PayPal.com's Business Model

The survey also revealed that PayPal scored way above its competitors (Refer Exhibit I for the results of the Gartner survey).

Commenting on PayPal, Avivah Litan, Vice-president and Research Director, Gartner Financial Services, said, "Overwhelming market lead and brand awareness position PayPal as the company most likely to establish the long awaited and critical e-cash standard for Internet purchases, especially for low-value items. Consumer support, and demand for an alternative to credit cards, may eventually drive larger e-tailers to accept PayPal, despite the fact that PayPal costs merchants about the same as credit cards do."⁵

When the service was launched, several analysts expressed doubts over its future. They dismissed the company as just another start-up with an innovative application.

Expressing his opinion on PayPal, Michael Angus, Director of financial services practice for Gemini Consulting, said, "Maybe, but it doesn't sound like the killer app to me - the thing that is going to blow open Internet payments."⁶

But the rapid pace at which the PayPal service network expanded in five years proved the analysts wrong...