These Two Charts Explain Why eBay Is Spinning Out PayPal Now

Ebay announced plans to spin out PayPal this morning.

For years, investors and pundits have been urging eBay to spin out PayPal. So, why do it now?

The following charts help explain, in part, why it's happening now.

They both come from Jessica Lessin at The Information, who first reported eBay was telling hiring recruits that it would spin out PayPal in 2015.

PayPal revenue is about to surpass eBay revenue:

And, PayPal is generating that revenue with less and less reliance on eBay.

David Sacks, PayPal's COO in its early days, told Lessin that these numbers support the notion of a spin out.

As PayPal needs eBay less and less to survive, it becomes harder to argue that there are synergies between the companies. PayPal is essentially operating as its own independent company.

"Reasonable people can disagree about the logic of a spin-out at 29%," said Sacks. But as eBay shrinks to 10-20% of PayPal's business, "holding out becomes much harder."

The trend is clear in these charts. PayPal is going to be bigger than eBay by revenue without relying on eBay for that revenue. It makes no sense for it to be a subsidiary.