Digital Media

Amazon's acquisition of shoes-and-more retailer Zappos is complete, the e-commerce giant said in a release Monday. The company in July had announced its intent to make the purchase, for about $850 million in cash and stock.

Zappos, which made a name for itself based on outside-the-box customer service principles, will stay independent from the Amazon.com brand and will continue to operate out of its Las Vegas headquarters.

Numbers released by J.P. Morgan Research in conjunction with the acquisition announcement predict that Zappos will post moderate, single-digit growth for the 2009 fiscal year after raking in $635 million in revenues last year.

With micropayments and transaction platforms a buzzworthy sector of the Web right now, it's no surprise that Google would want to get in on the game.

But Mountain View's pitch is a little bit different: the payment platform it plans to build, according to Harvard's Nieman Journalism Lab, is geared toward newspapers that want to charge for digital content.

Google's plans are detailed in a document the company sent to the Newspaper Association for America. The document, a response to a query from the association, also requested more information pertaining to paid-content models.

"While currently in the early planning stages, micropayments will be a payment vehicle available to both Google and non-Google properties within the next year," explained the document (PDF) posted Wednesday by Nieman Lab. "The idea is to allow viable payments of a penny to several dollars by aggregating purchases across merchants and over time. Google will mitigate the risk of non-payment by assigning credit limits based on past purchasing behavior and having credit card instruments on file for those with higher credit limits and using our proprietary risk engines to track abuse or fraud. Merchant integration will be extremely simple."

This is interesting, as Nieman Lab points out, because Google's plan aggregates payments into a bundle for processing, something that could potentially quell publisher concerns about transaction fees. The plan is very preliminary, obviously.

"The Newspaper Association of America asked Google to submit some ideas for how its members could use technology to generate more revenue from their digital content, and we shared some of those ideas in this proposal," according to a statement Wednesday from Google's PR department to Nieman Lab. "It's consistent with Google's effort to help publishers reach bigger audiences, better engage their readers and make more money."

Google's Checkout product, the online transaction service that would likely be the base for a micropayment system, has been around for a few years now. But it hasn't made a huge dent in far bigger competitor PayPal, and it's also been experiencing some big problems, as my colleague Tom Krazit reported Thursday.

It ought to be pointed out, of course, that Google has been the target of harsh criticism from the newspaper industry (as well as other sectors of the publishing business) for profiting from third-party content. Wall Street Journal editor Robert Thomson went so far as to call online news aggregators (not mentioning Google by name) "parasites or tech tapeworms."

Meanwhile, the payment platform that's been getting the most scrutiny and interest in the tech press these days has been, of course, Facebook's "credits" system. But while Facebook's pitch thus far has been toward nonprofits looking for small donations and game developers selling virtual goods, it's still impossible to discount the fact that Google's micropayments move could be aimed at staking a claim in the same territory.

Note: This post was expanded at 7:09 a.m. PDT. And on Friday morning, the Associated Press reported that Google was one of several tech companies, including IBM, Microsoft, and Oracle--that responded to the Newspaper Association of America request, though the AP story offered no details on those other companies' responses.

PayPal suffered a global outage and slow performance Monday, but eBay said its online payment system is mostly back in working order.

"About an hour ago, PayPal started experiencing site issues that affected the ability to send and receive money. We have all hands on deck to get this fixed," said PayPal spokesman Anuj Nayar in a blog post about noon PDT. "We're really sorry for the inconvenience."

An update at 12:40 p.m. said the site was working again for most users.

Nayar said in an interview the outage was global and the worst of the outage lasted about an hour total, though the site wasn't fully recovered just before 2 p.m. PDT.

$2,000 per second in transactions
The outage could be costly for those who rely on PayPal to handle e-commerce transactions. PayPal says about $2,000 in payments per second flows through the system, meaning that a one-hour outage would cut out about $7.2 million in commerce.

Nayar declined to comment immediately about whether sellers would be compensated in any way or how eBay handled such decisions in the past.

As a key driver of growth for eBay, PayPal is becoming more important at the online commerce and auction site.

"PayPal is a business that will be bigger than eBay," eBay Chief Executive John Donahoe said in July. And through a developer release in July of a new PayPal payment system, eBay wants to refashion the service to enable a new generation of online commerce.

