PayPal
This paper will review the book “The PayPal Wars” written by Eric Jackson from his point of view. In his book, the author recounts a story that he experienced in the early days of the company as a senior employee in the marketing department. In his book, Eric shares some of the inside secrets that were going on in PayPal. In his book, Eric recounts how PayPal acted as a main competitor with Billpoint and how after some time, eBay bought PayPal to replace Billpoint, a system it was using for money transfer. EBay accrued control of PayPal for 1.5 billion dollars in 2002. As explained by the author, the basic idea behind PayPal was to introduce a system in which people were able to trade money online. The clarity of the idea was one of the reasons why PayPal was tremendously successful. One of the most remarkable things that the writer shows in the book was the capability PayPal had even while running under a large negative cash flow. The fact that the business was able to survive these trying moments was just fantastic to say the least (Eric, 2004, p.6).
According to the writer, most of the negative cash flows that the company was running on were caused by the mafia, credit card and other types of fraud and the business model or stricter itself. In the beginning when PayPal started business, one of the most critical factors that the business was able to utilize was the use of money to attract customers. In the beginning, customers were given 10 dollars for registration as a reward. This structure of doing business had put the company in a tremendous dept crisis. However, the structure worked in the end. In his book, Eric notes that PayPal as a company, its main aim was to make profits. Although the system operated on rewarding $10 to customers who opened an account, the business eventually turned out and made profits. In his book, the author described PayPal as a business like no other that was built on speed and growth at any cost whatsoever (Kane, 2002).
The creators of PayPal started out with one idea for their product, but ultimately it became identified with a much more popular use. Has that ever happened before, and what does it say about the role of the customer in entrepreneurship?
The author’s sentiment on PayPal shows a company, which had been built from an idea, a general concept to offer the world something that would help in money trading. However, as PayPal grew, it started being identified as something more than that. Although a few companies had tried this, PayPal was one of the companies to succeed in this venture substantially. The structure of the company says a lot about customers in business and entrepreneurship. According to the author, the business’ main success was the idea that it offered a ten-dollar reward to anybody who signed up for PayPal (William).
In his book, Eric pointed out the fact that in the beginning PayPal did not aim at working with online public sales because the executive managers, in the company, assumed it was an incompatible target for the company. Finally, the company’s executive gave orders to test how well the company would perform in public sales. In his book, Eric notes that the research led to finding out that users and potential investors were particularly keen on what was happening in the online auctions. This led the company for a brief moment to change its course of direction and challenge its main competitors who at that time were working with eBay Billpoint. A Yahoo auction was also involved in the struggle for dominance. This led to a change of strategic direction by the company entirely (William).
Because of the change of direction and target, PayPal started a war with quite a few other online companies that were in the same field as it. In the course of the war, the company merged with one of the companies, which made it even moiré stronger. However, the merge with X.com led to a conflict of ethnicity and in-house conflicts that for some time as the author points out, almost broke the company. However, the issues that were raised between the two companies were cleared up through some top management selection where the company's culture and strategy were realigned in order to meet both the goals that were set by both companies. The last stroke of the war, according to the author, saw many companies fall out due to the intense competition (Eric, 2004, p.17).
This finally left only eBay’s Billpoint. The struggle for market dominance was finally through when eBay bought the companies, which hence resulted to the closure of Billpoint. According to the book, the struggle for dominance had left many companies out of the market. However, due to its market dominance and strategy, PayPal had survived the war. In addition, the acquisition of it by eBay had made sure that the company survived (William).
When Henry Ford was asked about what the customer wants, he replied, "He would say that he wants a faster horse." Would PayPal fall into the "faster horse" category, or was this a "revolutionary" new product?
The author’s book, “The PayPal Wars”, offers an inside look at the events that took place in the company before the company’s online paying or trading services were bought by eBay. The company had gone through many things before it stood on its own. The recounts summarize issues that took place in the online trading front and the unique outlook that affected the online auction at that time. PayPal story shows an account of a young company, which had the energy and innovation to be able to rotate route on a dime. In acutely few words, the company can be described as fast horse that was able to conquer most of the adversaries that were set before it. The company faced changes from the Russian mob eBay through Billpoint, SEC, and what the author views to be the rest of the world as a whole. In his book, Eric paints a picture that the company was a fast horse that was able to take over, the market even though it was not the first firm. The company’s ability to see in between the pictures that were presented shows just how much the company’s strategy was strong (Eric, 2004, p.24).
