Will This Company’s Futuristic Thinking Pay Off?
William is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
In the financial media, you always hear about how the best companies think over the long-term. Online auction house, payment processor, and e-commerce platform eBay (NASDAQ: EBAY) decided to take things a step further in terms of “light year thinking.” With consumers centering the way they work, consume, and entertain themselves on the web, it pays to look toward the stars in an effort to gain a competitive edge.
PayPal in space
On June 27, eBay launched PayPal Galactic, a joint initiative with the SETI Institute to work on issues surrounding the “commercialization of space.” PayPal wants to eventually capitalize on space travel, believing that commercial space travel will decrease in cost, resulting in more people traveling into orbit and possibly staying in futuristic orbital motels. PayPal wants to serve as the conduit of choice for any purchases these futuristic tourists may make.
You may argue that space tourism resides in the realm of science fiction; however, the allure of braving the final frontier will bring in adventure-loving tourists by the droves. It could well morph into the next hot growth industry, and PayPal will be ready to benefit.
Replicators come to life
In the popular science fiction series Star Trek: The Next Generation, you may have seen machines called replicators, where anything gets made per your verbal command. eBay, in partnership with three 3D printing companies, including the manufacturer of Makerbot, Stratasys (NASDAQ: SSYS), wants to bring that future a little closer.
Stratasys, in an effort to build up its Makerbot awareness, decided to team up with eBay to utilize e-commerce to sell 3D printing services. This presents an interesting strategy. Consumers and business customers alike may decide to purchase their own 3D printer if they like the products they order through the use of eBay’s latest app, eBay Exact.
Using eBay Exact, customers can order customized products ranging from jewelry to plastic cases for smartphones. Users can customize their product online and expect delivery within 7-14 business days.
Many pundits argue that 3D manufacturers such as Stratasys represent the wave of the future in manufacturing. It could revolutionize everything from the making of guns to car parts given that these companies don’t get sued for copyright and patent infringements. Stratasys increased revenue 118% over the last five years, translating into a gain of 324%, versus a total return of 35% for the S&P 500 according to YCharts.
Setting itself apart
Ordering customizable products from a faraway 3D printer certainly takes e-commerce to interesting new levels. eBay, which started out as an online auction house and eventually moved into other successful ventures such as online payment processing through the acquisition of PayPal, can now actually customize products for its users with the press of a button.
Clearly eBay wants to separate itself from the likes of online conglomerate Amazon (NASDAQ: AMZN), which sells everything from e-books, web hosting, original streaming video programming, and groceries. For example, Amazon launched Jet City Comics where the company will produce original print and digital comic books. Amazon represents another company that understands the increasing web-centric nature of the consumer.
Amazon grew its revenue 253% over the past five years, versus 73% for eBay according to YCharts. eBay and Amazon gave shareholders market beating returns of 117% and 343%, respectively.
eBay understands that it operates against some stiff competition and teaming up with Stratasys represents a good way to set itself apart.
Good year so far
On July 19, eBay reported decent second quarter results. PayPal, the online auction marketplace segment and its e-commerce platform all increased revenue 20%, 10%, and 11%, respectively. So the company is plugging along on all cylinders, and it wants to keep it that way.
eBay sees the need to look to the stars and think in terms of “light years” in order to differentiate itself. Look for the company to find more interesting ways to engage consumers by bringing in more partnerships. Look for Stratasys to pursue other creative ways to market its line of 3D printers. Amazon will also continue to use its deep pockets to thwart pretty much everyone. These companies will continue to innovate in order to compete effectively in a technological world, and shareholders should benefit.
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William Bias owns shares of Ebay. The Motley Fool recommends Amazon.com, eBay, and Stratasys. The Motley Fool owns shares of Amazon.com, eBay, and Stratasys. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!