• Forbes.com, Monday, January 22, 2007 11:15 AM

Google, the Web industry's much-maligned "frienemy," is now pursuant to online payments, the domain of eBay's PayPal. Google Checkout, the new online payment system for merchants has got eBay spooked.

In July, the online shopping giant banned eBay merchants from using Checkout. Last week, eBay reiterated that new sellers must offer PayPal or credit cards as payment for their products. It's reasoning: PayPal is the safest way to pay.

In response to the significant seller promotion Google offered for Checkout over the holidays, eBay issued a counter offer: the ability to sell goods to other countries at no added cost and $2,000 worth of free listings insurance coverage.

Google responded by dropping its own listing fee down to 20 cents from 30 cents per day, and will continue to offer the subsidy that keeps Checkout free for merchants through the end of this year-an offer eBay simply can't match. Google is showing it really wants to eat into PayPal's market share quickly. This could be particularly hard on PayPal, which has been the most positive component of eBay's business recently.

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