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In the minds of many investors, PayPal is the most important component of eBay's (EBAY) valuation. Consider this from January earnings:

The company's PayPal business continued to be the crown jewel in eBay's earnings. PayPal ended the year with 106.3 million active registered accounts, a 13% increase year over year. On average, PayPal added a million new accounts every month in 2011.

PayPal is a popular way for people and businesses to pay each other online, and it benefits from first-mover status. But competition is heating up. Just recently, Google (GOOG) acquired TxVia, which has a significant back-end network that the search giant can leverage. There is also Amazon (AMZN), which has earned payer trust via its shopping websites. There's Facebook (FB), which has started to threaten Google in driving some channels of web traffic and is an early popularizer of token currencies. And there's the next generation, like Square, which has A-list economist Larry Summers on its board.

In this scramble for dominance in payments, there is no particular winner as of yet. While a couple percentage points of a transaction would be small in most realities, two percent is a more than substantial prize across the scale of the Internet and the Internet's mobilization.

For customers, it makes little difference who processes a payment, so long as it is done reliably and easily. Thus, differentiation and branding are key for these competitors.

Paypal President Marcus says,

"Beauty needs to be everywhere, even in a payments product."

He's talking about beauty as a design issue, but the aesthetics of morality could soon prove a more pressing concern for PayPal.

George Zimmerman is the criminal justice student and neighborhood watch enthusiast who shot and killed a teenager in Florida. There has been an outpouring of anger which has forced him into hiding as he awaits possible charges. Now, he's raising money via a website using PayPal.

This puts eBay/PayPal in a PR dilemma. Should it allow Zimmerman's payments?

PayPal froze WikiLeaks donations, citing "illegal activity". So there is some precedent for criminally controversial donation drives being shut down. On the other hand, WikiLeaks "espionage" was an ongoing activity, whereas the Zimmerman killing is a past event. Plus technically, Zimmerman is innocent until proven guilty.

Still my first instinct tells me PayPal will invalidate the fundraiser. Because, although some would be mad at PayPal for not taking the opposite stand, people would be especially mad at PayPal for staying involved.

However, it is necessary for PayPal to draw a line of neutrality somewhere. Zimmerman is not the first "defendant" to collect support from the general public via PayPal. So it appears this issue may be framed on the one hand as a matter of principle (neutrality) and the other hand a simple question of decency.

Either way, there are strong feelings on both sides of this case, and PayPal is unfortunately going to make at least one side unhappy. Without PayPal, eBay is just another MySpace or Yahoo (YHOO). This dilemma could snowball very easily and is therefore a potentially bearish catalyst for Ebay.

Source: eBay Faces Dilemma Accepting Zimmerman Payments