(May 30, 2006) A multi-faceted marketing partnership between giant Internet portal Yahoo! Inc. and PayPal Inc., announced last week, seems likely to drive a significant flow of transaction volume to online auction provider eBay Inc.’s payment service. According to Nielsen//NetRatings, Sunnyvale, Calif.-based Yahoo! is the No. 2 parent company in terms of visited Web sites, with 87.8 million unique home-based visitors in April, second only to Microsoft Corp.’s sites with 96.3 million home visitors last month.

The eBay-Yahoo! deal includes not only PayPal, but also advertising and search services, a cobranded eBay toolbar on Yahoo!, and so-called click-to-call advertising technology that lets a viewer click on a link inside an online ad in order to directly call the advertiser to initiate a transaction.

Though PayPal already is a payment option on a number of Yahoo!’s vast menu of online services, PayPal will become Yahoo!’s “premier” payments service, according to a PayPal spokeswoman. “We will be very prominently displayed,” the spokeswoman says. PayPal will be Yahoo!’s exclusive online provider of so-called wallet services that, through PayPal, will let Yahoo! users fund purchases by linking their payment transactions to designated credit or demand-deposit accounts.

Most details of the payment service, however, have yet to be announced. Testing will begin this summer, with full rollout next year. San Jose, Calif.-based eBay doesn’t expect a material effect on earnings this year. The PayPal spokeswoman would not make projections for transaction volume. A Yahoo! spokesperson could not be reached for comment today.

The enhanced service comes at a time when both Yahoo! and eBay are feeling competitive heat from Google Inc., the Mountain View, Calif.-based search-engine giant that’s rapidly expanding its product list and Internet reach. Rumors abound that Google is interested in extending a payment service it has used for various Google platforms to non-Google merchants, though the company hasn’t confirmed that (Digital Transactions News, March 10). But the PayPal spokeswoman says Google had nothing to do with the Yahoo!-PayPal partnership. “Absolutely not,” she says. “There’s a lot of crossover in people who use Yahoo! and who use PayPal. It’s a natural fit.”

Meanwhile, General Electric Co.’s GE Consumer Finance unit announced today that it is now issuing a MasterCard credit card dubbed PayPal Plus that will offer various rewards for PayPal users. The new card program replaces a Visa cobrand issued for PayPal by Washington Mutual Inc., which inherited the card when it bought Providian Financial Corp. last October. The PayPal spokeswoman says PayPal chose GE because GE already had a finance program for PayPal users and offered an attractive rewards package. PayPal would not disclose how many consumers carry the Visa card, which is still valid but does not have a rewards program. Holders of the MasterCard will earn one point for every $1 spent in purchases. For every 2,500 points earned, customers will receive a coupon for $25 towards eBay.com purchases made with PayPal.