PayPal- eBay Split Expected to Significantly Benefit Both Companies in the Long Run

PayPal, which is one of the world's largest online payment companies, was created in 1998, had its initial public offering in 2002, and was acquired by eBay later that year. The system can be used to transfer money over the internet without the need for checks or money orders and is mainly associated with online shopping sites, where they are well-known for security and ease-of-use. In 2015, when eBay decided to make PayPal a separate entity once more, it was intended to diversify the company's investments. Now, according to James Peltz's L.A. Times article, eBay is committing deeper to that goal by cutting PayPal free from its position as eBay's primary payments processor.

For years, shoppers on eBay have been forced to use PayPal when checking out, and sellers have had to pay a commission to PayPal on top of the commission they already have to pay to eBay for using their site. eBay's relationship with Adyen, which will begin in 2020, will give customers more payment options to choose from, which will enable people to pick the one that suits them most economically. The massive online retailer also believes that the change to Adyen will create a "more seamless experience" for customers.

PayPal's stock took a dive and eBay's went the opposite direction after the announcement this week. However, analysts believe that PayPal's issues are only for the short-term. Executives have pointed out that the portion of PayPal's business connected to eBay has been steadily shrinking over the years, and that this break-up will have little impact. eBay's business was about 13% of PayPal's total volume last year (down 3% per year for the past few years). However, PayPal doesn't seem to be worried about the loss of volume. They are choosing instead to focus on profitability.

 According to PayPal executives, although the partnership with eBay had led to a large volume of money transferring for the payment company, they made very little per transaction, which didn't make it so profitable. One of PayPal's subsidiaries, Venmo, saw a huge jump in quarterly profits: 59% higher than last year, by some measurements. PayPal has other similar projects in the works that have the potential for profitability, so it seems that the split with eBay may be beneficial to both companies in the end.

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Comcast Replacing Cable Customers With Internet Customers

Especially in recent years, many people have been looking for clever ways to cut some of their higher utilities costs. For some, that means taking shorter showers or keeping the air conditioner off during the hotter months. Many others have found that cable is a pretty substantial monthly expense that they can go without relatively easily. "Cutting the cord," as it's commonly referred to, can save consumers well over $100 per month, depending on the package of channels they had. According to Gerry Smith's L.A. Times article, they opt instead to use their internet connections, paired with streaming services like Netflix or Hulu, to watch their favorite shows.

Comcast Inc. is just one of the many cable providers that have suffered losses to their bottom line due to the cord-cutting frenzy sweeping the nation. However, on the other hand, Comcast has also observed that as much as people are removing cable, they are getting more new customers for their internet plans. This quarter, the number of cable customers dropped yet again, but an additional 350,000 customers bought broadband internet service, which helped to balance out Comcast's profits.

People aren't only getting more into internet because of its ability to replace their cable entertainment. In the modern age, it is incredibly difficult to have a job, attend school, or do pretty much anything else without a reliable internet connection. Everything these days is online, so Comcast and companies like it are naturally going to keep getting new customers and are going to be getting demands from their customers for increased internet speeds. Some of their new features, including personalized home Wi-Fi networks, have led hundreds of thousands of new users to try out their internet connections.

Some cable giants are offering cheaper cable packages with fewer channels, which is attractive to some users. To many others, paying anything for any amount of cable is simply too much, because they can get access to anything they want to watch via the internet. Why pay more for something you can get elsewhere for less? Comcast's profits went up this year due to the influx of internet customers, and they expect to increase their shareholders' dividends by around 20% in 2018, while increasing stock value at the same time.

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Amazon Expects Advertising Revenue to Improve Profit Margin

Jeff Bezos, the CEO of Amazon Inc., recently took over the spot of "richest man in the world" from Bill Gates, the creator of Microsoft. To many, Bezos' wealth doesn't make much sense, because, for the past 20 years, Amazon has not brought in a profit. That may seem pretty cut and dry: profit means financial success. However, for Bezos, that's not exactly how it works. For many years, Bezos' financial strategy has been to choose business growth over profit, reinvesting any revenue into expanding Amazon. In that manner, Amazon's stock value has steadily gone up, even without paying any dividends to shareholders. According to an L.A. Times article by Spencer Soper and Mark Bergen, Amazon's latest shift, to focus on sources of advertising revenue, could help to push the company into profit territory.

Over the past few years, Amazon has been losing money in its e-commerce business but has been able to recoup those losses due to its profitable business of providing cloud services. However, the differences between gains and losses are tight: Amazon's average profit is only around 1%. Up until now, Amazon's advertising business has been pretty small, at $1.7 billion in revenue compared with Google's $35 or Facebook's $17.4 billion. Amazon has nowhere to go but up when it comes to advertising. It is likely that the growth will be among companies trying to get priority placement for their products on Amazon's website. That kind of business plan pivot is unlikely to have high costs and has huge potential for billions more in revenue.

