The initial reports were wrong. The new service is not, as was previously stated, G-Buy or Google Wallet, but Google Checkout.
And the goal seems to be less of creating a direct competitor to PayPal than another way to generate targeted advertising search revenue, and improve the data and specificity of targeted search results. The San Jose Mercury News reports:
"If Google Checkout is successful, the company could reap big rewards.
The transaction data for each person who makes a purchase, combined
with their search history, could lead to advertising that takes into
account their favorite stores and preferred brands. The more targeted
the advertising, the more advertisers are willing to pay."
Since Google will waive the transaction fees for vendors who buy AdWords, the goal may simply be to create more search advertising. If Paypal gets dinged in the process, they are collateral damage.
Her’s the cost structure: Sellers pay Google 2% of each transaction, plus a 20-cent fee. That’s less than what they would pay MasterCard or Visa, who charge 1.95% plus 30 cents per transaction. PayPal charges a 2.9% plus a 30-cent fee (but Paypal’s fees decrease when merchants sell over $3,000).
Google appears to be subsidizing transactions. The reason is ad sales: For every $1 in fees a company spends on search advertising, they will waive fees on $10 worth of purchases. That is about a 20% rebate on advertising spending.
As we noted previously, this is likely to inure to the benefit of consumers.
"this battle is bound to benefit consumers and merchants. By providing new and cheaper alternatives to credit cards for buying items online, these and other new online payment services could give buyers more confidence in a wider range of e-commerce sites. And coupled with e-commerce services from eBay, Google, Amazon.com, and others, they’re likely to help smaller merchants who can’t afford a credit-card merchant account to compete with bigger players."
There is a short video tour of Google Checkout at the demo sit (halfway down the page).
click for video
Google Aims to Speed the Online Checkout Line
NYTimes, June 29, 2006
Google launches Checkout service to compete with PayPal
Mercury News, Wed, Jun. 28, 2006
Google’s eBay Challenge
Businessweek, JUNE 28, 2006