eBay Says Bill Me Later But You're Fired Now

Dennis Faas's picture

eBay is cutting 1,600 jobs, representing around 10% of its work force. The announcement shortly after the company announced it would spend more than a billion dollars purchasing an online payment service and several overseas classifieds sites.

The job cuts, the biggest in the firm's history, should save around $150 million a year. The layoffs, covering 1,000 permanent employees and 600 temps, will be spread across the company and will include staff at PayPal (which eBay owns). Chief Executive John Donahoe says the savings will fund greater investment in the firm's services, which may include lower costs for users. (Source: reuters.com)

While most firms have suffered from the recent stock market slumps, eBay stock is currently at its lowest level in more than five years.

The savings from the job cuts are more than outweighed by this week's acquisition of Bill Me Later for $945 million. Bill Me Later runs a service by which registered customers can shop online and then pay up to 90 days later by check; retailers pay a transaction fee for the sale. eBay is also spending $390 million to buy two Danish online classified sites, presumably so it can inherit the existing customer base. (Source: fool.com)

Some analysts think eBay was worried that Bill Me Later was becoming a threat to PayPal. The service has been taken up by some big name retailers including Amazon, Overstock and even several airlines. eBay will now link Bill Me Later with both its auction services and PayPal.

In a particularly bitter irony, eBay predicts Bill Me Later will make it $150 million in 2009 – exactly the money it will save with the job redundancies.

It's clearly a good match for eBay, even down to 'Bill Me Later' having the same simplistic name and feel as the firm's fixed price 'Buy It Now' feature. Whether it's socially responsible to allow impulsive eBay users to bid and buy without having to worry about paying right away may be open to question, but it should certainly boost eBay's takings.

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