Yahoo Inc. stands out as the only major Internet brand without a payments service. That may change now that the company has hired Scott Thompson from PayPal Inc. to be its new CEO.
"I don't see how payments can't be important here, with someone with as much payments experience and someone who has developed essentially a new network" for PayPal, says Beth Robertson, director of payments research at Javelin Strategy and Research.
Yahoo, of Sunnyvale, Calif., announced Wednesday that it had recruited Thompson to fill the CEO position that had not been permanently filled since Carol Bartz was ousted in September.
Yahoo's main rival in the search engine space, Google Inc., has already branched out into payments with Google Checkout and Google Wallet. Amazon.com Inc. has also established a presence in the payments world.
Yahoo lost a foothold in payments last year when Alibaba Group Holding Ltd., a Chinese company in which Yahoo owns a 40% stake, transferred ownership of its payments unit, Alipay, to meet licensing requirements in China. Yahoo said the transfer of Alipay was initiated without its knowledge.
Yahoo once had a bill-payment service, which it shut down in 2007. The service routed payments through CheckFree Corp., which Fiserv Inc. bought at the end of that year.
On a conference call with Yahoo investors Wednesday, Thompson did not explicitly address what the company might do in payments. But he said mobile devices would be critical to serving Yahoo's base of 700 million users.
"Mobile, I think, is a really big question for Yahoo and a really big opportunity for this business," Thompson said in the conference call.
Under Thompson, PayPal has branched out to point-of-sale payments, expanded its work in mobile payments, and has explored other initiatives to take its payment system beyond electronic commerce.
"Scott has had a very strong influence on the growth and direction of PayPal," says Paul Grill, partner at First Annapolis Consulting Inc., of Linthicum, Md. "The question is what steps does [PayPal] need to take to implement its broader vision more fully."
John Donahoe, the CEO of PayPal's parent company eBay Inc., will fill Thompson's duties as president of PayPal until a permanent successor is found.
"While I'm sure Scott's decision is a shock to many of you, as it was to me, there is one thing I am certain of: PayPal has an enormous opportunity in front of it and we will not slow down," Donahoe wrote in an email to PayPal's employees Wednesday.
Thompson is a well-known technologist. Under his leadership as president since 2008, PayPal's annual revenues more than doubled to $4 billion.
He also was critical in continuing to expand PayPal's presence beyond eBay's auction site. Nearly half of the top ten online retailers in 2010 offered PayPal as a payment mechanism, according to First Annapolis.
Thompson's departure is a career move, not one that reflects on PayPal, says Ron Shevlin, a senior analyst for Aite Group.
"Scott Thompson has done a good job focusing PayPal and putting it on track for growth with person-to-person and mobile payments," Shevlin says. "PayPal is very well-positioned for the future, and Thompson is leaving the ship in pretty good shape."
Thompson's knack for increasing revenue should come in handy at Yahoo, whose flagship search and content businesses have been languishing.
"I fundamentally believe that Yahoo's future depends on its ability to create great products and an integrated compelling customer set of experiences. And how we do that will be a function of delivering both excellent technology and content," Thompson said on the call.