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123webguru News Desk
Ebay shares sink on talk Google eyeing PayPal rival
NEW YORK (Reuters) - Shares of eBay Inc. (EBAY.O: Quote, Profile, Research) fell about 3 percent on Monday on concerns that Google Inc. (GOOG.O: Quote, Profile, Research) may offer an "online wallet" service that rivals eBay's PayPal.
The move comes amid news reports that Google this year may launch "Google Wallet," an electronic-payment service that could help the Internet-search company diversify revenue. Like PayPal, the service could let users pay for purchases on Web sites by funding accounts from their credit cards or checking accounts.
"Regardless of the initial success of the product, we believe such a launch would likely negatively impact eBay shares and could be a positive catalyst for Google," said Piper Jaffray analyst Safa Rashtchy in a note to clients.
Rashtchy noted that Google has a history of launching products that are superior to existing service, with new user interfaces or features. In addition, Google has a large user base to tap and can likely subsidize the cost of transactions with advertising, so it can offer a lower price to merchants.
"Google payment system may not compete directly with PayPal, but it could limit PayPal's expansion beyond eBay," Rashtchy said.
However, Needham & Co. analyst mark May said that while the launch of such a service could boost the company's growth, it will take time to match the market size of PayPal, which he says is generating $1 billion in annual revenue 50 percent.
"Any such service would take at least 12 months to contribute to earnings," he said in a note. "In order to gain traction in online payments, Google must first gain traction as a destination for e-commerce transactions."
On Inet, shares of eBay were off $1.06 at $36.99, from the Friday Nasdaq close of $38.05. Google shares also slipped, easing $4.30, or about 1.5 perecnt to $276.00.
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