Yahoo and eBay announced the Yahoo PayPal Checkout Program, which users of Yahoo Search will encounter as little blue shopping cart icons in the search results.

Buy From Yahoo Search With PayPal

Merchants who participate in the Program will be able to offer PayPal’s Express Checkout as a payment process. PayPal touts this as their fastest checkout solution; its presence in Yahoo search result pages will let searchers quickly find PayPal merchants and make purchases directly from those SERPs.

Yahoo hinted that customers who buy from merchants offering the new Checkout Program will receive incentives to use both Yahoo Search and PayPal. On the Yahoo Search blog, Tim Mayer said: "There’s peace of mind knowing my credit card info isn’t being scattered across multiple merchants."

Rich Riley, senior VP for Yahoo Online Channel & Small Business Services, wrote more about the new partnership at the Yahoo Search Marketing blog:

As an advertiser, this is great news for you. The blue shopping cart icon that will appear next to your ad not only helps the ad stand out, it also lets customers know which merchants offer PayPal Express Checkout, from the brand known for security.

There is no cost for merchants to join the program, Riley noted. Merchants will have incentives to participate in the Checkout Program; PayPal Express Checkout process will be free through the end of 2007, and merchants will receive a $100 credit in a Yahoo Sponsored Search account (read all the fine print, folks.)

The deal gives PayPal an outlet to compete with Google Checkout, a payment processing program that’s also highlighted in Google’s SERPs with little blue shopping carts. PayPal has a much more established brand as an online payment processor, which could tip some customers over to Yahoo Search for shopping-related queries.

ZDNet blogger Donna Bogatin called the Yahoo announcement "Googley sounding" due to its similarity to the existing Google Checkout service. "Yahoo is even ‘flattering’ Google with its own mini checkout cart icon enhanced ‘Sponsor Results’," she wrote.

Eric Friedman at Marketing.fm wrote that Yahoo had to respond to Google’s service, with three options in play:

Looking at the options on the table they could have either A – built their own system and hoped for global adoption B – purchase a smaller checkout system with a user base or C – partner with the largest checkout system, over 130 million users. Option C seemed to be the best option pairing up with PayPal.

In March 2006, we suggested Yahoo may have an interest in acquiring a firm to handle payment processing in-house. Partnering with PayPal means Yahoo will give up some revenue, but Yahoo executives likely believe Checkout can be a driver for their new search advertising system, with better profit margins to offset the payment revenue loss.