Paypal case
By Gracie Lee (B94705011), Jennifer Huang (B94705035), Charles Virgile (A97749219), Nicolas
Valaize (A97749221), Vincent Montmoreau and Fabien Palmero.
1. What explains PayPal’s early success?
As an electronic payment network, PayPal prospered under seeing the emerging
chance among auction transaction and then hitting the market by the following
strategies.
 Expand among eBay: PayPal firstly expanded its service by incorporating with
eBay, so that it could take most of the auction users in the U.S. into its service
ecosystem and then catch the largest market. Moreover, beyond the U.S market,
it spread to eBay’s international sites, supporting in fourteen countries and
seven currencies.
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The first mover: PayPal offered more efficient and more convenient paying
alternative for both auction sellers and buyers who could choose to pay by a
real credit card or by a PayPal account. In fact, compared to most credit card
companies, PayPal did provide a saver way to deal with customers since
transaction could be made without giving real personal information, such as
credit card numbers. For sellers, even though they had no capability to build up
a credit card merchant service, they could install it easily and earn money
through it. Therefore, the first mover advantage of PayPal made it generate
significant profits.
Network campaign: An effective marketing strategy could always increase
growth, and PayPal manipulated a good campaign as well. A new user could get
$10 when signing up a new account and this attracted a large quantity of new
blood to use it; on the other hand, PayPal also treated its regular patrons well
giving bonus if they told others. Through this campaign, PayPal grew rapidly and
even reached a tremendous market share by getting users continuing using its
service and putting up the barrier to its rival to overcome.
2. Does Google represent a serious threat to PayPal? What strategy for payments
would you recommend for Google? For eBay/PayPal in defending against
Google’s attack?
The answer for whether Google represents a serious threat is definitely yes since
Google plays the most indispensible role in the process of e-commerce transactions.
Most e-commerce transactions begin with search and end with search, and, being
the big brother of search engine company, Google is indeed in an advantageous
position inherently where Google can also provide Google Base for users to post all
types of information. Although they claimed Google Base will not compete with
PayPal, Google Base provides wholly new platforms for users to decorate their own
ones of which transaction platform like eBay/PayPal can be viewed as one. Lots of
eBay/PayPal users are attracted by Google Base at the same time, and it’s even more
convenient for small merchants because it let them do the process of work from
making deals to reaching the analysis of market trends without leaving Google.
Therefore, it resulted in that they decided to take the advantage of Google payment
service rather than PayPal one, and Google really took over part of PayPal’s market
share.
Recommendation for Google
1) Insist Google Base: Google needs to offer other service to help its payment
system get the same effectiveness as PayPal does because only ity payment
system cannot compete with this strong rival. Since Google payment system is
now strongly connected to Google Base, this free service is the key factor to
2)
aggregate amounts of users and to expand its market share continually. Besides,
if there are more functions promoted on it by Google, users must be used to it
spending longer duration and cannot leave ever more.
More precise paid search ads: Compared to eBay/PayPal, if Google also
competes on the fees, lowering the charges, it cannot easily meet the goals due
to the smaller scale Google possesses. However, if Google takes the advantage
of its strength--Web search, it will be the key successful factor. 70% of
3)
e-commerce transactions begin with Web search, and in the meanwhile Google
can display precise paid search ads which must be valuable and appeal to
merchants, especially small merchants, since it is convenient for them to launch,
manage and campaign their startups all in one place.
Insurance against money losing: Losing money without notifications and
awareness in PayPal is not a new story and many users are fed up with accounts
being closed for no reasons! This is a good chance for Google to grab. If it takes
this money safety issue into accounts and gain the confidence of the users, it
will be a great advantage differentiating from eBay/PayPal.
Recommendation for eBay/PayPal
1) Cooperate with Google’s rival: PayPal should find another way against Google’s
strategy and making a partnership with its competitors like Yahoo! or Microsoft
may be a good idea since both of them are direct competitors in many
dimensions including search engines. This can not only help eBay/PayPal be
independent from Google, but also benefit the cooperating companies
decreasing it rivals market share.
2) Make strong deal with credit card companies: Make the relationship between
PayPal and those credit card companies more firmer is the current concern.
Charging no setup fees is still appealing to them, but if PayPal can make them
believe it is able to continue maintaining well and building up excellent goodwill,
it would be even harder for Google to fight.
3) Correct money safety problem: As it mentioned in the recommendation for
Google part, horrible customer service on money safety is the vital problem it has
been detested for a long time and must be the most emergent problem to be
solved.
4) Compete on Fees: It is the last choice but when it comes to fees, PayPal is indeed
the leader of this industry and has the qualification to lower its fees due to the
huge amounts of users it has which can result in the economy of scale.