PayPal No Longer Needs eBay

The biggest story in tech today is the news that eBay is finally spinning out PayPal.

Activist investor Carl Icahn started agitating for eBay to spin out PayPal earlier this year. But, prior to Icahn people in the tech world have long grumbled that PayPal was wasted inside eBay.

So, why is PayPal going solo now? There's a bunch of reasons - pressure from Icahn, pressure to hire people, competition with Apple, and other startups in the payment space. Being a standalone company makes recruiting easier. It also focuses PayPal on payments.

This chart gives another reason - PayPal doesn't need eBay anymore.

As you can see, PayPal's reliance on eBay to fuel its payment volume has fallen dramatically in the past five years. In 2009, almost half of PayPal's payments flowed through eBay. Today, it's less than 30%.

In August, Former PayPal COO David Sacks told The Information that it just doesn't make sense to keep PayPal tied to eBay when it's establishing itself as a strong standalone business. There are fewer and fewer synergies between the companies, so there is less and less reason to keep them together.

"Reasonable people can disagree about the logic of a spin-out at 29%," he said, but as it falls to 10% to 20%, "holding out becomes much harder."

At the same time that PayPal was becoming less reliant on eBay, its revenues continue to grow, which you can also see here. PayPal is going to be more than half of all eBay revenue in the future. So, it makes sense to free it to run on its own.