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eBay Buys Bill Me Later

Troubled auction site seeks growth through acquisitions

By Truman Lewis
ConsumerAffairs.com

October 7, 2008

Bill Me Later lets consumers buy goods and services online without using a credit card. Instead, they provide their birthday and the last four digits of their Social Security number. That enables Bill Me Later to run a quick credit check to see if it wants to fund the purchase. If so, the consumer is billed, as the name implies, later.

eBay Monday agreed to pay $945 million in cash and options for Maryland-based Bill Me Later, which will be merged into PayPal. eBay also owns Internet telephone provider Skype and ticketseller StubHub.

Like buying used stuff online from people you never heard of, the Bill Me Later concept sounds good but many of the consumers who've written to ConsumerAffairs.com say otherwise.

"I was given false information by a customer service telephone representative I was charged a finance fee of $12.15. Not only has this cost me an hour of my time but $12.15, I would like the $12.15 refunded," said Kari of Reseda, Calif.

"I thought it would be a great convenience to buy now & pay later, little did I know of the nightmare to come. Since day one there have been problems," said CI of Memphis.

Analysts gloat

Whatever consumers may think, Wall Street analysts were cheering the transaction, gushing that it gives eBay yet another piece of each online transaction it handles. Since Bill Me Later transactions don't involve credit cards, the company doesn't have to pay the pesky fees credit card issuers impose, making each sale just that much more profitable -- and it gets to charge interest on delayed payments.

"PayPal and Bill Me Later belong together," eBay CEO John Donahoe said. "We're going to continue to invest in PayPal to extend that leadership position because we think it has enormous potential, and almost a once-in-a-lifetime opportunity to extend that lead."

The acquisition came as eBay was preparing to fire 1,000 fulltime and 600 parttime workers at it deals with stagnant sales and lower traffic. eBay's traffic has declined 11% to 71 million visitors per month over the last two years and sales are flat -- $16 billion last quarter, about the same as the year before.

Among the competitors cutting into eBay are Google and Amazon, which have devised methods of steering consumers to merchants offering the lowest prices and offering their own check-out systems to compete with PayPal.

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