Shopping Spree: Pay with eBay or Google?

There is the eBay sellers’ fee. When the item finally sells, eBay takes another cut, charging an associated commission off the final price of the auction. The company’s easy-to-use infrastructure has contributed to that success.

In addition, eBay is attempting to generate even more revenue per transaction. It recently purchased online company Skype, integrating its web phone services into its auction site.

Expanding from traditional e-mail communication, users can now also interact with a person live, through voice interactions. The added convenience costs a few cents per minute. Ebay has seen $45 million in revenue in 2Q'06 from Skype alone.

However among the most convenient and useful features are payment systems that don’t work well on one site but facilitate transactions among various online sellers and retailers.

A number of companies have seen the opportunity but many have not made been able to capitalize.

Western Union’s BidPay, CitiBank’s c2it, and Yahoo!’s PayDirect service have all closed shop. Early in its history, eBay conceded its BillPoint service had not been up to the task.

One system

However in 2002, eBay found the system it was looking for through Paypal Inc. The system had garnered a massive following, and by the time eBay had purchased it for nearly 2 billion in 2002, it was already used in over 50 percent of eBay listings.

The purchase was well worth it. Paypal is now used in 96 percent of all its auction listings in the US, and brought in $334million in revenue from Paypal for the company’s second quarter in 2006.

That figure represents 20 percent of eBay’s total revenue. However, only 2 percent of PayPal’s income came from purchases unrelated to its auctions. While the PayPal solution can work independently of eBay, only 2 percent of the income generated through the payment system took place apart from eBay auctions.