Comcast Corporation (CMCSA - Analyst Report) and eBay Inc. (EBAY - Analyst Report) are at an early stage of discussion to enable Comcast’s subscribers to buy products featured in television advertisements and pay via eBay’s PayPal payment service. We believe that this is an effort by the company to compensate for the loss sustained from over-the-top video segment.
As part of the collaboration agreement, viewers with a PayPal account will be able to buy a product being advertised on television, donate money to political campaign and non-profit organization. Additionally, they can also ask advertisers to text information to their phones regarding a product and can collect coupons through PayPal to shop in retail stores like Home Depot Inc. (HD - Analyst Report) .
Though innovative, this type of Enhanced TV Binary Interchange Format (EBIF) is not new for Comcast subscribers. The company already has an application that supports HSN Inc’s (HSNI - Snapshot Report) Shop By Remote product and can run on any type of set top box.
PayPal has already signed a similar deal with Tivo Inc. (TIVO - Analyst Report) . Further, this deal with Comcast is an attempt by the online shopping giant to grab significant market share of the TV commerce business. Last year, PayPal came up with a similar application for Apple Inc’s (AAPL - Analyst Report) iPad customers. According to Nielsen Co., on an average, the U.S. consumer watches 34 hours of television per week, among which 49% of them are ready to embrace the idea of making purchases through Television.
We believe that this is a win-win situation for both the companies. Cable companies like Comcast Corporation, which has been trying this EBIF format for long, now has the support of its interactive platform, X1.
Furthermore, the cable MSO’s will be able to take in higher fees for ads, since they would give the customers the ability to purchase from the television, and thus offset the reduction in revenue from other sources. On the other hand, PayPal, which already has 20% of the global e-commerce sales, can improve its registered customer base through the deal and can increase its topline by charging transaction fees for the service.
We maintain our long-term Neutral recommendation on Comcast Corporation. Currently, Comcast Corporation has a Zacks #3 Rank, implying a short-term Hold rating on the stock.