According to reports, two Wall Street analysts have been told of Google's plans, which signify the company's next extension away from its roots as a search engine. It is believed that the service will be launched before the end of the year.
The company is branching out with offerings such as Gmail, its free email service offering more than 2GB of storage, and Froogle, the price comparison service.
As well as launches, there have been acquisitions such as Picasa, the online picture service, and the weblog service Blogger.com.
Google also has more than 1m advertisers using its AdWords programme, as well as the AdSense programme that delivers contextual advertising to web publishers' sites, including those using Blogger.com.
The news of the launch hit eBay's share price, which fell on Monday by over 2%. It bought PayPal, which allows internet users to transfer money between accounts, in 2002 in an all-share deal worth around $1.3bn.
PayPal is used as the payment system on many of the transactions on eBay, which closed its own payment service after it emerged that users preferred the PayPal offering.
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