Yahoo! Targets eBay with Payment Service Acquisition

In an effort to consolidate its position in the hotly-contested online auction market, Internet powerhouse Yahoo! (Nasdaq:YHOO) announced Thursday that it has acquired e-commerce payment service provider Arthas.com, Inc.

The acquisition of Arthas, which operates DotBank.com, will allow Yahoo!’s 120 million users to forgo the use of such outside services as PayPal.com and PayMe to make person-to-person purchases through Yahoo! Auctions.

“We expect this acquisition will enable us to further expand the services for consumers of Yahoo!’s person-to-person properties,” said Tim Brady, senior vice president of Yahoo! Network Services.

Move to Simplify

A multitude of Internet auction houses have sprung up in recent years, giving buyers and sellers the opportunity to do business at what amounts to huge online garage sales. Until recently, however, payments had to be sent through the mail, meaning that customers would have to wait weeks for their goods to be delivered. This delay posed a problem for many Web shoppers, who had become accustomed to instant gratification.

Internet entrepreneurs took note, and a slew of sites offering users the ability to make person-to-person payments to other Internet users have opened in the past year.

One such entry, X.Com, announced a partnership with Yahoo! on Monday that will allow Yahoo! users to check their X.com accounts through My Yahoo! and Yahoo! Finance. It is not yet clear how the purchase of Arthas.com will affect Yahoo!’s deal with X.com.

The Person-To-Person Payment Fray

Auction leader eBay is also moving to simplify person-to-person payments for their 10 million users. In a move announced last month, eBay and Wells Fargo (NYSE: WFC) announced a partnership to expand online payment processing company BillPoint, which eBay purchased in May of 1999.

Under the terms of that deal, Wells Fargo, the seventh-largest bank in the U.S., will provide back end support and receive a 35 percent equity interest in BillPoint.

Also, consumer financial software leader Intuit recently reached an agreement with America Online to provide online bill payment services through the View and Pay Bills feature of the Quicken.com Web site. When the deal was made in November 1999, the firms said the capability would be rolled out to AOL’s members early in 2000.

In other recent deals, online bill payment leader Checkfree.com merged in a $1 billion deal with Transpoint, which claims such investors as Microsoft, First Data Corp. and Citibank.

Inside the Deal

Financial terms of the Yahoo! deal were not disclosed, but the company said it will launch its person-to-person payment service later this year as Yahoo! Pay Direct.

Auction participants will be the first Yahoo! users to be able to use the new service.