- Enhance the shopping experience for users, even if they already have PayPal in many cases.
- Make AdWords more attractive for advertisers. For every $1 spent on keywords, Google will wave fees on $10 of purchases. Google is actually subsidizing Checkout (2% + 20c is less than 1.95% + 30c that credit card companies charge in many cases), so it doesn't aim to create a new revenue source. It's all about volume (compare Amazon.com's free shipping strategy), and about prices as well (higher demand for keywords).
Will Checkout beat PayPal, which actually is a revenue source for eBay? I don't think so.
- I think the market will expand. There is room for both.
- Advertisers will not offer Checkout exclusively on their sites. That would be a dumb thing to do, as it would force users to sign up to something totally new.
- The Yahoo! deal will allow eBay to match Google's Checkout. Yahoo! will push PayPal and Yahoo! Search Marketing could subsidize it. (AdWords + Checkout = YSM + PayPal.)