PayPal's developer site said the outage hit not just its Web page, but also through PayPal's application programming interface (API), which lets applications use the service without having to go through the Web site. It first noted the problem at 10:41 a.m. PDT.

Updated with more details at 2:04 p.m. PDT.

PASADENA, Calif.--PayPal is just over a third of eBay's revenue at the moment, but the online payment service will ultimately be bigger than the company's flagship e-commerce site, its chief executive said Thursday.

"PayPal is a business that will be bigger than eBay," CEO John Donahoe said in a talk at the Fortune Brainstorm: Tech conference here. However, he said that shift will take four to six years.

eBay CEO John Donahoe speaks at Fortune's Brainstorm: Tech conference on Thursday

(Credit: Ina Fried/CNET)

Donahoe's comments came just as the company announced that it is opening up its PayPal platform to third-party developers. "There is this opportunity for an explosion of growth."

Among the uses, Donahoe said we are not that far off from the day where a restaurant beams a bill to your mobile device and you pay via PayPal.

Asked about Facebook's long-rumored payment service, Donahoe noted that online payments require a company to be part financial services outfit and part Internet concern. Those that have been one, but not the other, have failed, he said.

"People will find a much better solution building on top of the PayPal platform," he said.

Donahoe, who has been CEO about 15 months, said the company is a leader that is adjusting to shifts in the market. "We're making the tough changes we need to make," he said. "We need to evolve on an auctions site to an e-commerce site."

There is plenty of room for e-commerce to grow, Donahoe said, noting that only 5 percent of sales are online as compared to in stores. That could eventually grow fourfold, he said. "What portion of everything you buy will you ultimately buy online?" Donahoe said.

He said eBay has already come a long way. "We still get referred to as an online auctioneer, but we have moved way beyond that.

Right now, eBay gets about half its money from eBay.com, with half of that auction-based sales and half from fixed-price sales.

As for the core auction business, eBay plans to announce a number of changes next week. Among those, Donahoe said that the company will expand the "eBay Bucks" loyalty program it has been piloting as well as offering telephone support to more buyers.

Given that PayPal may eventually eclipse eBay.com in sales, moderator Adam Lashinsky asked if the company should change its name.

"That's the least thing I worry about," Donahoe said. "We'll probably hire some big fancy consultant who will give us some strange name," he quipped.

Corrected at 2:31 p.m. PDT: The last name of eBay's CEO was misspelled. His name is John Donahoe.

Amazon.com has filed for a number of patents that hint at ad-supported books for its Kindle e-reader--more specifically, a free or discounted ad-supported e-book for customers who buy the physical version.

Amazon Technologies, a subsidiary of Amazon, filed for a patent ("Method and system for access to electronic version of a physical work based on user ownership of the physical work") in December 2006. It was approved last month and makes it possible for buyers of a physical book to have an e-book bundled with it.

But two additional patents, filed a year later by Amazon employees (and not yet approved), are the more interesting ones: these, according to MediaPost, "clearly note that Amazon would insert advertisements throughout the e-books, from the beginning to the end, between chapters or following every 10 pages, as well as in the margins."

It looks like the story first surfaced on Slashdot last Friday.

Presumably, this could be a way to guide potential Kindle customers through the transition--which some find daunting--from consuming primarily physical books to digital ones, subsidizing the price of either or both of them in the process.

Ad money would be an additional revenue stream for Amazon too.

This post was updated at 10:14 a.m. PT.

Amazon CEO Jeff Bezos shows off the Kindle DX

(Credit: Sarah Tew/CNET News)

NEW YORK--Amazon CEO Jeff Bezos unveiled the much-anticipated large-screen Kindle e-reader in a lecture hall Wednesday at the downtown Pace University. Called the Kindle DX, the new device is geared toward readers of personal and professional documents, newspapers, and magazines--and textbooks, a potentially huge target market.

The debut of the bigger Kindle wasn't exactly a secret: rumors of a larger-screen Kindle had been around for quite some time, and concrete reports began to surface earlier this week.

Amazon's Kindle DX

(Credit: Amazon)

According to Amazon's Kindle DX page, the device has the following:

• A 9.7-inch display with 16 shades of gray. (The standard Kindle has a 6-inch display.)

• Capacity to hold up to 3,500 books, periodicals, and documents.

• An auto-rotating screen to show either portrait or landscape views.

• A built-in PDF reader.

• 3G wireless network support with no monthly fees or annual contracts.

