Analysts like PayPal integration into Android Marketplace-

The move would be good for growth, but would be a major blow to Google's own Checkout service.

Android PayPal app

Late Friday, Bloomberg reported that PayPal and Google are in discussions to include PayPal as a payment option for Android applications. Google Android app purchases are currently done through Google Checkout, Google's own Paypal competitor that hasn't really taken off with consumers.

As an added benefit, developers would also be able to get paid through PayPal, perhaps offering another incentive to create more content for the Android Marketplace.

Susquehanna's Marianne Wolk thinks that the move would be a net positive for Google (GOOG) and obviously a boon for eBay's (EBAY) PayPal.

PayPal would bring the Android marketplace a sizable user base of 87 million registered accounts, as well as incremental support for direct bank account debit or money orders. By integrating PayPal more tightly with Android, it could enable one-click purchasing that is more comparable to the Apple app store, which would facilitate greater usage. The market could be significant, making this a potentially significant financial win for eBay's PayPal. Just as important, this would be a major strategic win for PayPal perhaps signaling Google's exit from the payments business

PayPal recently released an Android App that allows users to make payments to other Android or iPhone users with a bump of their phones.

Bloomberg quoted Lopez Research, which had a similar stance:

"It's clear that PayPal has been making huge strides in mobile. From Google's perspective, they just haven't won the war on this. Why bother fighting it?"

I'm not so sure this would be a net positive for Google.  They have an incredible success with Android and finally a motivation for their users to sign up for their Checkout service.  Instead of working with PayPal, Google should be bringing its service up to line with PayPal's offerings (which frankly leave much to be desired).  Why cede this business to PayPal, of all times, now?

Google's end-to-end strategy should include having a system like PayPal's -- which can access bank accounts for payments and transfers --which would tie nicely into its Adsense service.  Adsense counts hundreds of thousands, if not millions of web publishers that Google pays out every month.  A Checkout integration here should have been done a long time ago.

Both analysts are right on one point: If Google goes to PayPal, its Checkout product is dead.