Google vs. PayPal-eBay: Silicon Valley Titans Battle To Dominate The Online Payment Processing Market

The new tech titans' war in Silicon Valley these days is between eBay-PayPal and Google for control of the future of the highly lucrative online payment processing business.

Currently, PayPal, which eBay purchased in 2002, is the leading payment processing service in the world with a claim of 143 million users in 50 countries.

Google wants a piece of the action, and they want it bad. At stake are billions of dollars and potentially dominance of ecommerce transactions in the future.

The battle between eBay's PayPal and the global Internet's most popular website - Google - has been brewing for two years following a bizarre war chant targeted at Google during a PayPal company meeting.

But tensions heightened dramatically last month when eBay suddenly pulled all of its U.S. advertising from Google's search results service - Adwords (for which companies pay millions of dollars to be featured prominently in targeted certain search results).

EBay announced it was divesting approximately $25 million a year from Google's Adwords on the heels of a Google-sponsored event in Boston during the eBay Live convention in Bean Town that reportedly infuriated eBay's CEO Meg Whitman.

Whitman headlined the annual eBay Live convention where some 9,000 eBay sellers and merchants attended, making it one of the largest conventions in the United States.

Google, which is aggressively positioning itself to compete with eBay's PayPal service by marketing the Google Checkout service, welcomed buyers and sellers to a "Let Freedom Ring" party in Boston but canceled the event at the last minute.

The title of Google's party was apparently a play on the tiff between Google and PayPal. For more than two years now PayPal has refused to offer Google Checkout as an option in any of its variety of payment processing and fund transfer services.

PayPal is offered as an alternative payment option on websites for companies like Dell and Apple. But, PayPal's core base is from eBay and thousands of other merchants who sell on their own but offer PayPal as a payment alternative.

Annually, online payment processing is a multi-billion dollar business expected to grow by leaps and bounds in the next five years worldwide. That said, it makes perfect sense why Google wants a piece of the action, and they have the money and brand name to seriously threaten PayPal's dominance of the market.

According to Whitman the move to pull eBay advertising from Google's Adwords service was out of spite, but in fact a long-planned "test" to see what the "response" would be if eBay divested ad dollars from Google and used that money to sprinkle across a number of less popular search engines (like MSN, Yahoo and Ask.com) .

"We were not pleased by this notion of the Google Checkout party and the marketing around it, I will tell you that," eBay CEO Meg Whitman told the Associated Press last month.

"But you don't (deploy) these kind of tests [diverting ad dollars to other search engines] with no planning. You can't. Because you have to know how you're going to redeploy these US dollars."

Apparently, the pilot must have crashed because eBay reinvested its millions to Google's Adwords service in less than two weeks following the tiff.

A larger storm may be brewing for eBay that few on the outside fully understand.

Stayed tuned for Part Two of The Titans Battle To Dominate The Future of Online Payment Processing: "PayPal Declares War on Google" will be published tomorrow.

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