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June 29, 2006

Google Checkout checks in

Posted by David Hunter at 10:03 AM ET.

Google today launched Google Checkout and despite the rumors that it was a “PayPal killer,” it’s not really a payment system, but an identity and payment processing system that is available to Google affiliated merchants across the Web to speed customer purchases. Saul Hansell at the NY Times:

The company is introducing Google Checkout today, a service that will allow users to make purchases from online stores using payment and shipping information they keep on file with Google.

Google’s aim, said Eric E. Schmidt, the chief executive, is to make it easier and faster for people to buy products advertised on Google ? thus attracting more advertisers.

“The goal here is to make it be one nanosecond from the time the customer decides to buy to the time the transaction is complete and the product is on the way,” Mr. Schmidt said.

For consumers, this sort of service, often referred to as an online wallet, is hardly new. Microsoft, AOL and Yahoo have offered similar wallets, which proved to have limited appeal. While the PayPal service of eBay has attracted widespread use, it offers additional features like the ability to transfer money from checking accounts.

That is, in addition to identity, PayPal has significant payment features for consumers including a PayPal “account” replenished from a checking account or credit card as well as the ability to write “e-checks” from a regular bank account.

But for merchants, the service comes with a twist: Google will waive some or all of the transaction fees for companies that buy advertising from it. That may give the service a leg up on competitors like PayPal and several smaller companies that help online merchants accept credit cards.

Google is charging merchants 20 cents plus 2 percent of the purchase price to process card transactions, less than most businesses pay for credit card processing. Banking industry executives say that credit card processors typically pay MasterCard and Visa a fee of 30 cents and 1.95 percent for every purchase, so Google will be subsidizing many transactions.

What is more, for every $1 a company spends on search advertising, Google will waive the fees on $10 worth of purchases. Factoring in the 2 percent fee, that represents a rebate of at least 20 percent of advertising spending.

Mr. Schmidt said the company was willing to lose money on transaction fees because it felt the package would increase advertising spending.

Advertisements on from companies that accept Google Checkout will display a small image of a shopping cart. Clicking on the ad will take customers to the advertiser’s Web site, as it does now. When customers decide to buy something, they will be offered the option to sign into Google Checkout and use the credit card and address information on file there. Customers that do not have accounts with Google will be encouraged to set them up.

There’s more in the article including the expected benefit to Google of obtaining more demographic information about Web shoppers in order to better serve ads to them, much like one of the promised benefits of Microsoft’s adCenter. Forrester Research’s Charlotte Li has more on the benefits and summarizes it this way:

So hopefully you’re beginning to see the virtuous circle that Google is building with Checkout and how it supports the core search business. It’s brilliant – by tying the wallet service to search, Google creates a huge incentive for its retail advertisers to participate. This is what differentiates Google Checkout from other wallet services …

Offhand, it looks like Google has pulled an interesting looking rabbit out of the hat. Also notice that Google Checkout is not a beta, but has been fully launched and is ready to rock and roll although admittedly it’s version 1.0 with all that implies. In any case, the bar just got higher for the other big search and commerce players like Microsoft.

Filed under AOL, Advertising, Coopetition, General Business, Google, Microsoft, Online Services, PayPal, Yahoo, eBay

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One Response to “Google Checkout checks in”

  1. Make You Go Hmm: » Google Checkout worth checking out Says:

    [...] Others are saying Don Dodge continues the overhype and FUD: “Credit card companies better look out…Google is coming. PayPal should be worried too.” Techeffect: “On the positive side for consumers, Google isn’t demanding an exclusive relationship for sellers who use both AdSense and Google Checkout. PayPal and Google Checkout can be offfered side by side.” Jeremy has no Google Checkout envy: “Google’s a leech. An innovative leech, but a leech nonetheless. They can’t lead. They can’t develop software that gets mass appeal. And they can’t even innovate beyond their first core of ideas that are more than a decade old.” TechCrunch: “I’m not sure how much I trust Google at all and I’d need a more compelling feature set in order to give them this information (I use GMail because it’s a great system). I hope that stores will offer both PayPal and Google Checkout services, though it seems very unlikely.” David Hunter: “Also notice that Google Checkout is not a beta, but has been fully launched and is ready to rock and roll although admittedly it’s version 1.0 with all that implies.” [...]

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