In its characteristically understated style, Google has begun offering a new payment option for a handful of people who had listed items for sale on the Google Base posting service, a step that could eventually put the Mountain View Internet giant in direct competition with eBay and PayPal.View this article written by lise Ackerman of Mercury News here

This is from the Offical Google Blog.
There’s been a lot of interest and speculation about what Google is doing with payments. We thought we’d give you a quick update on what we’ve done so far and what we see down the road.

If you take a look at the history of Google’s advertising programs and online services, one thing you notice is that online billing and payments have been a core part of our offerings for some time. To run our ad programs, Google receives payments every day from advertisers, and then pays out a portion of those funds to advertising partners. Over the past four years, Google has billed advertisers in 65 countries more than $11.2 billion in 48 currencies, and made payments to advertising partners of more than $3.9 billion. When one of our consumer services requires payment to us, we’ve also provided users a purchase option.
View this Google Blog

On 25th June 2005 I had written article called “Google plans to nuke Paypal”. Its finally true. It’s in the news all over.

The column published on 25th June, 2005.

Google Plans to Nuke Paypal

Corporate communication and blogs combined with technology blasted in the new media aka www and the impact could be lethal. Vested information enthroned on the blog squalled on the www and eureka the message would be delivered. What a terrific idea, resulting revenues and an informative column. Alas! not all dreams are meant to come true and the same happened with my column on blogs and corporate communication. A week’s research nuked by Google. If on a Sunday afternoon you read a headline like “Google Takes on Paypal” you can’t help but put everything down.

The Importance of being Paypal

If you an online entrepreneur Paypal is your probably your best online pal. PayPal is one of the most popular methods of paying on the Internet without using the credit card. In fact, no cash transaction is generally involved as users can just transfer money using their e-mail ids.

In 2002, San Jose-based eBay.com bought PayPal for $US1.3 billion. Presently Paypal accounts for a substantial portion of eBay’s profits. During the 1st quarter Paypal accounted for $233.1 million or 23 per cent, of eBay’s revenue.

The Google Move

Google versus Yahoo, corporate rivalry is understandable. Google versus MSN, Microsoft the bully and its hunger for rival companies, again comprehensible. But Google versus eBay (Paypal is an eBay company), not comprehendible. Consider this, Google relies mainly on advertising for its revenues and eBay one of its biggest advertisers. So why is Google so hell bent upon crippling one of its biggest customers?

War time equations

What Google is probably doing is following the ancient war maxim of minimum casualties. The reason for its move probably lies in the Google versus Yahoo versus Microsoft war and Google has good reasons to look into this market considering a bulk of their revenues come from the online advertisement market which is expected to get complicated with the entry of Yahoo! and possibly Microsoft services later this year. The cost of this probably maybe killing one of its biggest customers, eBay. The payoff will be survival. Google seems to be making the former choice.

For Google, a payment service could represent a significant expansion beyond online advertising, which generated 99 percent of its $3.2 billion in revenue last year.

The Credibility Factor

An important aspect to consider currently is that Google taking on eBay is only a piece of news as of now. Nothing is confirmed from Google and no spokesperson from Google has said anything so far. The source of this news is The Wall Street Journal which reported Google’s plans on its Web site late yesterday, citing sources familiar with the Mountain View-based company’s plans. The Journal did not provide any details about Google’s strategy. But worth mentioning is that in the recent breaking news Wall Street Journal also takes the credit for reporting the Apple’s switch to Intel Processors for the first time on the Internet. Wall Street Journal cited sources familiar to Google Inc. and are said to be quite trustworthy.

Could this news have been leaked to ‘credible sources’ in WSJ?
Is this part of some corporate communication plan of Google to scare Paypal and submit itself to Google?
Is Google trying to do a Microsoft to smaller entities?

Unanswered questions. Probably next few days will have answers to some of them.

The End Benefits

It seems likely that Google would want to create streams of revenue in addition to their advertising systems as everyone knows not to put all their eggs in one basket. Paypal don’t really have any international competition for their services so having Google compete with them will be good for both webmasters and users alike. Paypal has a huge head start. But worth remembering is, so did Hotmail.com. Remember what Gmail.com did to the world of email?

Puneet Mehrotra is the founder of TheBusinessEdition and a columnist for HindustanTimes on New Economy