Google has launched Google Checkout, a payment system for online retailers that's tightly integrated with Google AdWords. Checkout isn't the rumored PayPal killer, but it does offer some compelling features for both merchants and online shoppers alike.
Rumors have been flying for more than a year about a payment system under development by Google. Reports emerged that Google was developing a micropayments system, an online wallet, even a PayPal killer (see this blog post for a chronology of Google payments speculation over the past year).
In fact, Google Checkout is simply an extension of technology the company has developed internally for its AdWords, Base, Picasa and other services.
"There are more and more reasons for users to do transactions for Google products. We wanted to generalize that experience," said Salar Kamangar, vice president, product management at Google.
Google Checkout is a payment system that can be used either alone or as an alternative to existing checkout systems already in place on a retailer's web site. Users with Google accounts can simply sign into their account on the retailer's web site and then click once to complete the checkout process using the credit card number stored with the Google account, rather than having to fill out detailed forms with shipping and payment information.
"It's not about a universal wallet; it's about making the checkout process streamlined with the fewest number of steps," said Kamangar.
In addition to being able to buy with only one or two clicks from any merchant using the program, Google Checkout offers other benefits to users. Since payments will be processed by Google, consumers don't need to share credit card details with merchants using the system.
The program also has email forwarding controls. If you don't want email from a merchant, you can turn off in your own Google account. Google will also maintain a transaction history of all purchases you've made through Google Checkout.
Google is also offering merchant review ratings from Checkout users, and guarantees that users will have no liability for unauthorized use of their account.
Google Checkout should appeal to merchants, as well. Google is making the code to use Checkout available to merchants at no charge, either through simple cut-and-paste code or through a more sophisticated API. Google is also working with shopping cart providers to integrate Checkout into their systems.
Google will charge merchants 20 cents and 2% of a total transaction cost to use the service—very favorable rates compared with PayPal's 30 cents and 2.9% fees (PayPal's fees scale lower with higher-cost transactions). However, merchants who also are Google AdWords advertisers get even more favorable terms.
Google will credit $10 to a merchant for each $1 spent on Google AdWords. For some merchants, this will lower transaction costs for using Google Checkout to virtually nothing. And even though Google CEO Eric Schmidt swore that Google didn't have eBay's PayPal system in its sights when developing Checkout, it's bound to have a significant impact on PayPal's business.
Checkout isn't a person-to-person, stored-value system like PayPal. But with its pricing and ease of use, it's a compelling alternative for businesses of any size that are currently using PayPal as a payment processing system—particularly with its aggressive pricing and incentives for AdWords advertisers to use the system.
Google has tightly integrated Checkout with AdWords. Any advertiser offering a Google Checkout option will now see their ads displaying with a Google Checkout "badge" icon next to the ad in search results. This visual cue lets searchers know they have the option of using Google Checkout if they click through and buy from that advertiser.
If the program takes off, it's likely to give an advantage to advertisers who participate in the Google Checkout program, as Google ranks ads in part based on the number of clicks they receive. If searchers display a preference for Google Checkout enabled sites, advertisers displaying the badge will see their ads rise in prominence in search results.
This will surely raise concerns about what Google is doing with the data it's collecting, as it now has visibility into searcher buying behavior from the first initial queries through the entire clickthrough and conversion process.
Already, many search marketers avoid Google's free analytics service because they are unwilling to let Google capture data that can show conversion rates, ROI and other cost and profitability metrics. But advertisers risk losing position in search results to other advertisers who are using Checkout.
This will create a conundrum for some search marketers: Which is more important—a high ranking ad or not allowing Google such a complete view of your search-related business transactions?
It also raises the questions of whether Google will use this data to potentially influence minimum bids for AdWords customers, or data-mine it for other uses.
Kamangar says that the data collected is used solely to process payments at this point, though he also declined to rule out other potential uses of the information in the future. He stressed that Google would keep its data collection and use policies transparent to both users and customers, however.
For now, using Google Checkout will be a no-brainer for smaller merchants with limited budgets, as the program provides a valuable service for very low cost and offers additional benefits for advertisers. More established merchants may well want to wait to see how successful the program becomes before jumping in, keeping a close eye on the positioning of competitors' ads who are using Checkout to see if their ads are getting a boost from consumers clicking through more frequently.
Google Checkout links:
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