No Killer . . .

Soon after signing up for a Google Checkout account, it’s apparent that this is no PayPal killer. Much like any ecommerce checkout, Google takes your personal shipping information and keeps your credit card on file. From there, participating vendors such as Starbucks and Jockey now let you pay for items at their online store by simply signing into your Google Checkout account at their checkout screens. Google provides the buyer with security and convenience because he only enters his credit card information once with Google, which then makes the payment to the vendor. The user doesn’t have to re-enter the same personal information and spread his credit card number across countless companies online. Google not only shields your credit card information from the vendor but also can optionally shield your email identity, as well. And because the sellers must apply to Google to participate in the program, the search engine has a direct relationship with the stores, so Google is in a position to resolve any conflicts that might arise and police the system for fraud. Furthermore, the service promises reimbursement for unauthorized use of your account.

Sound like PayPal? Not quite. eBay’s successful company is more like online banking. PayPal also maintains your personal information so that it can pass it onto a partnered vendor and also acts as a go-between to resolve conflicts. But PayPal can hold money on account or draw directly from a real-world bank account. More importantly, PayPal is a peer-to-peer system that can transfer funds to any of the 100 million other people or groups that have PayPal accounts. Google Checkout only keeps a credit or debit card number on account and can only charge it on behalf of a vendor. This gives PayPal a distinct advantage on eBay, where individual auctioneers take payment directly. Google Checkout is exclusively for established businesses.

. . . But Still Threatening

Nevertheless, PayPal clearly feels threatened. eBay banned the use of Google Checkout within the auction service, claiming it has no history of reliable service. Although Google Checkout and PayPal do compete for retail partners, some analysts see Google more directly threatening Amazon.com’s 1-Click method of ordering products. But Google is applying the convenience across thousands of independent competitors to Amazon’s many ministores.

Neither company was first to try solving the “virtual wallet” problem, an easy, safe, and universal online payment solution. Microsoft Passport and Yahoo! PayDirect failed to grab consumer interest, yet people continue to find entering their credit card information for every purchase a tedious and insecure way to buy things online. Forrester research shows that 62% of consumers don’t buy on the Web primarily because they fear putting their credit card numbers online. Online payment systems also expand the Web economy by making it less expensive for smaller merchants to accept payments online and compete directly with larger retailers. PayPal may have eBay, but the world’s biggest search engine has tens of thousands of large and small companies that already buy AdWords text ads that advertise their wares in Google search results. On that basis alone, says David Berkowitz, director of strategic planning at 360i, “Google Checkout can have a really significant impact on ecommerce.”

Fire Up The Engine

This is why Google is pulling out several stops to lure both users and merchants to its Checkout service. For merchants, Google Checkout is the better deal, charging only 20 cents per transaction and 2% of the purchase price vs. 30 cents plus 2.9% for a PayPal-enabled exchange. Current Google AdWords partners also get price breaks on the transaction fees according to how much they spend on text ad buys. To attract consumers, Google offers rebates and coupons for initial purchases at retailers.

But it’s the search engine itself that ultimately will power Google Checkout. Partners get a special blue shopping cart icon next to their sponsored listings atop search results. When users search for services on Google, these icons on the results page signal to the users that a purchase here will be that much easier than a transaction elsewhere. Google and its partners are relying on making a frictionless, seamless flow from search query to final purchase. And as users click links with Checkout icons more often, these ads themselves start floating to the top of the Google ad listings; popularity, too, is one of the criteria Google uses for determining ad placement on a page. Google officials say that preliminary statistics show that a Checkout badge does indeed increase click-throughs on an ad and also improves the rate at which those users make a final purchase. The search engine will effectively feed the ecommerce engine. Although others such as Yahoo! and Microsoft have failed to make the virtual wallet pay, this is the first time that a payment system has been tied to an advertising engine, let alone one with the reach of Google.

Although eBay/PayPal sees a challenger in Google, other systems such as micropayment vendor BitPass hope it somehow can integrate with Google. “That Google is entering the online payments space reflects how much the digital download and premium content space is growing,” says Doug Knopper, CEO of BitPass.

Far from a slam dunk, Google Checkout is just the latest in a long line of “let’s-see-what-sticks” projects from the company, with unremarkable initiatives such as Google Base (classifieds), Froogle (ecommerce), and Orkut (social networking) that have yet to catch on. Google may be venturing into areas it doesn’t really understand. “Checkout is not really a fit in some ways,” says Danny Sullivan, editor at Search Engine Watch. “They are doing so many things, it is difficult to track them as clearly as they would like.” In this case Google has to contend with the potential for fraud, people using stolen credit cards on its system, and illegitimate vendors. PayPal has invested tens of millions of dollars in staff and technology to detect financial cheats.