PayPal Wars in truth was an extremely entertaining book, recounting a tale of PayPal in its beginning in the late 1999 to 2002. The most astonishing part in the book is when the author Eric gives a tale of how the company lost over 5.4 million to fraud. During this period, the company as the author tells it began losing almost 3.5% of its profits in every transaction it made. The author points out that the company lost 1% of every transaction to fraud while 2.5% was lost during the transaction of fees by the customers (William). As the company matured, a gap that was being left due to fraud was discovered and fixed. The company also changed its tactics and begun working with low transactions, and moved away from the high expense transaction cards. The company built a new network of making payments in which it targeted customers that were mostly working with eBay. When eBay bought the company, its transactions increased from almost nothing to almost 60billion by the close of the year 2008. However, the author points out that although this was the case, the company had been on the verge of collapse in the beginning of the year when it had been forced to pay money as a benefit in order to attract customers (Eric, 2004, p.63).
Why did PayPal survive and become profitable when other similar firms fell by the wayside?
According to the book “The PayPal Wars”, the author notes that PayPal survived and became profitable because of a powerful marketing structure. PayPal paid ten dollars to individuals, who registered with it and opened an account. PayPal later reduced this offer to five dollars. The author states that this marketing strategy led to many customers joining PayPal leading to its growth and hence leaving the competitors behind. The author notes that this system led to a positive cash flow for the company. This system corked in favor for the PayPal Company unlike the competitors. In the book, the writer notes that PayPal success was due to the sponsorship that was offered by project capital groups. This sponsorship led to expansion of the company since the costs were well catered for. The author also states that PayPal gained traction faster than its competitors did. This made PayPal acquire monopolistic status in the field hence gaining many profits and hence growing at a faster rate than the competitors (Eric, 2004, p.127).
The book, “The PayPal Wars” states that the PayPal Company gained success because it had a clear aim in the market hence the clients had faith in the company. This was also because it allowed trading of currency in an easy and effective way in through email. The author notes that PayPal was ahead of other companies because it had an excellent business idea, which catered for the clear necessity in the economy of the world. The idea also made the transfer of payment in the whole universe effective, which met the globalization goal (William).
When we write of entrepreneurship, we say that successful entrepreneurs take factors of production and move them from lower-valued to higher-valued uses. What would have been the factors moved here and what were the higher-valued uses?
According to the author, the factors of production that are moved from a lower valued to higher valued use include technology. Technology has been put into profitable use through the information technology to move monetary transitions from one part of the globe to another. This was originally the business idea of PayPal, and it has been utilized to the maximum. In the book, “The PayPal wars”, the author states that capital is another crucial factor of production that has been moved from low value use to higher value use. The capital that it acquired from venture capital groups was put into a more beneficial use of expanding the services of PayPal all over the world through internet transactions (Eric, 2004, p.205).
Which of the obstacles that the company faced was typical for any entrepreneur, and which do you think were more specific to PayPal and the kind of business it was operating?
In the book, “The PayPal wars”, the obstacles that are more specific to PayPal and the kind of business it was operating include the competition that was offered by the rivals, which included other online payment systems that operate online. This forced the PayPal Company to merge with them according to the author. An example of mergers is X com. Another obstacle according to the author was the collision of cultures, which was brought about by merging with other companies. The workers of PayPal felt that their cultures were affected by the intrusion of other companies. The other serious obstacles according to the book “The PayPal wars”, it was internal conflicts that enormously affected the performance of PayPal. These conflicts were solved by arrangement of goals and selection of the management. The author states that PayPal encounters an obstacle of the regulatory system of government. This obstacle also affects other entrepreneurs with similar businesses (Peter, 2010 p.123).
According to the author, this affects the profitability of PayPal and other entrepreneurship companies. PayPal is faced by an obstacle of collision of culture due to merging of PayPal and other companies like X com. This greatly affected the profitability of PayPal. The cultural collision obstacle due to merging affects many entrepreneurial businesses. The book notes that another significant obstacle affecting PayPal is the struggle to attract as many customers as they can in order to increase benefits (Peter, 2010 p.122). The writer notes that the company had to offer ten dollars for every new individual who acquires a PayPal account. This was done to attract customers, yet it meant that the costs of operation of the company were increased. Overall, PayPal was able to attract extremely many customers as it expected. This obstacle affects other entrepreneurial businesses similar to PayPal. The author notes that lack of funds to expand PayPal is a substantial obstacle for the company. This means that PayPal had to solicit funds from venture capital groups in order to carry out their operations swiftly. This obstacle affects not only PayPal but also other entrepreneurial businesses (William).
References
Eric M. Jackson (2004). The PayPal Wars: Battles with eBay, The Media, the Mafia, and the
Rest of Planet Earth. New York: World Ahead Publishing
William L. Anderson. Introduction to Austrian Economics
Peter, G. (2010). The Capitalist and the Entrepreneur. Alabama: Ludwig von Mises Institute
