Google planning to take on PayPal

The Wall Street Journal is reporting (subscription required) that Google is planning to launch an online payment service sometime this year that may compete with eBay's PayPal unit. Details are scarce, as the Journal is drawing its information from sources "close to the matter," but the move does make sense.

At first it might not make sense that a company that derives 98 percent of its revenue from search-related ventures would want to get into the transaction business, making ~1-2 percent on transaction costs, but all of that can be tossed aside when you consider that Google is in a powerful position to essentially insinuate itself into any number of transitions. Look no further than Froogle, Google's shopping comparison engine. Not only can they make bank using referrals, but they can take themselves on as a payment processor, and squeeze a little more blood out.