Google Inc., the most-used Internet search engine, will start an online
payment system this month that will challenge EBay Inc.'s PayPal and
let Google offer more targeted ads, an analyst wrote.

GBuy, which will begin on June 28, will handle purchases between
shoppers and merchants, RBC Capital Markets analyst Jordan Rohan wrote
today in a note to investors. Participating sellers will be listed as
``trusted GBuy merchant'' in Google search results, he said.

Chief Executive Officer Eric Schmidt has confirmed that Mountain View,
California-based Google is working on a payment system to make it
easier for users to buy products online. The move counters an
initiative by EBay, the world's largest Internet auctioneer, which last
month formed an alliance with Yahoo! Inc. for Internet advertising and
online payments.

``Consumers now view Google as the main starting point for the
Internet,'' Rohan, who rates Google shares ``outperform,'' said today
in an interview. ``That centrality gives Google a huge advantage.''

The product will generate transaction fees for Google and purchase data
may help the company identify which search keywords are most likely to
generate sales and increase the cost of those ads, Rohan said. He said
he learned details of GBuy from merchants who are testing the software.

"We are experimenting in making the whole advertiser buy cycle
faster,'' Schmidt said at the conference in Las Vegas. ``If you get a
stop watch and you time how long these things take, they take way too
long in an online, instantaneous world.''

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