Starting today with some yesterday’s news, but I’ll get caught up. Stay with me.

The Wall Street Journal has a good piece examining how PayPal intends to take on Google’s competing service that Google CEO Eric Schmidt says won’t compete directly with them. PayPal CEO Jeff Jordan seems to think this is statement isn’t entirely accurate and has been ramping up PayPal operations to meet the impending GBuy storm.

The part that of the article that struck me as odd is here (emphasis mine):

The Google challenge comes amid PayPal’s push to win new business. In June, the San Jose, Calif., business introduced new software and tools so smaller merchants could process PayPal transactions on their own Web sites. Its sales force has been recruiting big-name merchants such as Dell Inc. and Sharper Image Corp. to accept PayPal as an option on their Web stores. Late last year, PayPal purchased VeriSign Inc.’s online-payments-technology unit for $370 million to help build ties to hundreds of new merchants.

First of all, go ask somebody in the adult business who was using PayPal for processing what PayPal did to them. Heck you can easily Google this subject and see how PayPal was courting the adult business at one time, even showing up at industry trade shows trying to get adult webmasters on board — and they were.

Until eBay bought them.

And then these PayPal customers were told they needed to pay a high risk fees and then ultimately told to take their business elsewhere. PayPal lumped adult sites in with gambling sites like the two were intertwined in illegal activity. And when I say adult sites I’m not only talking porn sites, also phone sex operators, sex toy and adult movie distributors and more.

I don’t have a hard on, pardon the pun, for PayPal. We’ve used them — and still do — for some of our ventures and the experience has been positive. I know a number of people, though, who were hurt by PayPal for what I feel to be silly reasons on PayPal’s part. It’s not like they said: hey, we just won’t process illegal adult sites, which would have been totally reasonable, they started by charging the adult sites more money and then later said they didn’t want the business at all. I can see eBay not wanting to process gambling money, but not processing legitimate sex toy and movie distributors?

So it is with this knowledge and memory that I’m a bit skeptical of PayPal’s grand plans to expand their business. Sure, they’d like to get their hooks into mainstream markets like Best Buy and Sharper Image, but what happens if those markets turn out to be not profitable to them or create complications with eBay? Will they turn on these markets too?

When Google fires off an auction clone — GAuction — then this space will get really interesting.

I hope GBuy does go head to head against them. As written here numerous times before, I’m a strong believer in competition being healthy for all parties, most importantly the consumer. Having GBuy be sucking some PayPal exhaust would be good for improving PayPal and perhaps as this WSJ article shows, it already has been.

Bring it.

• $500 fine for using PayPal for gambling, porn or unauthorized prescription drug sales
• Paypal integration in Skype to finally be reality as GBuy lurks
• eBay slows, PayPal grows
• Bill Me Later in crosshairs of PayPal Pay Later
• eBay Live! June 24-26, 2004 in New Orleans
• No Google Checkout for eBay auctions, rippling biceps alert