Google Checkout

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.

BusinessWeek reports

"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,, 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
Elise Ackerman
Mercury News, Wed, Jun. 28, 2006

Google’s eBay Challenge
Robert Hof
Businessweek, JUNE 28, 2006

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What's been said:

Discussions found on the web:
  1. SINGER commented on Jun 29

    is EBAY ok then????

    What about PALM today?

    Do people like the new TREO??

    Gotta get back to formulating my inflation expectation

  2. trader75 commented on Jun 29

    This could be pretty frockin’ huge.

    In addition to a no-brainer incentive for any paypal merchant to try it risk free (just another link on the checkout page), the combination of adsense and checkout working together could facilitate a pay-per-sale model.

  3. Ned commented on Jun 29

    seems like a threat to the credit card companies more than to Paypal, no?

  4. FliteTime commented on Jun 29

    Yes, the credit card companies will have to change their tactics to stop schmoozing the custumer, and start with the merchants. But they’re NOT taking away my 1% Cash Back Visa!
    On the other hand, less money getting funnelled to the big credit card companies should reduce costs, right? Maybe a couple of merchants might actually pass that savings on to the rest of us as reduced prices or merchant incentives.

  5. ~ Nona commented on Jun 29

    This seems to be a smart move for Google. It’s clear what the company’s focus is: reeeeeally targeted advertising. Very smart.

    I watched the explanatory video. The copy is sharp; the visuals excellent.

  6. Andy commented on Jun 29

    The goal *is* to ding PayPal. Google is in a quiet battle with eBay (and their new agreement with Yahoo). PayPal is important to eBay, so — like MS and the spreadsheet thing — they’re trying to suck some oxygen out of their competitors’ lungs. Ok, that was a gross visual.

  7. chris wine commented on Jun 29

    first time poster. this is a great blog!!

    sounds like microsoft passport repackaged. i might have some concern about loading all my identity and payment data into the googleplex. i like to keep that stuff local, and use a form filling product. but then again, i am a believer in privacy.

  8. dud commented on Jun 30

    Just one note – PayPal is free if buyer is paying with his bank account, not credit card. Is Google free in that case?

  9. RRR commented on Jul 7

    Payapl is not free for a buyer who recieves payment from a paypal bank account once they’ve upgraded to a “premier” account, ie after their first credit card transaction. This tatic pisses merchants off to no end. Paypal is charging merchants the full 3% on all transactions, credit card or bank/existing funds payments, pocketing the whole amount since they’re paying nothing out on the back end. Once a merchant account is upgraded they are charged on every transaction recieved, even if the payment is simply a bank to bank etf.

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