Please, correct me if I'm wrong but I don't think their niche overlaps too much with paypal customers. So why would they market themselves as a direct competitor to paypal? Why would they, given this premise, advertise to paypal customers at all?

If you read the whole story you will get the impression they are paypal competitors - that is, unless you visit their website and read comments here. You will find out they are nothing like paypal and they won't replace it.

They're riding paypal disappointment tide cough diaspora cough yet they don't offer viable replacement.

There's been a lot of negative opinions about paypal coming from this very community but, in my opinion, if they position themselves as paypal competitor a lot of people will be disappointed in their offering right now.

Do you think it's a good way to market themselves? Or should they focus on their core audience via other channels? Or maybe paypal customers are indeed wepay's customers in the making?

they are not a direct competitor. their offering is not equal to paypal's. they only do a few things, but try to do them well.

the services they provide are similar to some things that people are doing with paypal.

Have you used the service? I've been using it for close to a year, and I love it.

I've been using it to manage sponsor payments for Hackers and Founders for some time. It's wonderful, easy and simple to use.

And, the reason that they are building this is because PayPal sucks.