Thursday, December 15, 2005

Google CEO confirms online payment system

Web search leader Google is developing an online payment system but not a direct rival to eBay's PayPal, Google Chief Executive Eric Schmidt said Tuesday.

Schmidt spoke after several days of heated speculation over reports that Google was working on a potential rival to PayPal, eBay's popular online payment system. Schmidt said Google does not intend to offer a "person-to-person stored-value payments system" like PayPal's, in which money briefly resides in PayPal's control during the transaction, but he did not give details of how the Google system would differ. "The payment services we are working on are a natural evolution of Google's existing online products and advertising programs, which today connect millions of consumers and advertisers," Schmidt told Reuters in a brief telephone interview in which he declined to elaborate.

"We believe that e-commerce can be improved and we are working on ways to improve the user experience," Schmidt said. The company declined to say when a product would be available. By avoiding PayPal's model, Google may also bypass a replay of the regulatory battles that were among the thorniest obstacles PayPal faced in its early days as an independent company. The biggest issue was PayPal's plan to briefly hold money on account, generally a bank function, and the saga was chronicled in a book called "The PayPal Wars."

Google currently accepts payments from advertisers and sends money to participants in its AdSense program, which pays Web publishers when Google ads are displayed on their sites. Google advertisers pay each time a Web surfer clicks on an ad that is generated through the company's AdWords program. In March, Google said it began testing a third-party electronic funds transfer service to send payments to Web sites that carry Google ads. The Web search darling recently launched a video search service, which will sell content. The company also operates a price-comparison shopping engine called Froogle, which analysts think could one day become the heart of a full-fledged e-commerce system.

For its part, eBay has been working to expand PayPal's reach beyond its online marketplace and has signed up a variety of retailers including Apple Computer's iTunes service that sells individual songs for 99 cents each. Analysts on Monday said the biggest and most immediate risk to PayPal from a Google payment system would be a cap on growth in PayPal's off-eBay business, prompting a 2 percent drop in eBay shares.

Adult site sues Amazon over sexy images

Adult magazine publisher Perfect 10 is suing Amazon.com, alleging that the e-tailer's search engine is violating copyright law by displaying thousands of images from its Web site without permission.

"It is Perfect 10's contention that 'search engines' such as A9.com and Google are displaying hundreds of thousands of adult images, from the most tame to the most exceedingly explicit, to draw massive traffic to their Web sites, which they convert into ad revenue or sales revenue," the publisher said in a statement. Beverly Hills, Calif.-based Perfect 10 filed a similar lawsuit against Google in November and said it has sent numerous notices of infringement to both Google and Amazon that have been ignored. Representatives from Google and Amazon did not immediately return calls seeking comment.

The lawsuit against Amazon was filed in U.S. District Court in Los Angeles on Wednesday.. A motion for preliminary injunction, that was due to be filed on Friday, asks the court to prevent Amazon's A9 search unit from displaying and distributing the images, said Russell Frackman, an attorney representing Perfect 10. The lawsuits allege infringement of more than 1,000 images. Under U.S. copyright law, defendants could be liable for up to $150,000 for each infraction, Frackman said. The Google lawsuit has been tied up in discovery disputes, he added.

The search sites are displaying reduced-size images of Perfect 10's, but also larger images and links to many other Web sites that are showing full sizes of the copyright images, Frackman said. Porn is driving searches, and thus ad sales, on the Web, said Norm Zada, a former professor and IBM computer science research staff member who launched Perfect 10 magazine in 1997. "Overture's Key Selector Tool indicates that most searches on the Internet are sex-related," he said in a statement.

As search engines expand into images and video, they are increasingly at risk of becoming targets of copyright lawsuits. On Thursday, Google scrambled to remove movies and TV episodes that were uploaded to its new video search site that infringed on copyright. The situation is more dire after the U.S. Supreme Court ruled earlier this week that companies can be held legally liable for copyright piracy that takes place on their online networks.