According to CNBC, the feud between Google Inc. (NASDAQ: GOOG) and eBay Inc. (NASDAQ: EBAY) could get a lot worse. Last week, eBay pulled its ads from Google in an apparent protest to Google Checkout's (a leading Paypal competitor) "Let Freedom Ring" party being held the same week as the annual eBay Live event. Sensing that it had acted insensitively, Google canceled the party, but eBay still hasn't come back.

eBay CEO Meg Whitman claims that she's not worried about Google Checkout, and denies that pulling the ads was a coordinated act of retaliation, although she admits to being none too pleased with the timing of Google's party. eBay doesn't allow Google Checkout as a payment method on its site, and essentially said that eBay would crush Google Checkout the same way it crushed Yahoo! Inc. (NASDAQ: YHOO) and Amazon.com Inc.'s (NASDAQ: AMZN) efforts at building auction sites.

Whitman said, "We're defending ourselves aggressively with PayPal. That is one of our core businesses. We're not going to let that go away to someone who'd kind of like to be in the business."

She's right that it's one of eBay's core businesses, but I wonder how successfully eBay will be able to defend it. The fact that it had to take the step of not allowing it as a method of payment on the site indicates that eBay can't really crush it on the merits: Google Checkout is a formidable competitor only a year into its life. eBay investors might want to look out. With the auction site in a slump, competitors making inroads into Paypal could spell disaster for Whitman and company.

eBay Inc. (NASDAQ: EBAY) has finally admitted that Google Inc. (NASDAQ: GOOG) isn't its friend. This is long overdue.

For months, CEO Meg Whitman and other top eBay executives have used some convoluted logic to argue that Google Checkout doesn't compete with its PayPal service. Google executives also argued not-too-convincingly that there was enough room for both Google Checkout and PayPal in the marketplace.

While it's true that PayPal and Google Checkout aren't exactly alike, they do compete. Everyone knew it but the companies tried to maintain this false image that the Internet is one big politically correct summer camp where everybody is a partner and there are no winners and losers.

That analogy bit the dust Wednesday when Google scheduled an event in Boston to promote Checkout to coincide with a big eBay sellers' event. In response, eBay yanked its search advertising from Google. Remember that eBay has been one of the biggest buyers of search advertising on Google for years.

In July 2006 I posted Google should buy Starbucks -- NOW! and received many less than favorable comments. I was way too glib in my post and that took away from the serious points I was trying to make. Google Inc. (NASDAQ: GOOG) is still a one-trick pony. Yes, they bought YouTube but they are far from generating profits from that. They paid $1.65 billion for this acquisition and contracted with News Corp's (NYSE: NWS) MySpace (TM) for another $900 million in a collaborative effort, and spent millions more on legal matters, further site development costs. All told they are probably approaching $3 billion in cost for these two deals, and will carry losses until some future date when they make some money, but so far what have they done?

They are making some money with Google CheckOut (TM), a quasi PayPal (TM) competitor owned by Ebay Inc. (NASDAQ: EBAY) but nothing to write home about. Googles other initiatives amount to offerings that are all "me too" add ons that dilute the Internet further but add nothing new. If gmail did not exist people would not be missing much and that can be said for many other things they have explored.

Things weren't that pretty over at eBay Inc. (NASDAQ:EBAY) in previous quarters as eBay stock declined 34% in the past year taking it to a low of $22.83 in August. Last quarter, however, eBay charmed the Street when it reported third-quarter financial results. Even Cramer did a backflip and considers eBay a value Internet stock. The stock climbed from its August low to hover around $30 lately.

For fiscal 2006 fourth quarter, consensus analyst estimate calls for earnings of 28 cents per share, in line with the company's guidance, and up from 20 cents last year. eBay gave revenue guidance for Q4 2006 to be in the range of $1.615 billion to $1.675 billion. According to Thomson, analysts call for a 25% growth in sales to $1.67 billion.

eBay will be reporting Wednesday January 24th after the close, and I'll liveblog the webcast beginning 2 p.m. Pacific, 5 p.m. Eastern. It will be interesting to see how eBay does. Here's what analysts (and I) expect to hear:

Remember that just the other day eBay, Inc.'s (NASDAQ:EBAY) online payment service, PayPal, announced a holiday promotion? Well, guess what. Yesterday Last week, Google, Inc. (NASDAQ:GOOG) also announced a holiday promotion for its online payment service, Google Checkout.

