.commerce is.

At present, it's defined very broadly as an all-encompassing commerce platform. That's fine, but it's so broad that it almost sounds like how Dr Seuss' Lorax describes a Thneed:

A Thneed's a Fine-Something-That-All-People-Need!

It's a shirt. It's a sock. It's a glove. It's a hat.

But it has OTHER uses. Yes, far beyond that.

You can use it for carpets. For pillows! For sheets!

Or curtains! Or covers for bicycle seats!

It doesn't get much better when Matthew Mengerink, X.commerce's chief, calls the platform "a sort of e-commerce operating system". It's not an OS at all, and using that metaphor doesn't help to elucidate what developers are supposed to do with X.commerce.

The real magic in X.commerce, at least in the short term, is helping offline retailers easily do business online, complementing eBay and subsidiary PayPal's ability to facilitate online businesses.

Retailers, online and offline, are scared to death of Amazon and its stranglehold on e-commerce. By providing an end-to-end commerce solution that helps all vendors do business online and offline, eBay's X.commerce can be quite disruptive to Amazon's grip.

Its marketing messaging, however, needs to be simplified and clarified.

The current messaging is clearly losing would-be customers, as Square is eating PayPal's lunch offline with the "cool kids" crowd. It's simply miles ahead of PayPal in terms of ease of use. That said, PayPal's brand recognition, for better and worse, gives eBay a lot of runway to take on Square with its Square knock-off, PayPal Here.

It's also losing to Braintree with developers. As with Square, Braintree's magic is largely in how easy it is to use.

But, again, these losses are reversible, and largely depend upon eBay marketing X.commerce much more effectively. Chances are you've never heard of this initiative. If you have, the chances are even slimmer that you actually know what you're supposed to do with it. At its founding, X.commerce had a builtin audience of nearly 800,000 programmers, derived from counting eBay, Magento, and PayPal developers.

It's a good start, but anaemic compared to the number of businesses, and the developers who serve them, that would want an easy-to-use platform that gave them the easy ability to do business online and offline, seamlessly.

This is X.commerce's promise, but it's a promise that needs to be broken into bite-sized pieces that are digestible by individual developers looking for incremental improvements to their e-commerce strategies.

Hence, if eBay wants to fend off would-be competitors to PayPal, it needs to tell its X.commerce developer story much more coherently.

Matt Asay is senior vice president of business development at Nodeable, offering systems management for managing and analysing cloud-based data. He was formerly SVP of biz dev at HTML5 start-up Strobe and chief operating officer of Ubuntu commercial operation Canonical. With more than a decade spent in open source, Asay served as Alfresco's general manager for the Americas and vice president of business development, and he helped put Novell on its open source track. Asay is an emeritus board member of the Open Source Initiative (OSI). His column, Open...and Shut, appears three times a week on The Register.