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Google Denies Attempt to Match PayPal Service

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June 22, 2005|From Associated Press

Google Inc.'s chief executive Tuesday denied reports that the online search engine leader was gearing up to compete directly with EBay Inc.'s pioneering PayPal service, but acknowledged some kind of electronic payment product was in the works.

Eric Schmidt did not give details about the project but said it wouldn't trespass on PayPal's turf.

"We do not intend to offer a person-to-person, stored-value payments system," Schmidt said.

That description fits PayPal, a service that creates "digital cash" by accepting credit card payments from its users and then delivering the payments to a designated recipient.

As e-commerce thrived so did PayPal, growing from 24 test users in 1999 to 72 million account holders through March. Looking to profit from the fees that PayPal collects from completing online transactions, San Jose-based EBay bought the service for $1.3 billion in 2002.

The Internet industry began buzzing about the possibility of Google competing with PayPal after the subject surfaced last week during an e-commerce conference hosted by Piper Jaffray. The Wall Street Journal subsequently reported that Google hoped to roll out a rival payment service later this year, quoting people familiar with the company's plans.

Google consistently declined to comment until Schmidt tried to set the record straight Tuesday.

The Mountain View, Calif.-based company's recent incorporation of a subsidiary called Google Payment Corp. fed the perception that a battle with PayPal loomed. But Schmidt indicated that the project wouldn't stray far from its search engine.

"The payment services we are working on are a natural evolution of Google's existing online products and advertising," he said without further elaboration.

The speculation about Google's plans have raised investor fears that PayPal's growth might taper off, squeezing EBay's profit. Shares of EBay slipped 34 cents Tuesday to $36.90.

At the same time, investors have been hoping Google will develop another source of revenue besides online advertising, which accounted for almost all the company's $369-million profit during the first three months of this year. Shares of Google rose $1.14 to $287.84.

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