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Leave it to the financial press to — once again — miss the boat completely. Do they practice missing the target or does it just happen naturally for them. On Friday, the WSJ reported that Google is coming out with a new payment system — Google Wallet. Since, the fools at The Fool have posted their insights in Google Gunning for eBay?. The article suggests that Google, the newly crowned king of category killers, could pose a significant threat to eBay’s prized PayPal unit.

As I sit here now, eBay’s shares have gapped-down about 4% — the markets are reacting!
Take a moment with me now to pause and consider this foolish theory. Google, which generates in excess of $1 billion per quarter in revenue, according to The Fool is not only targeting, but a real threat to PayPal and eBay. No mention is made of the fact that virtually all of Google’s revenue is generated by search-based ads. And, there is no reference to Google’s complete absence in the product sales environment — including auction and online stores — that eBay thoroughly dominates — both domestically and in many cases internationally.

I suppose the theory goes something like this. If you can provide a payment system to 70 million users, then they will use it. And, if they use it, they will stop using PayPal. Forget about the fact that all the stuff they are buying is being bought and sold on eBay. Forget about the fact that Yahoo, which had a robust store front community, tried it and failed. Forget about the fact that Google’s shopping tool, Froogle, is an elementary knock-off of so many other shopping bots.

In fact, let’s just forget about all of it, because Google is still the next big thing to hit Wall Street. And next big things to deserve a chance to be all things to all people, no matter how unlikely.

So, what does this announcement really mean?

What it really means is that they guys and girls at Google are smart enough to realize that ALL of the billions of dollars in revenue they generate flow through the bank association networks — Visa and MasterCard. These discount fees can add up to 1-2% of Google’s total revenues or roughly $50 million dollars annually. Multiply that $50 million by a P/E of 100+ and now you are talking about real money — not that virtual online wallet stuff.

Chances are, Google is focusing on a way to keep more of that revenue flowing through its own systems. That is, they would rather plug-in an electronic checking system in to their system to allow for a deeply discounted fee structure — just like PayPal did. Once this e-wallet is in place, they can offer promotional benefits — say, $50 in free click-throughs — to their advertisers to switch from the credit card to the Google Wallet.

Certainly over the long-term, Google would love to expand deeper in to online shopping. Google will try to be all things to all people. They will try to get a foothold in the payment systems arena. They will (and should) try to improve Froogle. But, for now, eBay controls the marketplace. And just like every other sovereign with a robust marketplace, their currency will remain highly-valued because it is the quickest way in and out of the marketplace.

This is not to say that the announcement should go unnoticed. The real threat is not to eBay, the 900 pound gorilla of online shopping. However, if I were sitting at the helm of Visa or MasterCard, I would certainly be taking a close look at Google AND eBay’s continued expansions in to payment systems.