Google Checkout, Concerns Unveiled

After more than a year of anticipation, Google finally revealed Google Checkout late last week. Though the new Google product is not the rumored “GBuy” that was feared to directly compete with PayPal, it offers similar features and will make a splash in the online payment pool, not to mention the AdWords pond.

Google Checkout offers a streamlined, safe, and convenient shopping experience. Users with a Google account are asked to enter their credit card and personal information (name, address, phone number) on the login page. Google has made it clear that it will not share full credit card numbers or users’ purchase information with retailers.

This means that when a user makes a purchase at a participating merchant’s site, they will be able to do so without entering their credit card and personal information again. Their credit card information will not be shared with the merchant.

When a user searches for products and services on Google they will see a green shopping cart icon beside each search result or AdWords ad whose vendor accepts Google Checkout as a payment option. Currently, there are about 100 sellers accepting Google Checkout, though that figure will undoubtedly climb.

If a consumer wants to purchase something from a site that accepts Google Checkout, they can checkout by clicking on the Google Checkout button. The transaction will be completed quickly since the user will not have to spend time filling in their personal information again.

Google Checkout will also enable users to keep track of their online purchase history. A merchant ratings system will also be available for users.

“It’s not about a universal wallet; it’s about making the checkout process streamlined with the fewest number of steps,” said vice president of product management at Google, Salar Kamangar.

Merchants, maybe even more than buyers, have good reasons to utilize Google Checkout. The new service is smoothly integrated with AdWords, and even offers cheaper transaction fees and discounts for sellers who advertise using AdWords. Google will charge sellers $0.20 and 2% of each total transaction made through Google Checkout. This makes Google Checkout a cheaper alternative to PayPal, which charges $0.30 and 2.9% of each transaction, though these figures scale lower with higher-cost transactions.

AdWords users will see additional benefits in the form of a $10 Checkout credit for each $1 a merchant spends on AdWords. For some vendors this could easily translate into almost no transaction costs arising from the use of Google Checkout.

All of this will make it more difficult for AdWords advertisers who do not use Checkout. If Google Checkout is widely adopted, those ads that have the green shopping cart icon next to them will most likely see higher click-through and conversion rates, not to mention potentially higher AdWords positions.

Back in February, Google CEO Eric Schmidt vowed that Google was not aiming to directly compete with PayPal, which he described as a “person-to-person, stored-value payments system.” It turns out that Schmidt was telling the truth. Google Checkout is neither person-to-person, nor does it allow users to maintain an account balance that can be used towards future transactions.

However, its low pricing and streamlined convenience will make Google Checkout an attractive alternative for merchants, especially smaller ones. The incentives and pricing will be particularly alluring to AdWords advertisers.

So far, Google’s latest product is raising eyebrows for multiple reasons. Not only does this indicate that Google will be crowding PayPal’s elbow space, but it could very well have far-reaching implications for advertisers. Schmidt has indicated that he would not mind if Checkout became a loss leader so long as it drives more advertiser spending with Google AdWords.

Merrill Lynch analysts Justin Post and Han Pham put it this way: “Wide adoption of Checkout would enable deeper relationships with merchants and greater affinity for use of Google AdWords.”

Google Checkout is also raising the eyebrows of those who are concerned with the large amount of data that Google is obtaining. With the unveiling of Checkout, Google now possesses the ability to view the entire spectrum of the online shopping experience, from the search queries, through the entire click-through process, to the actual purchase/conversion. Add to this the fact that Google will have purchase histories, order details, and personal credit card and shipping details, and it is no wonder that Google is sending shivers down the spines of those who do not warm up to the idea.

“Now we have Google tracking our search history with personalized search, e-mail with Gmail, and online spending with Checkout. At what point do consumers get that squishy feeling in their gut that Google knows too much?” asked Charlene Li, principal analyst at Forrester Research.

Some also worry that Google will use all of this information to tweak minimum bids for advertisers using AdWords. Kamangar maintains that Google will only use the information received through Checkout to process payments at this time. However, he did not rule out the possibility that the information could be applied to other uses in the future.

For now, small businesses will likely take advantage of the cost benefits of using AdWords and Checkout, and merchants using the new Google online payment option could see increased conversion rates and ROI, as well as a decreased number of transactions that die when potential buyers get to the checkout stage. The real conflict could be between an advertiser’s desire to have a high-ranking ad and it’s unwillingness to allow Google to get such a revealing peek at their transactions.

Sources:

http://searchenginewatch.com/searchday/article.php/3617061

http://www.dmnews.com/cms/dm-news/search-marketing/37344.html

http://publications.mediapost.com/index.cfm?fuseaction=
Articles.showArticleHomePage&art_aid=45188

http://www.ineedhits.com/free-tools/blog/2006/07/google-
checkout-good-or-bad-for.aspx

http://www.webpronews.com/insiderreports/searchinsider/wpn-
49-20060629GoogleFlipsTheCheckoutSwitch.html