PayPal Fights Back

In 2002, eBay paid $1.5 billion for PayPal, which it quickly integrated into its auction engine. The bet paid off big, with $27.5 billion in transactions processed last year, up about 45% from the previous year. It boasts over 100 million accounts, although its late 2005 public statements reveal that only 28 million of those are considered active at any time. AC Nielsen found that 29% of online shoppers in North America had used PayPal to purchase items.

Nevertheless, PayPal suffers limited coverage with top-tier online retailers, and there’s room for a universal payment system online. No one has the audience reach and commercial relationships of Google. And so, PayPal isn’t standing still. It recently launched a mobile payment plan that uses SMS messaging to debit offline purchases. Also, an upcoming Virtual Debit Card will work at sites that don’t accept PayPal but do accept MasterCard. A downloadable toolbar would let users get a unique MasterCard number to make purchases using their PayPal account balance for payment.

Expanding Google’s Base

No one ever accused Google of being dumb, and the smartest part of Checkout may have less to do with cash than with the market knowledge the search engine gains about how people move from querying a term to actually buying goods. What if Google now sees that certain keywords result in higher sales for it advertisers? It could add a premium price to those terms on the AdWords system. Jeffrey Grau, senior analyst at eMarketer, says that ultimately, Google is after what it’s always after: more information. “The more they can learn about the people who use their search engine, the better off they are in the other side of their business: ad targeting.”

And so the game continues, in which a web of content and commerce companies try to anticipate Google’s next move to see whether it threatens or bolsters their own businesses. Google Checkout may compete with PayPal as a payment system for major e-tailers, although there’s no reason why a vendor couldn’t offer customers both payment methods. The real and deeper threat of Checkout may come in how it supercharges other Google projects down the road, namely the Base classifieds. If that product evolves, as many suspect, into full-blown online auction services, jobs listing, and/or a mall for small merchants, then “you have a game changer,” says Berkowitz. “Google Checkout with Google Base takes on HotJobs, Monster.com, Amazon.com, and eBay. You name a major player out there, and Google is a potential threat.”

Google vs. the world: Now that’s a smackdown.

David Berkowitz: Waiting To “Checkout” David Berkowitz, director of strategic planning for search marketing firm 360i, is a longtime columnist and expert on the search business. He says Google Checkout offers a great user experience, but online merchants may want to wait and see. CPU: 360i has recommended that its clients wait and see on Google Checkout. What are the greatest areas of concern? Berkowitz: If they’re using AdWords, then Google will provide complete insight into the consumer research and buying process for those marketers, which may be more than they are comfortable with. Second, there isn’t much information about how well it actually works, if consumers are happy with it, and if Google is adequately resolving any conflicts consumers have. There are a lot of questions that marketers should ask. CPU: Is it good for users? Berkowitz: It can streamline the conversion process, especially for those who tend to make one-off or sporadic purchases from an array of different retailers. Anecdotal evidence, such as blog postings, hints that consumers are satisfied with the experience. I’ve tried it. I would use it again. CPU: How big a challenge could Google auctions via Base and Checkout pose to eBay and PayPal? Berkowitz: eBay has said that at least for the time being, eBay merchants can’t accept Google Checkout, and Google doesn’t let AdWords advertisers pay through PayPal. If Base and Checkout became significant alternatives to eBay, then in time, anyone retailing online could be forced to choose between the two platforms. CPU: Does Google risk being distracted from its core search business by sidelines like this? Berkowitz: Google doesn’t even see itself as being in the search business. It says it’s in the business of gathering the world’s information and making that accessible, and it counts advertising and products as ‘information.’ So far, while some of its offerings have been successful (such as News and Maps and its AdSense network) and some have been less so (Orkut and Froogle, for example), nothing has diluted its search experience.

A CAPS LOCK Revolt? You’ve probably noticed that while speedily typing along, you can press the wrong key. Luckily Word corrects some misspellings, but what about when you PRESS THE DARN CAPS LOCK key? Annoying? Yes, but to some it’s more than just a nuisance, it’s life or death—for the CAPS LOCK key that is. Pieter Hintjens is so irritated by the CAPS LOCK key that he’s petitioning computer manufacturers to eliminate the key from keyboards. If you despise CAPS LOCK, check out Hintjens Google Group (groups.google.com/group/capsoff) forum to join the CAPSoff Rebellion. Source: www.newscientist.com/blog/technology