The comeback story is rare in the dot-com world, but eBay (EBAY) is poised for a resurgence. As part of its reboot strategy, the Silicon Valley company is betting PayPal's international expansion on Brazil.
PayPal, the Web payment company eBay bought a decade ago, burst into Brazil's retail scene two years ago, determined to strike it big. On a call with analysts and reporters last month, eBay CEO John Donahoe said PayPal's popularity in Brazil is soaring.
But its success has been mostly with Web retailers, and what it really needs to succeed is to conquer
the Brazilian mobile market. How successful PayPal is in Brazil's mobile sector could determine its success in other -- and trickier -- Asian markets that are part of PayPal's global expansion.
Challenges await in Brazil. With limited mobile Web access, a smartphone shortage, challenges from Brazilian mobile carriers and competition from home-grown startups, PayPal faces a thorny environment that threatens to stall its growth there.
"PayPal will find big competitors in Brazil," said Eduardo Henrique, co-founder of Movile, a mobile publishing platform with offices in Brazil and Silicon Valley. "Almost nobody sees PayPal as an option for mobile. Their product is not as good as the others."
Some experts say PayPal hasn't
yet figured out the peculiarities of Brazil's mobile industry. And in a country where more people own phones than computers, and would rather shop from their phones than an Internet cafe, the lack of a surefire mobile plan is a problem.
"The potential of m-commerce is much, much greater than e-commerce," said Brazil native Ron Czerny, a longtime Silicon Valley entrepreneur and founder of mobile gaming network PlayPhone. "Everyone has a phone and purchases through phones. Not everyone purchases through PCs."
In Brazil, it's go mobile or go home. Cellphones -- but not smartphones -- are king and computer and Internet access remains scattered. About 42 percent of people have Internet access and there are about 70 million PCs for a country of 197 million. But most everybody in Brazil -- young and old, poor and rich -- have phones. The country has about 260 million cellphones -- about 130 phones per 100 people -- and mobile users have more than doubled since 2007, according to Teleco, a Brazilian telecommunications research company.
Electric bill, water bill, phone bill -- many Brazilians pay their monthly expenses on their phone through a mobile carrier, Czerny said. Buying clothes, Christmas gifts and baby diapers is a natural next step for the country recently named the fifth-largest mobile phone market in the world by telecommunications research firm BuddeComm.
If PayPal can figure out how to reach people on their phones, it can tap into large and diverse swaths of consumers in a country with limited transportation and infrastructure. But that's not easy for a company that has been tethered to PC and smartphone shopping since its inception. In Brazil, only about 15 percent of mobile customers have smartphones. Analysts say taxes keep smartphones out of reach for many; an iPhone can run $1,100.
Without the luxury of smartphones, PayPal's entry into mobile depends on partnerships with mobile carriers to facilitate cell purchases without web access. The success of these partnerships, said Henrique, will determine whether PayPal is successful in Brazil. However, there is little incentive for Brazilian mobile carriers to help an American company compete in a space where they have long had control.
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