Before that deal, the alternative payment landscape was dominated by companies fully or partially controlled by three of the largest—and oldest—E-Commerce sites: eBay had PayPal; Google had Google Checkout; and Amazon had, in effect, two horses in the race. Amazon had its own entry called Amazon Payments—which was introduced this summer—in addition to a minority investment in Bill Me Later.
With eBay moving in to buy out all of Bill Me Later, Amazon will get cash for its share but little more than that. Mark Lavelle, Bill Me Later's VP for corporate development, was careful to avoid answering specific questions about Amazon's part in the eBay drama (had it declined to buy out Bill Me Later? How much of the company did they end up owning?), other than to say, "I don't think this is a surprise to them at all" and to imply that Amazon's share wasn't that large by saying that it had no seat on Bill Me Later's board of directors.
Given how long such financial negotiations take, it's likely that Amazon's July 29 introduction of Amazon Payment happened after the investment decision had already been made. Had Amazon decided to go it alone and lost interest in Bill Me Later, or was the rollout a competitive response to what the company anticipated eBay would do with it?
One not-so-ironic note is that of the handful of major E-tailers that had agreed to accept Bill Me Later—including Apple, OfficeMax, Foot Locker, OfficeMax, Dicks Sporting Goods and Walmart.com—the most prestigious was Amazon itself, which promised to accept Bill Me Later for payment late last year and finally delivered on July 9.
Will eBay's move prompt Amazon to reconsider accepting Bill Me Later? One prominent industry analyst—who was quoted in PayPal's own news release as saying that "this deal makes perfect sense" and that PayPal and Bill Me Later "can extend the presence of the two brands and offer even more choice for consumers when they shop online"—said that such a change of heart is inevitable.
The Amazon and Bill Me Later "relationship is dying if not dead already," said Bruce Cundiff, director of payments research and consulting for Javelin Strategy and Research.
Amazon, eBay and Google, though, have more to worry about than industry politics and fighting against each other (although that's where so much of the fun is).
On the one hand, the acceptance of alternative payments among the largest E-tailers has soared in recent years, going from about 9 percent in October 2006 to 24 percent in February 2007 to about 30 percent in December 2007, according to research done by Brulant.
Although those numbers are impressive—and it's quite likely that today's figures are still higher—there are still a healthy number of major retailers that have not embraced any alternative payments. For market expansion, that must change.
The Bill Me Later and PayPal/eBay deals have substantial consumer numbers behind, with Lavelle saying that Bill Me Later alone has about 4 million consumer accounts delivering about $1 billion dollars in annual revenue. PayPal boasts 157 million consumer accounts in 190 countries, although that number plummets to 63 million consumers when it's limited to accounts that have shown any activity for the prior 12 months.
But the retail resistance is not because of an insufficient number of consumers nearly as much as it is about the complexity of making any kind of material payment change.
Among the largest alternative-payment hesitant retailers are Best Buy, Sears and Dell, Lavelle said, and they are delaying because of a combination of IT complexity and the priority—or lack of same—that they give to online operations. With dollars especially tight these days, projects get prioritized based on pure spreadsheet return-on-investment calculations.
"We need to focus on the ROI of the service, to make it relevant enough to knock everything else out," Lavelle said.
The issue of in-store versus online priorities assumes that alternative payments are a purely Web offering, which is no longer necessarily the case. Various retailers—including Borders—have been considering accepting alternative payments at in-store POS locations, especially with younger consumers that might find PayPal a more compelling choice than Visa.
As is the case with almost all mergers, eBay has been stressing the advantage of the acquisition to strengthen both sides, with the ever-present promise that Bill Me Later's team will now have access to the much deeper pockets of eBay. That speech is usually given about two days before the E-mail pink slips start landing.
But if Bill Me Later is serious about trying to tackle alternative payments in-store—as Lavelle said—it's going to need a lot of resources. Then it will be a question of eBay and what it's spreadsheet-loving ROI-obsessed managers think should be their own priorities.