Google checkout will be waiving processing fee for merchants until December 31. Google Checkout, only a few months old, hopes that with this promotion more retailers might try it out. This promotion could attract merchants who haven't been using Google's ad service, AdWords, as those who do already received rebates and other promotions to render fees effectively null.

As I mentioned when PayPal announced its (very long) holiday promotion, the company is targeting mostly the buyers as the buyers can get up to $20 in cash rebate. Google Checkout , on the other hand, targets the sellers (as it had been doing all along). With Checkout's very limited exposure, especially compared to PayPal's huge user base, I don't see how Google's strategy is going to work.

Say I am a merchant and buyers want to buy my products using PayPal (because they'd get a rebate), otherwise, they'd probably not buy. I'd rather get a sale and pay some fees as opposed to not making a sale at all. Of course, the other option would be to lower prices, but that gives everybody the same result at the end as offering PayPal. So why wouldn't I offer PayPal?

Once a site offers PayPal, buyers will most likely prefer it over an unknown service. Even if the service is from the mighty Google. I'd say it's not even a contest.

After doing some research recently on the newer Google Checkout payment system offered by the world's largest search company (but wanting to be more, of course), a recent ad showed up in my email from buy.com, a company I have done business with many times. Amazon.com is a great place to shop, but I'll search buy.com on occasion to find a rare item I just can't find anywhere else.

Although Google Inc. (NASDAQ: GOOG) has been pushing out the Google Checkout system for a few months now, the highest-profile co-branding campaign I have seen is with Buy.com -- see the ad image here?

Ever since eBay locked out the use of Google Checkout on its site (no doubt to rid competition for eBay's PayPal system), Google Checkout has allied itself with many other web properties, like Starbucks.com and Ace Hardware. While those are large names, they can't hold a retail candle to Amazon.com in the area of Internet retail sales.

My point, you may ask?

Maybe it's time for Amazon.com (NASDAQ:AMZN) to offer Google Checkout as a payment selection. It's hard to imagine many Internet-savvy customers these days who have not purchased anything from Amazon.com -- and therefore have their payment information stored at the online retailer. But giving yet another choice to consumers -- especially a new one -- might just be a good idea.

After all, marrying the world's largest online retailer with the world's largest search company is probably not a bad thing for either. Some think Google Checkout is a huge threat to Amazon -- I say, let them work together. It's all about serving consumers and increasing sales, isn't it?

So perhaps it was indeed the changed fundamentals (and not all the rumors) that caused the recent positive sentiment as eBay Inc. (NASDAQ: EBAY) shares today broke the $30 mark, gaining 56 cents or 1.87% to close at $30.46.

Compared to the negative sentiment I posted about at the end of July, this is some change. First, we had a Goldman analyst that came out with a bullish note last week. Then, yesterday, it was a Morgan Stanley analyst. Today, we had Jefferies & Co. analyst Youssef Squali joining the rest of the analysts who note a higher than expected listing growth in the quarter. This should translate to a positive quarter, or even, as Squali said, "surprise on the upside."

To that, even Scot Wingo, a vocal critic of eBay's latest strategy, had to admit he sees "some signs of life from good ole' eBay core." More than that, GMV also seems to be growing, he notes.

For those who can't take too much eBay good news, I offer this: a Fool, who obviously refuses to be fooled, examined again the threat of Google Checkout. He found that it is alive and kicking but may surprise from the back door. He found that because of the incentive that Google offers the retailers, many of them push Google Checkout and try to close more sales using that form of payment (even by offering buyers discounts), much in the same way PayPal used to offer $5 for opening an account. This holiday season, he predicts, Google Checkout will be more visible.

Sheldon Liber and I have aggregated our latest thoughts on the ongoing eBay saga so you all will have something to SPEND your time on over the weekend. Seems like the eBay seller base is being rather vocal while the market watchers on Wall Street are yawning and just looking at eBay's balance sheet. That's a lot of zeroes.

Brian: With all the fierce hubbub these days on fee craziness on eBay, what is the online auction giant doing to quell the masses? Does it even have to? eBay stock has been doing just fine even as highly-motivated eBay sellers have been incredibly vocal all around the web on eBay's recent fee hikes. Sure, eBay has seen hikes before, and the resultant seller loudness has quieted down over time. What makes this situation any different?

Sheldon: Sellers claim they are spending to much for what they get! Buyers will have to spend on some cost pass-thrus somewhere along the line. EBay cannot ignore the fact that they are an ever increasing and larger percentage of the cost part of mechandise so they are contributing to a reduction in the desirability of their website as the customer finds themselves spending more and thus the site being less competitive with other sites.