eBay's Love-Hate Relationship With NFC

eBay CEO John Donahoe, the man who popularized NFC standing for Not For Commerce, seems to have developed a love-hate relationship with near-field communication. He hates NFC and firmly believes it will never be adopted by large retailers, unless it is adopted by large retailers—in which case, he'll love it.

Oh, and Donahoe not only believes that NFC will never be adopted by large chains, but he has a specific prediction of when that adoption will happen—just in case he's wrong. And, no, we're not making any of this up.

First, the history. In July 2011, the eBay chief predicted that NFC would go nowhere with large chains, because "when you're a large merchant and you have 500 stores and 14 checkout lanes per store, you want zero friction at checkout and point of sale. And they're not going to allow anything that has friction. No proprietary systems."

On April 18, during an earnings call with analysts, he doubled down that NFC won't go anywhere with large chains. But Donahoe then oddly enough ended his answer with a reversal, saying that in "at least a couple of years" the industry will "see widespread adoption of NFC in large retailers all over the world."

Let's now introduce the second part of Donahoe's answer to the first part of his answer. Asked when NFC would be mainstream, he opened with a declaration that his prior anti-NFC statements were still valid.

"On NFC, I think we're proven to have been right. My flip answer (to) 'When is it going to be ready?' Never," Donahoe said.

He continued: "I think other technology solutions, things like PayPal Here, things like what we're doing at point of sale where you pay hands-free mobile number and PIN, you don't even need your mobile [phone], are ways to provide compelling consumer experiences that don't require the actual use of an NFC technology. So I think location-based payments is something that you'll see a lot of innovation around. And just as we—in PayPal Here, you see us using the check-in feature on location-based payment fees to be quite powerful, the GPS devices and smartphones. But again, it's not dependent upon an NFC for the last inch."

That's actually a strong and coherent argument for why NFC isn't going to happen. But he then pivoted and added: "So I don't know. I think you'll see more—and I think it's going to be at least a couple years before you see widespread adoption of NFC in large retailers all over the world."

So he does anticipate widespread NFC adoption, see?So he does anticipate widespread NFC adoption, see?

In other parts of that call, Donahoe talked about its Home Depot deployment and the likely next steps. But he started with an unusual marketshare claim, arguing that in-store PayPal payments—which Donahoe calls off-line payments—are an attractive financial move, because an awful lot of people buy things in stores.

"We continue to be very excited about the off-line opportunity for PayPal. It expands PayPal's served market from a $500 million market to a $10 trillion market. And if we just capture 2 percent of the off-line retail, it's another PayPal," he told financial analysts. Did he just say that it's a great move, because if eBay only captures one out of our every 50 purchases in every store, it will make a fortune? Heck, why stop at 2 percent and be another PayPal? He should have said 5 percent, and then eBay could be larger than Wal-Mart.

Isn't this like the argument to venture capitalists that "our startup's products will appeal to men and women everywhere. And if only 1 percent of the relevant customers buys it, we'll make you billions?"

Back to Home Depot. Donahoe confirmed that very few actual Home Depot customers have been using the PayPal service, but that will likely change this summer when, he said, active marketing to consumers will start.

"Frankly, the only people using it thus far are eBay and Home Depot employees and others that have happened to have seen it. We're now working with Home Depot to start a phase of marketing to consumers, which will come in the May –June timeframe, and you'll see that," he said. "Now you'll probably see some signage in the Home Depot stores. They will be doing some mailing to their customers. We'll be doing mailings to ours. And that's when we'll really begin to focus on trying to get some consumer engagement around it. And so a good part of the summer will be working on that phase of things. Now in the interim, we've continued to have a pipeline. Don Kingsborough and the team have been working hard signing up other retailers. We have several under contract, and during the second half of the year, we'll be bringing those live to site. But again, with very much of a test-and-learn mindset, really, we're trying to get some retailers in different segments to learn."

At least he's learned his lesson about citing specific numbers of retailers that will be using PayPal in-store.