Billionaire eBay (NSDQ: EBAY) founder Pierre Omidyar is entering the local news business. In a blog post, Omidyar says he’s setting up an online-only local news service that will cover public affairs and civic matters across Hawaii, where he lives. It’s set to debut in early 2010, although Omidyar admits that the initiative is still in the early planning stages and, for the moment, lacks both a name and editor.

Omidyar, who is leading the effort along with former eBay VP Randy Ching, is a high profile entrant to the online local news startup space, where dozens of sites are clamoring to fill the gaps left by cutbacks at local newspapers. Hawaii’s largest newspaper, the Advertiser, for instance, has eliminated more than 130 jobs over the last two years, while the rival Honolulu Star-Bulletin has also had a series of cutbacks, according to journalism layoff tracker PaperCuts.

A central goal of effort is to prove that local news can continue to be a profitable business. Omidyar, for instance, writes in his blog post that he believes “effective news reporting and analysis… can be done in a profitable sustainable way.” In a companion piece, advisor Howard Weaver also emphasizes that the service plans to make money, saying, “I applaud any effort to create the journalism democracy needs — profit, non-profit, hybrid or otherwise — but my heart and my guts both tell me that journalism that meets real needs can pay its own way — and should.”

Why the emphasis on the word “news service” instead of “news website”? A spokeswoman tells us the company wants to emphasize that it will be producing original content. She would not say how many people the operation will employ, saying it’s “a startup at this point so starting small and growing as needed.”

Omidyar remains eBay’s chairman but stepped down as CEO more than a decade ago. Since then, he has shifted much of his focus to his philanthropic investment firm, Omidyar Network, which has backed Digg, SocialText, and Prosper.com, among other companies.

Last year, however, Omidyar co-founded Peer News, a startup that launched a Twitter-client called Ginx. Omidyar says he is now shutting Ginx down so that the company’s employees can instead focus on the local news service.

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