Mobile Payments

PayPal Really Does Want to Be Your Pal


PayPal’s projected 2012 mobile payment volume is $10 billion. After Marcus became president, he raised it from the original estimate of $7 billion

Photograph by Yoshikazu Tsuno/AFP/Getty Images

PayPal’s projected 2012 mobile payment volume is $10 billion. After Marcus became president, he raised it from the original estimate of $7 billion

(Corrects website redesign and new market rollout in the sixth paragraph.)

When David Marcus first addressed EBay’s (EBAY) PayPal unit in April, he showed his 11,000 employees a photo of actor Will Smith holding the memory-erasing Neuralyzer from the film Men in Black.

“What I generally tell people is they need to forget everything they know,” says Marcus, who became PayPal’s president after the company acquired his mobile payments startup, Zong, last year. “People who have been in any type of environment for a little while know too much for their own good. It boxes them in. They know what’s not possible.”

There’s a lot about PayPal that Marcus wants to vaporize, including Web pages deemed boring by users, software that makes it hard for merchants to collect payments, and a bureaucracy that hampers decision-making. Even though the division is the fastest-growing at EBay, with revenue increasing 26 percent last year, it risks losing business to competitors including Square, Visa (V), and Google (GOOG), which are elbowing into the $170 billion market for mobile payments.

“There are a lot of people out there who just don’t want to have anything to do with PayPal,” says Colin Percival, who founded data backup and encryption company Tarsnap Backup. He recently began using Stripe, a startup that lets merchants accept payments online, after clients complained about having to use PayPal. Stripe, which was launched in September 2011, takes about two hours for merchants to set up, compared with as many as 10 hours for PayPal, says Brett Radler, chief executive officer of 86Serving.com, a restaurant-management services company that chose the startup’s payment processing over PayPal’s.

Marcus, a 39-year-old native of France, says PayPal’s culture—where employees are benumbed by excessive meetings and PowerPoint presentations and a months-long approval process to begin any project—needs to be blown up. He started the makeover in June by consolidating nine product groups into one. Employees will eventually move from walled cubicles and offices to open rooms, where management will sit among staff. He’s also taking steps to expedite product development, says Nik Sathe, vice president of PayPal’s technology division. The company has doubled investment on a project called Sparta, which should shorten the time it takes to build applications for new products to weeks from months. Sparta “massively simplifies what it takes to build a Web application, so developers can focus on the functionality,” Sathe says.

The new president’s efforts have shown signs of success. The introduction of a revamped PayPal website, which boasts a less-cluttered home page, was done in six weeks—a process that previously took six months, says Anuj Nayar, a PayPal spokesman. The company also entered Costa Rica in three months, from decision to introduction. In the past, entering new markets had taken as long as three years.

“One of the great things David brings to PayPal is a founder’s style of leadership,” says Hill Ferguson, head of the new, consolidated product division. “Driving a more simplified user experience starts with having a more simple internal structure and more simple ways of working with other teams. It’s a very welcome change.”

Marcus, who studied economics at the University of Geneva in Switzerland, started his first company at 23. That venture, called GTN Telecom, grew to be one of the top telecommunications carriers in Switzerland. He later founded Echovox, the foundation for Zong. “The biggest advantage startups have is speed,” says Marcus, whose conference room wall is painted with the letters G-S-D, for “Get S––– Done.” Says Marcus: “It’s how fast they can build and test stuff, throw stuff away, and start over again. We’ll never be that fast, but we need to be much faster.”

Running a division with 113.2 million users and $4.12 billion in annual sales will require a different set of skills than Marcus used when he oversaw smaller enterprises. “He’s a guy who’s never managed a team of more than 150 people,” says Dana Stalder, a partner at Matrix Partners and former PayPal vice president of product, sales, marketing, and technology. “But he’s been starting companies since he was 23. He’s always lived life shoulder-deep in competition and a month away from running out of money.”

The bottom line: David Marcus is trying to reinvent PayPal’s culture without sacrificing its revenue for parent EBay.

Kucera is a reporter for Bloomberg News.

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Companies Mentioned

  • EBAY
    (eBay Inc)
    • $53.4 USD
    • -0.35
    • -0.66%
  • V
    (Visa Inc)
    • $216.2 USD
    • 1.20
    • 0.56%
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