Google Inc., the operator of the most-used Internet search engine, confirmed it is developing a payment service.
But the company says it sees the service as a way to give consumers more reasons to use its Web sites and for Google to get more of the estimated $12.3 billion that will be spent on online ads this year.
It said it does not plan to go head to head with PayPal Inc.’s person-to-person payment service.
“The payment services we are working on are a natural evolution of Google’s existing online products and advertising programs,” Google chief executive Eric Schmidt said in a statement sent by e-mail Tuesday.
Adding payment capabilities may help Google sites draw more searchers and advertisers, stepping up competition with Yahoo Inc. and PayPal’s parent company, eBay Inc. Mr. Schmidt said he hopes to benefit from the rising popularity of the Internet as a place to buy and sell.
Google, of Mountain View, Calif., already lets clients conduct financial transactions online. Companies can bid for ads that appear alongside search results and pay by credit card. Google also pays a commission to some Web site publishers, such as Web log writers, that display ads sold by Google.
Google said it is not developing a PayPal-type product that would allow funds to be transferred between people. PayPal is widely used by buyers and sellers to exchange auction payments and make other transactions.
Dan Schatt, an analyst for the Boston market research firm Celent Communications LLC, said, “If Google can actually turn a search into a purchase, they’re going to be able to command a lot more in terms of advertising dollars.”
PayPal spokeswoman Amanda Pires would not discuss Google’s payment program. She said in an interview that Google remains an important partner for eBay. “It brings traffic to the marketplace and we continue to expect that relationship will be strong,” Ms. Pires said.
Anthony Noto, an analyst with Goldman, Sachs & Co., said that global online sales could rise 37% this year, to $287 billion.
Yahoo, the No. 2 U.S. Internet search engine, offered a person-to-person payment system called Yahoo PayDirect until 2004. Joanna Stevens, a Yahoo spokeswoman, said last week that “we didn’t see it as a business that warranted our investment at that point in time.”
Yahoo still offers Yahoo Wallet, which stores consumers’ credit card, shipping, and billing information.
