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PayPal reportedly shedding up to 400 jobs

Cuts are part of strategy to streamline the company, despite recent successes

Financial trends and news by Steven Loeb
October 13, 2012 | Comments
Short URL: http://vator.tv/n/2ae5

PayPal is looking to looking to cut 3% of its workforce, or up to 400 works, according to a report by Bloomberg late Friday.

The job cuts will come in PayPal’s product and technology sectors, and will happen within the next few weeks.

The cuts are reportedly part of a larger strategy by PayPal President David Marcus, who has been in the job since April, to streamline the company. He previously consolidated nine product groups into one, back in June, and is even looking to reorganize the office space, removing walls so that management and staff sit together.

Marcus, who took over in April, is leading an overhaul to streamline a business marked by inefficiencies such as excessive meetings and a months-long project-approval process. He started the makeover in June by consolidating nine product groups into one. Workers also will be reorganized -- moved from walled cubicles and offices to open rooms, where management will sit among staff.

“We have told PayPal employees about plans under way to strengthen and simplify how we create and deliver consistently great products and brand experiences to our customers,” PayPal said in an e-mailed statement to Bloomberg.

“We have not yet discussed how these plans may impact any existing jobs across our product, technology and marketing teams.”

PayPal's success

That PayPal would be shedding so much of its workforce comes as a bit of a surprise.

According to Forbes, eBay, which purchased PayPal for $1.5 billion 10 years ago, had its revenue grow 23% quarter-to-quarter. This growth is attributed to PayPal, which added one million new users every month in the quarter, and saw its Total Payment Volume grow 20% year-to-year, to $34.5 billion.

In July, on the 10th anniversary of eBay buying PayPal, I called it a one of the rare “once-in-a-lifetime purchase that makes such a ripple that people will even care all those years later.”

In fact, the acquisition is seen by some as the most successful in tech history.

Not only does Ranker list the acquisition as the third smartest tech startup acquisition ever, behind Google’s purchases of YouTube and Android, but PayPal’s revenue has grown every single year since it was purchased, as has its percentage of eBay's total revenue.

PayPal now makes up 38% of eBay’s entire revenue, and has generated around $20 billion for eBay in the last 10 years. When it was first purchased, PayPal had 23 million users; now it has 110 million, up 12% from the first quarter of 2011, according to eBay’s financial release for the first quarter of 2012.

Competition

Despite its tremendous success over the last decade, PayPal has tremendous competition.

While the company drifted away from the mobile game throughout the years, focusing on becoming the leader in secure online payment, it is now refocusing on mobile to compete with other payment companies, such as Square, Eventbrite, and WePay.

Earlier this year, it was proclaimed that Square processing one million payments a day.

In June, Facebook wrote on its blog that it would be dropping Facebook Credits in favor of local currency in order to "implify the purchase experience, give you more flexibility, and make it easier to reach a global audience of Facebook users who want a way to pay for your apps and games in their local currency."

Even Groupon is getting into the game, announcing last month that it had created a mobile payments system, dubbed Groupon Payments.  Like Square and PayPal, Groupon Payments uses a little plastic dongle that merchants plug into their iPhone or iPad to start swiping credit cards. 

With competition becoming so fierce, PayPal is looking beyond even mobile payments, and is planning on expanding its reach into other areas as well. 

In June, PayPal also announced a deal with Comcast and TiVo that will allow users to donate money and purchase goods with a single click of their remote.

PayPal could not be reached for comment.

(Image source: http://tessajagger.blogspot.com)


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