Is eBay (NASDAQ:EBAY) a little nervous now that Google (NASDAQ:GOOG) has confirmed that it will be rolling out an electronic payment service? Even as Google insists that it will not compete directly with PayPal, how comfortable can eBay be with Google launching any kind of digital-cash service?
After all, PayPal didn't succeed because it was eBay's preferred online-paying platform. It wasn't. eBay originally championed its own BillPoint service. PayPal began as a third-party assault on eBay, and succeeded because it achieved the critical mass necessary to make a person-to-person service take off.
So what to make of Google's announcement? CEO Eric Schmidt insisted this week that the new product will be more in line with its current paid-search stronghold. "We do not intend to offer a person-to-person, stored-value payments system," Schmidt said in an interview with the Associated Press. That's fine, but if I were eBay, I would still be quivering.
Here's why: With 99% of Google's revenues coming from advertisers, why go "person-to-person" when most of the transactions and eventual leads produce a sale with a merchant? Add to that Schmidt's claim that the new service will not include a "stored-value" aspect and you're left with little more than an attack on credit cards.
I don't buy it. Google wouldn't be bringing much to the table if that's all that it had to offer. This is not a company that does things as a "me too" fashion statement. It only goes to the prom if it has a dress that will make heads turn.
Google also happens to have plenty of credit card companies paying top dollar for ad placement on its site. It wouldn't want to alienate those lucrative sponsors. Sure, eBay is also one of its biggest advertisers, but it's easier to take on one company and its online micropayment dominance than the entire credit industry.
In the end, no matter how Google's mysterious foray into Web-based payments starts out, the public will ultimately take it where the money is. If it gains popularity, it may morph into something entirely different. That's not out of the question, given Google's extensive reach.
Then again, Yahoo! (NASDAQ:YHOO) has never had a problem drawing a crowd, and it still discontinued its PayDirect service back in November. In January, Microsoft (NASDAQ:MSFT) announced that it would no longer promote its Passport feature to third parties after it fell out of favor with eBay and Monster Worldwide (NASDAQ:MNST).
So Google still has an uphill battle on its hands. But thankfully, that's just the way Google likes it.
More related links:
- PayPal did have a notorious outage late last year.
- eBay's last quarter was a mixed bag of results.
- eBay and Google are still story stocks worth telling.
- Share your thoughts on our eBay discussion board.
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Longtime Fool contributor Rick Munarriz is a satisfied eBay user with 147 positive feedback recs to show for it. He does not own shares in any of the companies mentioned in this story. The Fool has a disclosure policy. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.
