eBay buys Bill Me Later but cuts 1,000 staff to pay for it
eBay is a company in transition. And that transition period has reared its ugly head today with the announcement of the firing of 10% of its workforce, which equates to roughly 1,000 being put out of work. But at the same time, eBay has gone on a spending spree of over $1 billion, acquiring Bill Me Later, and two leading Danish online classifieds sites.
Bill Me Later is a US-based online payments service which eBay is hoping will compliment PayPal. 1,000 online stores accept the method, which gives credit to anyone shopping online with only information such as your birthday and social security number.
eBay has paid $820 million in cash for the company, with a further $125 million in outstanding options. Bill Me Later has so far managed to secure over $200 million in venture funding and is expecting to make $150 million in revenue next year. This means eBay paid over six times the company’s revenues.
The Danish websites are dba.dk and bilbasen.dk, the leading two online classifieds sites in Denmark. Ebay has paid approximately $390 million for the two properties. This brings total spending to over $1.3 billion in the last few days. Which wouldn’t be an issue for anyone if it wasn’t for the fact that eBay is also cutting over 1,000 full-time staff.
The staff cutbacks were expected as revenues in the third quarter were lower than expected. These global cutbacks, which will also see several hundred temporary staff members let go, will cost around $70 million. They are being done in an effort to streamline the business, and of course, save money in the process.
According to The Register, John Donahoe, eBay’s chief executive, said:
“While never an easy decision to make, these reductions will help improve our operations and strengthen our ability to continue investing in growth.”
The acquisition of Bill me Later makes a lot of sense as it adds to the eBay properties that allow people to shop safely and securely online. Bill Me Later will appeal to those without a credit card and those who have one but are nervous of using it on the Internet.
eBay is definitely evolving from the ultimate online flea market to a more traditional e-commerce site, one that has a finger in every pie. Whether this is a good or bad thing depends entirely upon your point of view. For the 1,000 staff about to find themselves without a job, it is quite clearly the latter.
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