Auction giant urges customers to use its’ own PayPal service
In the ongoing fight between Internet giants, the latest round has eBay coming out swinging. Shortly after Google rolled out a PayPal-like payment service called Checkout, eBay banned it from being advertised on auction listings.
Auction giant eBay is preventing its sellers from using Google’s rival Checkout service.
Google Checkout allows consumers to buy products online without having to reveal any sensitive financial information to sellers.
Google Checkout joins AlertPay; AuctionChex and 40 or so other payment services blocked by eBay. Payment methods allowed by eBay include bank-to-bank wire transfers, Visa, Discover, MasterCard, and, of course, eBay’s own payment service, PayPal.
Google Checkout is seen as a competitor to eBay’s PayPal service, which allows for payments between individuals, as well as between consumers and merchants.
eBay is not able to monitor or police the actual payment methods that buyers use to purchase items from eBay sellers, said Hani Durzy, a spokesperson for eBay. "But we can control through our Accepted Payments Policy what payment methods sellers advertise on their personal pages."
Citing PayPal’s ease of use and fraud protection features, eBay states on the Rules For Sellers section of its website that it "strongly encourages sellers to offer payments through PayPal".
Offering buyers the option of using any of the blacklisted payment services can result in a cancellation of the listing, limits on account privileges, account suspension and loss of PowerSeller status, eBay warns.
eBay spokeswoman Catherine England told vnunet.com that Google Checkout lacks a track record as a secure and reliable consumer payment service.
She acknowledged that Google is an established brand that has consumer confidence, and that Google had been using the Checkout service before launching it as a merchant offering last week.
But making sure that each payment model offers substantial protection is important for our buyers and sellers, said England. "We are using the same criteria to evaluate all payment services."
eBay recently updated its Accepted Payments Policy. The update added Checkout to the list of banned services. "We continually monitor new payment systems and methods as they come to market," Durzy said.
The search firm started offering the service to online shops last month. It had previously been used only to pay for Google advertisements and offerings from Google Video.
Tried and Tested
eBay’s move to block Google Checkout, which formally launched on June 29, is not intended as a measure to protect PayPal against competition from Google’s new service, according to Durzy.
We have around 105 million people worldwide using PayPal, and dozens of billions of payments take place over PayPal every year, Durzy said. "We are the biggest player in online payments, and we have already faced a lot of competition from firms such as Citibank and Visa."
eBay allows 13 payment services in addition to PayPal, including Allpay.net and MyCheckFree.
Durzy said the reason for the block is to protect users. "For a payments method to be accepted by eBay, it has to have a historical track record of secure operation," he said.
"Obviously, Checkout has just been launched, so it does not have a track record," he explained. "My understanding is that it acts as an electronic wallet by storing a user’s credit card number, so it is not a competitor to PayPal, which acts as a stored-value account."
Google Checkout is likely to be deemed an approved payment service once it has a proven track record, according to England.
The spokeswoman was unable to say when this would occur, but claimed that eBay will continue monitoring the service and will listen to feed back from its users.
In another development, shares in eBay fell more than 5 percent to their lowest since 2003 on the departure of Jeff Jordan, 47, once seen as a potential successor to Chief Executive Meg Whitman.
Investors worry about mounting challenges to eBay as Google Checkout takes aim at the same merchants PayPal targets. "It seems like no matter where you look, there are uncertainties," said Standard & Poor’s analyst Scott Kessler.
Jordan, who led eBay North America until 2004 after joining in 1999, will leave in the autumn after running PayPal for nearly two years.
"I have no plans other than to spend time with my family and to get some sleep," he told Reuters.
eBay also swapped assignments held by executives at Web phone service Skype, eBay International and Shopping.com. The company, which changes the duties of its top managers every few years, did not bring in new managers from outside.
Jordan will be succeeded by Rajiv Dutta, eBay’s chief financial officer before becoming Skype’s president this year.
Whitman said the timing of Jordan’s departure—a week after Google launched Checkout—is "purely a coincidence", but admitted the Web search leader’s service is a new rival.
"I think it is a competitor on some dimensions and not on others. Competition is not foreign to eBay and PayPal," Whitman said in a telephone interview with Reuters.
Asked if Jordan’s departure was due to disagreements over PayPal’s direction, she said there were "no issues at all."
PayPal Killer?
Google has long been viewed as a possible challenger since its Web search ads are an easy way for buyers and sellers to connect. eBay pioneered such online connections.
Analysts, for the most part, do not see Google Checkout as a real threat to PayPal’s dominance in the world of online payments.
"As it stands right now, Checkout does not compare to the functionality PayPal has," said Mukul Krishna, a Frost & Sullivan analyst. Google is trying to augment its service by providing a simple payment platform. It is not even close to a “PayPal Killer” right now.
Krishna also noted that Google will be using Checkout as a way to collect more consumer information to make its advertising strategy more effective. To help drum up business, Google is offering online merchants a discount on Checkout fees in return for participating in its AdWords system.
Analysts have cast doubt on eBay’s growth prospects as its U.S. market slows and its international expansion efforts face tough competition from home-grown rivals in overseas markets.
"In the medium and long term, Google’s checkout service could become a serious threat to PayPal if it widened its target market from advertising to include all types of merchants and merchant sales, whether they are linked to ads or not," said Avivah Litan, an analyst at Gartner.
Citigroup’s Mark Mahaney trimmed long-term earnings growth estimates for eBay from 22 percent to 20 percent, citing competition posed by Checkout, and cut his 12-month share price target to $40 from $51.
“As the growth potential of PayPal off eBay has been part of our core investment thesis on the stock, we view this Checkout development as materially raising eBay’s risk profile," Mahaney said.
Shopping.com CEO Lorrie Norrington was named president of eBay International, replacing Matt Bannick who will lead its corporate charity efforts. Josh Silverman becomes Shopping.com general manager after serving as vice president of products.
As part of the management changes, Alex Kazim will become president of Skype, reporting to its CEO and founder Niklas Zennstrom. Kazim is now Skype’s vice president of products.
Shares in eBay are down 44 percent from their year high of $47.86 in January.