Social Media Is PayPal's Next Bet

EBay Inc. hopes that growing use of social media Web sites will boost online transactions and drive up volume for its PayPal Inc. unit.

Social media is "one of the things that's going to grow e-commerce" as people do "social shopping" online and use PayPal to make payments, eBay's president and chief executive, John Donahoe, said last week at the Goldman Sachs technology and Internet conference.

He said eBay would like to have PayPal integrated more into social media like the Web sites operated by Facebook Inc. and Twitter Inc. EBay has been trying to make PayPal the go-to payment system of the Internet.

Last month eBay announced a partnership with Facebook in which PayPal will become a payment option for Facebook Credits and Facebook Ads, services widely used on the social networking site.

Donahoe said he sees Facebook, Twitter and other social media sites all having their own forms of virtual currency — such as Twitter's recently announced person-to-person payment service Twitpay — powered by PayPal and branded to fit specific sites.

"PayPal may have the biggest business opportunity I've seen in my career," he said. "This is a business that can grow for a decade at attractive rates."

The San Jose online auction company has been struggling to recapture its dominant position in e-commerce amid stiff competition from fixed-priced online retailer rivals, including Amazon.com Inc.

EBay has moved to emphasize fixed-price listings and attract listings from larger, high-volume merchants. In January it said it plans to cut U.S. listing fees, even dropping them completely in some cases, as part of its continuing effort to align its revenue with actual sales rather than listings.

Donahoe reiterated that he's optimistic about the new pricing structure, based on initial results in the U.K. and Germany, and said the reception from the eBay community has been positive.

"This pricing is going to be profound," he said. "It's going to benefit both sets of customers," both large- and small-volume sellers.

Donahoe said he worries about competition from companies such as Amazon but does not view e-commerce as a "zero-sum" situation.

"It's not going to be a winner-take-all game," he said. The e-commerce market is growing enough to benefit many players, he said.

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