PayPal was arguably eBay, Inc.'s (NASDAQ: EBAY) best acquisition. The leading internet payment processing and transaction service continues to rack up revenue for the auction giant on its worldwide auction sites. In addition to that, PayPal has become a sort of de-facto payment and money transfer service on the internet, regardless of being owned by eBay. If you need to buy something from an internet merchant or vendor, many now take PayPal payments in addition to credit cards. With over 150 million accounts active the world over, that's market penetration for you.Could PayPal be a main reason why eBay acquisition rumors may start swirling around the internet in 2008 -- again? Known suitors have included Yahoo!, Inc. (NASDAQ: YHOO) and Amazon.com (NASDAQ: AMZN). EBay seems to be mostly immune from any economic downturn, and in fact may actually pick up more traffic as bargain hunters tighten their wallets and purses in a world of high energy prices and mortgage credit problems. Well, at least in the U.S., anyway.
Although Google Checkout and Amazon's stake in Bill Me Later are two alternatives to eBay's PayPal, first-mover advantage is squarely in PayPal's favor. It's hard -- even with Google's prowess -- to imagine any service rivaling PayPal any time soon. But the popularity of the service may serve to be a central piece in an eBay acquisition should a bidding war develop. That $1.5 billion eBay paid for PayPal back in 2002 may look like a bargain if any outfit ever looks to take over the world's largest auction franchise.
