The two companies have little consumer overlap, Donahoe said. PayPal's customer base includes mostly small and midsize merchants and 63 million active users. Bill Me Later has attracted large retailers, including 75 of the top 200 brand names, and nearly 4 million consumers.
Combined, the two brands can more quickly acquire new merchants, offer consumers more payment options and lower PayPal's transaction costs, Donahoe said.
"This acquisition significantly strengthens our ability to lead online payment," he said. "Now we have the No. 1 and No. 2 online-oriented payment brands with highly complementary capabilities. Each offers unique benefits that customers want when they shop online, and each delivers merchants lower costs and incremental sales. That's a powerful combination."
Adil Moussa, an analyst with Aite Group LLC, a Boston financial services research and advisory firm, said eBay provides capital and other resources for Bill Me Later to pursue other opportunities, such as expanding its service to brick-and-mortar operations.
The acquisition will enable eBay to increase market share in the alternative-payment market. PayPal launched a Bill Me Later-like service in August that gives consumers a credit line without a credit card, but Moussa said it paled in comparison.
Still, some analysts questioned how the tightened credit environment would impact Bill Me Later's business.
Ebay said Bill Me Later's credit risk model and analysis have performed better than the consumer credit industry average. Donahoe said eBay was impressed with Bill Me Later's ability to maintain a "very strong discipline in their underwriting."
Marino said Bill Me Later has developed a model to better assess risk. "We think the model we developed does that with transaction-based credit, which gives you a chance to see every transaction to make a decision and substantially more data that we use in our underwriting decisions," he said.
Marino and other Bill Me Later founders have known one another since the early 1990s, when they worked for Citibank.
"They had a hope and a dream. Today they look back and they've done extremely well," said Steve Kozak, executive director of the Greater Baltimore Technology Council. "Gary is still running it, and they're in a tremendous hiring and growth mode. They may really ramp this up in the region."
Bill Me Later became one of the fastest-growing companies in the region, attracting venture capital and investors such as T. Rowe Price Group and Legg Mason Opportunity Trust mutual fund.
Amazon.com, which began offering the payment option in July, became the company's sole retail investor in December. An Amazon spokeswoman said the company cannot speculate on how the acquisition would affect Bill Me Later's availability on the site and declined to comment on whether it was interested in buying the company.
Bill Me Later was thought to be considering going public. Lavelle said the company was evaluating options and that eBay's deal was the best one at the right time. Both companies said the two sides had been talking for at least a year.
Bill Me Later's largest shareholder, San Francisco-based Azure Capital Partners, which invested in company in 2001, said it was thrilled by the acquisition.