Amazon is in a good place for advertisements. Often, on Google or Facebook, an advertisement appears that tries to push a user toward another site, where the user might purchase the product being advertised. The problem with that system is that users get annoyed by incessant advertisements when they aren't looking to buy anything. The difference for Amazon is that its users are already looking to buy something. Advertisements would be both helpful to the shopper, would benefit the advertiser, and would give Amazon more revenue. Everyone wins!

Food companies spend millions each year to put advertisements on television and in magazines to try to generate more interest in their products among potential customers. The same effect can be achieved on Amazon's website for far lower cost, with less work, simply by adding in suggested searches or sponsored search results. Of course, putting actual images and videos as advertisements can also help, but if someone is looking to buy a product, they're going to choose the one that seems to be at the best price. Through Amazon advertisements, companies can make their products more interesting to the average user. Perhaps one day, Amazon's advertisements could replace those on television entirely. Amazon does have its own video streaming capabilities, after all.

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Latest Fortune 500 List Contains 53 California Companies

The well-known "Fortune 500" is a list of 500 of the nation's top companies, published each year in a list by Fortune Magazine. The companies are those that bring in the most revenue and show the highest profits, which means they are likely to do well in the coming year. Basically, they are the 500 best companies on the market in a given year. Many, especially in recent years, are tech companies, and some have even been on the list for many years, even decades in some cases. According to Makeda Easter's L.A. Times article, of the 500 companies, 53 are based in California.

While California is not the number one state in regard to their number of Fortune 500 companies, California falls in a close second behind New York's 54 companies. The remaining 400 or so companies have headquarters spread throughout the rest of the country. California has two companies ranking in the top 10 of the Fortune 500 list: Apple is in third and McKesson Corp. is fifth. Trends show that California's biggest earners are technology companies and pharmaceutical/biotech companies.

Even with some companies having difficulties with slowing sales or scandals within their board of directors, California companies still improved quite a bit this year. Chevron came in 19th place on the list and Wells Fargo unexpectedly rose to 25th place, even after recent bad publicity. In Los Angeles specifically, construction company Aecom was in 161st place, real estate firm CBRE Group was in 214th, and Reliance Steel & Aluminum Co. placed 320th.

The percentage of companies with women CEOs that make it onto the Fortune 500 list is very small, only about 6.4% of the 500 companies. However, of the 32 companies on the list with women CEOs, 7 of those companies are based in California. Apple Inc., which is based in Cupertino, California, made the largest profit this year, at approximately $46 billion, but Wal-Mart still holds the number one spot on the Fortune 500 list based on revenue alone. Approximately two-thirds of the US's total GDP come from the 500 companies on the list. If trends continue as they have been, California's companies could end up being the most valuable on the list in time.

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Verizon's Acquisition of Yahoo Slows Down, Pending an Investigation into Data Breaches

A previous post discussed how Yahoo Inc.'s financial difficulties had led the company's management to get more and more creative in trying to turn everything around. The post also mentioned that a sell-off might be Yahoo's only choice and that, if they did sell, Verizon Communications Inc. would be the most likely buyer. In the several months since that post was written, Yahoo had indeed decided to sell to Verizon. Unfortunately, while the deal was meant to close relatively quickly, Yahoo's recent data breaches have slowed down the proceedings and may lead to a withdrawal of Verizon's offer. In the meantime, however, as the Associated Press of the L.A. Times discuss in their recent article, Yahoo's profit margin has been expanding, even as its net revenue slips.

Even while dealing with the huge repercussions of their data breaches, Yahoo succeeded in improving their financial performance during the fourth quarter. In the fourth quarter of last year, losses were high, so it's good for the company that they have been able to cut costs enough to get some stability back. Over the past few years, Yahoo has been rapidly losing the online advertising market to more powerful competitors like Google. More precisely, Yahoo's revenue from ad sales fell by around 4% in the one quarter. While that may seem like a lot, it's better than the double-digit losses seen over the previous four quarters. Because online advertising is a large portion of the company's income, it makes sense that financial considerations are forcing them to close up shop.

Yahoo announced this week that the $4.8 billion sale of its internet operations is expected to be delayed for at least 3 months while Verizon performs more due diligence and Yahoo faces an investigation by the Securities and Exchange Commission regarding the security breaches. In not just one, but two attacks, hackers were able to gain access to Yahoo's servers containing email addresses, birthdates, and other personal information of more than a billion users. It wasn't just fact that the breach occurred that triggered federal interest; it was that the breaches happened years ago, in 2013 and 2014.

To investigators in the SEC, Yahoo's delay in releasing information about the breaches makes the company seem guilty. Although the SEC claims that Yahoo is complying with requests that the investigators and governmental agencies have made, there are still worries among customers that the company is hiding something. Because of those suspicions, Verizon seems to be slowing down the purchase, no longer sure whether they want to even buy the company anymore. If more negative information comes out after the sale, then Verizon will suffer the losses caused by people's uncertainty. They made the smart move in pushing off the sale by a few months, in the hopes that all of the bad publicity may die down by then.

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