PayPal agreed to pay $800 million for Braintree, a
Chicago-based start-up that was founded in 2007 and has about 4,000
merchants using its service.
PayPal said Thursday it agreed to buy Braintree Payments Solutions as
the payments division of eBay looks to expand further into mobile
commerce and partner with hot start-ups like Airbnb and Uber.
PayPal
agreed to pay about $800 million in cash for Braintree, a Chicago-based
start-up that was founded in 2007 and has about 4,000 merchants using
its service. Braintree's platform helps process payments for start-ups
such as Airbnb, TaskRabbit and Uber.
Braintree, headed by Bill Ready, also owns Venmo, which lets users pay each other for free through a mobile app.
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The PayPal tent at the Outside Lands Festival in San Francisco.(Photo: Kim White for PayPal)
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PayPal
paid so much for Braintree for three main reasons, according to Sanjay
Sakhrani, an analyst at Keefe, Bruyette & Woods.
First, the
deal gives eBay access to current and prospective clients of Braintree.
The start-up has focused on integrating its payment platform with
fast-growing start-ups and the mobile apps that power much of their
business, Sakhrani explained.
Second, Briantree's Venmo business
has gained a lot of traction with younger users, a demographic that
PayPal may have been struggling to reach, according to the KBW analyst.
Third,
Braintree has superior application programming interfaces, or APIs,
which control how different software interacts with each other. This is
important for attracting software developers to a platform. While PayPal
has been trying to improve its APIs, it probably made sense to buy
Braintree and quickly adopt its APIs, Sakhrani said.
"They also took out a pretty viable competitor, which always helps," he added.
eBay shares rose 3.9% to $56.32 in afternoon trading Thursday. That pushed the stock close to a 52-week high of $58.04.
Mobile
commerce is the fastest-growing part of e-commerce because people are
increasingly using smartphones to shop and pay for things. Retail mobile
commerce sales will grow 68% to $41.68 billion this year and by 2017,
retail sales made on mobile devices will climb to well over $100
billion, eMarketer estimates.
PayPal has its own rapidly expanding
mobile payments business, however, the company has lots of competitors,
including Square and Google.
"Braintree is a perfect fit with
PayPal," said eBay CEO John Donahoe. "Bill Ready and his team add
complementary talent and technology that we believe will help accelerate
PayPal's global leadership in mobile payments."
Braintree will
continue to operate as a separate service within PayPal under CEO Ready,
who will report to PayPal President David Marcus. Braintree's
management team and employees are expected to stay in place, PayPal
said.
Published on: USAtoday
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