Facebook + eBay

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Both Facebook (FB) and eBay, with its ecommerce unit PayPal, pose a significant threat to the way banks do business.

Each brings together a large number of buyers and sellers. Each has machinations of allowing those folks to transact over their networks. Each has the potential to displace  traditional financial services companies in their customer’s wallets.

But should either buy the other?

Says Payments consultant Philip J. Philliou on Quora :

Facebook should buy eBay for PayPal. eBay’s PayPal division within Facebook would be a transformative event. PayPal under Facebook would emerge as a highly efficient, global payment network.

The combined companies would be interesting for several reasons, says Aite Group senior analyst Rick Ogelsby, in an email:

If this were to happen and Facebook were to make PayPal an integral part of its platform, using it to enable cross channel promotion and purchase (on-line promotion to drive in-store purchases), it would definitely enhance PayPal’s offering to merchants increasing the likelihood that they would gain strength as the 5th payment network.

The threat to banks wouldn’t change much other than by increasing the likelihood that PayPal’s efforts to become the next network will be successful.

The most likely answer, though, is ‘No,’ neither company will try to acquire the other.

Why?

They are roughly the same size. Facebook has a market cap of about $68 billion. eBay is worth roughly $54 billion.

Facebook, the most likely to make a move, only has about $4 billion in cash. And they are already working together.

Says Wedbush analyst Gil B. Luria, in an email :

At this point FB is not really much bigger than EBAY, so no longer in a position to buy EBAY.

The two are already cooperating on trying to help Facebook monetize its userbase through commerce and I expect to see more of that going forward.  Facebook head of product Katie Mitic is even on EBAY’s board.

 

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