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Auction giant eBay's emerged as the stealth investor in tiny PHP shopping engine specialist Magento.

eBay has invested $22.5m in Magento in return for a 49 per cent stake in the four-year-old company.

eBay made the investment in March 2010 but the name of Magento's backer was kept secret until a recent eBay analyst event where chief technology officer Mark Carges coughed up details here and here.

A 49 per cent stake in a company of 230 people gives eBay considerable control over management and roadmap. A spokesperson for eBay's PayPal subsidiary, which provides eBay's ecommerce infrastructure, classified the relationship though as a "partnership" allowing PayPal to integrate its payment system with Magento's shopping cart.

Magento's chief executive Roy Rubin has also blogged that his company continues to operate independently and work with other payment providers.

Magento targets small and mid-sized businesses looking for an off-the-shelf shopping basket.

The company already offers the M2E product that lets you create eBay listings, synchronize stock levels, and import eBbay transactions and orders.

However, PayPal helped Magento develop its Magento Mobile product for shopping from your smart phone or tablet. The pair is also devising a mobile-ecommerce platform for outdoor sports specialists North Face.

Meanwhile, they collaborated on Magento Go, the company's recently launched Software-as-a-Service (SaaS) built using PHP and targeting businesses that don't want to have to set up and manage their own ecommerce system.

"It's more integration of the shopping cart and payment technology - it lets you do more integrated stuff," the PayPal spokesperson said of the companies' well-funded relationship.

eBay's investment and involvement came after eBay chief executive John Donahoe said he believed PayPal could be eBay's second core business after marketplaces. "PayPal's opportunity and its niche is to power all of e-commerce," Donahoe said in April 2009.

PayPal is built using a variety of technologies, but the website and payment services are build predominantly using Java and C++.

But PHP is the preferred programming language of web developers, and tighter integration with the modules being used to help build their sites could help Donahoe's dream, especially if PayPal can levy more transaction charges on customers' sales.

PayPal generated $91m in net payment volume during its most recent financial year - up 28 per cent. Net revenue was $3.4bn compared to $5.7bn for eBay's market places - growing 23 per cent and eight percent respectively. PayPal has 94.5m active registered accounts.

Meanwhile, PayPal has hired Blackhawk Network founder and CEO Don Kingsborough as vice president for retail and prepaid products. The hire is in line with Donahoe's vision of capitalizing on growth in the PayPal business as eBay's markets slow. eBay said Kingsborough would "help us bring PayPal offline and into traditional retail stores." Blackhawk provides prepaid third party card products and is a subsidiary of retailer Safeway Foods.

"Don's experience in consumer product development, technology, retail, POS and merchant relationships will prove invaluable as we work to bring PayPal to connected devices and the offline world," PayPal said in a blog here. ®

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