• Battery capacity to "read for days without charging."

• Text-to-speech abilities to read publications aloud.

Several of those features are shared with the current Kindle 2, but several are unique to the Kindle DX: the native PDF reader that doesn't require the files to be converted, the rotating display, the 3,500-publication capacity compared to 1,500 for the Kindle 2, and of course the larger screen.

eBay announced an agreement Wednesday to acquire Gmarket for a price of up to $1.2 billion, and Yahoo has agreed to sell its 10 percent stake in the South Korean e-commerce site in a move that would raise about $120 million.

Gmarket's board unanimously approved eBay's tender offer, in which the online auction and commerce site will pay a cash price of 31,767 Korean won, or $24, per share for all common shares and all American Depository Shares. eBay said it's assured of owning at least 67 percent of the company, and if it acquires all shares in the tender offer, the total price will reach about $1.2 billion.

eBay said it will combine Gmarket with its own Korean operations, the Internet Auction Co. it acquired in 2001, , though it will still use separate Web sites. "This deal creates strong operational synergies between the two market leaders, offers more opportunities for sellers and enhances our ability to serve complementary consumer segments," said John Donahoe, eBay's president and chief executive officer, in a statement.

eBay, once an e-commerce darling but now under more financial pressure, is making dramatic moves. The company plans a 2010 initial public offering to spin off Skype, its Internet telephony group.

The Gmarket offer, pending final approval by Korean antitrust authorities, would give eBay a significant new source of revenue. While its existing IAC business produced revenue of $161 million on $2.2 billion in gross merchandise sales, Gmarket produced $221 million on $3.2 billion in sales, eBay said. The company's offer is a 20 percent premium over Gmarket's closing price of $19.96.

With the recession hurting advertising revenue and Google supplying relentless competition, Yahoo is under pressure of its own. The company could announce more layoffs as it reports financial results next Tuesday, and raising $120 million could also help appease shareholders dissatisfied with Yahoo's financial condition.

eBay announced Tuesday plans to spin off its Internet phone and video-conferencing service, Skype, with an IPO in the first half of next year.

The decision comes four years after online auction giant eBay , with the plans to offer customers the ability to discuss their transactions in real-time. But over the course of the four years, eBay found its acquisition failed to provide the synergies it sought.

John Donahoe, eBay's chief executive, said in a statement:

Skype is a great stand-alone business with strong fundamentals and accelerating momentum. But it's clear that Skype has limited synergies with eBay and PayPal. We believe operating Skype as a stand-alone publicly traded company is the best path for maximizing its potential. This will give Skype the focus and resources required to continue its growth and effectively compete in online voice and video communications.

Although eBay plans to launch a Skype IPO in the first half of next year, the company noted its exact timing will be based on market conditions.

Last year, Skype generated $551 million in revenues, up 44 percent over the previous year. The number of Skype's registered users has increased to 405 million at the end of last year, up 47 percent from the previous year.

Over the past year, eBay has been weighing its options regarding Skype's fate. When the company announced Donahoe as its new CEO last spring, eBay indicated the online auction giant would take a year to evaluate the future of its online phone and video-conferencing service.

Meanwhile, reports surfaced earlier this month that Skype's founders were interested in repurchasing the company, with the aid of private equity firms KKR, Warburg Pincus, Elevation Partners, and Providence.

eBay shares rose 3.76 percent in after-hours trading on Tuesday to $14.92 a share. During the regular session, eBay closed down 1.71 percent to end the day at $14.38 a share.

Skype's founders are reportedly encountering turbulence in striking a deal with eBay to buy back the Internet phone service, despite the financial backing from a group of large private equity firms, according to The Wall Street Journal.

KKR, Warburg Pincus, Elevation Partners, and Providence are reportedly teaming up with founders Niklas Zennstrom and Janus Friis, who reportedly are interested in repurchasing their company from eBay.

But eBay and the founders' group face a wide gap on price, the Journal reported, and a deal involving the private equity firms appears unlikely.

The private equity firms are reportedly interested in kicking in $1 billion toward the total purchase price, according to the report, which noted it remained unclear on the total bid price.

Back in 2005, for $2.6 billion, asserting that it would allow customers to discuss their transactions in real-time.

eBay has since publicly stated there are few synergies between the companies and that it would be willing to sell off Skype for the right price.