BOB GARFIELD: PayPal, the online payment service, did what few of its contemporaries were able to do. It survived the dot.com bust to be become the undisputed leader of payments for eBay auctions and many other online transactions. Now PayPal is owned by eBay and is, naturally, thriving. But that has meant certain business expediencies, such as the regulation of content on the websites it serves that the company's founders certainly never envisioned. Eric Jackson, author of the new book The PayPal Wars, was with the company in its formative years and he joins us now. Eric, welcome to the show.

ERIC JACKSON: Thank you for having me, Bob.

BOB GARFIELD: First briefly, what is PayPal and how does it work?

ERIC JACKSON: What PayPal does is it treats your e mail address as sort of your unique identifier because every e mail address is obviously unique. And then you can take this account that you've created, hook up your credit card or even your bank account, if you want to, and put money into the account and send it to someone, really anyone with an e mail address. And that's all you need to know. You don't need to know their private information, their bank account number, their address, even how to spell their name. There are over 72 million people today that use the service, and they use it predominantly for eBay auctions but also really to send money to just about anyone in the world for just about anything you can imagine.

BOB GARFIELD: I understand that it was the core of the founders' vision for PayPal to be a means for individuals to exchange currencies free of government regulation, to protect them from, among other things, the vagaries of government monetary policies. Is that right?

ERIC JACKSON: The founders of PayPal were a couple of libertarians, who really in the backdrop of the late 90s, looking out at the world and seeing all of these currency crises that spread through Southeast Asia and much of the developing world, and they saw a real need to empower people, especially in instances where governments were causing hyper-inflation to really wipe out the savings of the populace, meanwhile forbidding people from taking money out of their bank accounts. PayPal, as originally envisioned it, would allow people to really move money anywhere in the world in any currency in the world and give even the poorest consumer, once they had access to the Internet, a virtual offshore account where they would have greater control over their own money.

BOB GARFIELD: So it sure would be ironic if in its present state PayPal itself were in the regulation business.

ERIC JACKSON: It is ironic that PayPal has begun to put some restrictions on different types of uses of the service. Soon after eBay acquired PayPal, they got PayPal out of the business of doing virtual gambling and use of PayPal for adult content. And also I believe recently they've outlawed certain types of other transactions, including that for medical equipment and drugs, and also for cigarettes.

BOB GARFIELD: And there was a case, if I'm not mistaken, where people's websites were barred from using PayPal because they simply linked to content that PayPal deemed objectionable. I think it was some terrorist videos of beheadings.

ERIC JACKSON: I believe that was the case. I read about that as well. It sounded as if it was an instance where it was someone not necessarily promoting terrorism, but rather that had content on his website or his blog to discuss about these type of current event issues that PayPal apparently found objectionable. So this really is a very different sort of policy that PayPal's now pursuing than the one originally envisioned by its founders.

BOB GARFIELD: Now, before we get all self righteous here, let's just talk about the real world for a moment. Not only does a parallel banking system facilitate say, online gambling and porn, it would be pretty much made to order for money launderers or other perpetrators of organized crime - drug traffickers, terrorists. I mean, what company wants, wittingly or unwittingly, to be essentially a courier for criminals?

ERIC JACKSON: That's a very good point, and obviously no company does. PayPal took a stand against this sort of criminal activity being conducted in its system from early days, overseas criminal rings that were using PayPal early on to do money laundering, to take their stolen credit card numbers, put them into PayPal and get cash out, which they could then wire to a bank. And so PayPal has, really from almost day one, worked to capture these sorts of criminals, to block this type of activity, and to really look for unusual usage of the system, without really policing content.

BOB GARFIELD: If PayPal should decide that for one reason or another it's unhappy with what content's on my site, what recourse do I have?

ERIC JACKSON: Well, certainly you can appeal to PayPal, and they do have an appeals process in their customer service department. But if the outcome is still not in your favor, the only solution is to look elsewhere. And there aren't very many other options out on the market. PayPal really has defeated most of the competitors that have come along.

BOB GARFIELD: Do you think PayPal represents some sort of archetype, you know, a quintessential example of what happens when the ideals behind the Internet become compromised by the reality of having to keep a lot of various interests happy?

ERIC JACKSON: Certainly in the case of online gambling, something that Congress annually debates but does nothing about, for companies like PayPal that were operating in kind of a void where not all the laws are spelled out, there have been instances where regulators such as New York Attorney General Eliot Spitzer, have moved in and really tried to influence what the company does. I think one issue that's being highly debated though is are companies such as eBay and PayPal going further than what's being required of them by governmental entities? Are they taking a stance where they're actually editorializing in some way or another? And I think that is what many of its users have complained about.

BOB GARFIELD: Well, Eric, thanks very much.

ERIC JACKSON: Thank you, Bob.

BOB GARFIELD: Eric Jackson is the author of The PayPal Wars: Battles with the Media, the Mafia and the Rest of Planet Earth. (MUSIC UP AND OVER)

BROOKE GLADSTONE: Coming up, amateurs insert themselves into novels, and museum audio guides.

BOB GARFIELD: This is On the Media from NPR.