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Buy-it-Now With PayPal (Except for Adult Stuff)

Attention eBay sellers. If you want immediate payment for some of your goods, eBay's PayPal payment processing division is at the ready -- as long as they're not porn-related items.

The immediate payment option is available for "Buy-It-Now" fixed-price items on eBay, the company said, in an effort to promote more use of its PayPal online payment processor.

The option will initially be available in time-sensitive categories such as tickets, said Chris Donlay, spokesperson for eBay/PayPal. "We heard from our sellers on this. Often they are selling tickets for next day events where fast payment is critical."

But transactions for sexual-themed items are another story. The online auction site recently announced that PayPal will stop processing payments for all adult items as of June 12. The deadline for non-tangible adult items, such as streaming video, comes sooner on May 12.

PayPal's exit from the porn market comes after eBay, facing stiff legal pressure under the Patriot act, recently shut down PayPal's gaming business. "The regulatory environment for the gaming business is just too challenging," said Donlay. "And the adult market has extremely high rates of fraud."

The new PayPal payment promotion, and policy, are examples of the changes afoot at the online payment company since eBay acquired the service last July for $1.5 billion. After the acquisition, eBay focused on replacing Billpoint, eBay's lackluster payment service, with the more popular PayPal. At the time, the company also said it planned to phase out PayPal's services for gaming operations, "in view of the uncertain regulatory environment."

The [Buy-It-Now option] is the first new feature that goes beyond the prior payment service, said Donlay.

Ebay logged $2.6 billion in total PayPal payment volume, on and off eBay, in the first quarter of 2003, up 80 percent from the previous quarter.

Avivah Litan, online finance analyst with Gartner , called the new payment option a smart move for eBay. "It's a great example of how eBay is leveraging PayPal," she said.

But she also noted that porn and gaming payments were also big money makers for PayPal. And although legal issues are reason enough to quit gaming, the rationale on nixing payments on adult content is different, Litan continued. "Given the high profit margins there, I find it suspicious as a business decision. I think they just decided they didn't want to be in that business."

Donlay pointed out that adult material would still available on eBay in the Mature Audiences section. "You just won't be able to use PayPal to buy it," he explained.

The moves are sure to keep analysts begging the ultimate question about PayPal, namely how eBay plans to grow that section of the business.

"EBay said it planned to continue promoting and expanding PayPal outside the eBay brand," said Litan. "But I am still skeptical -- I think the main thrust will be to grow it inside eBay where they get a cut of each sale and the transaction processing."

Donlay said the company is still committed to PayPal as an independent brand. "We absolutely plan to grow PayPal outside eBay."