Thursday, June 29, 2006

Google Checkout, Amazon, and eBay

It is being widely reported that Google launched their payment system, Google Checkout.

Google Checkout is a system for handling credit card processing between small merchants and consumers. At launch, it has been integrated with over a hundred online stores.

A couple reviews ([1] [2]) see this as a bigger threat to Amazon than eBay's PayPal. For now, I do not agree.

Amazon's value to small merchants is in taking over the online store. Amazon lists third-party merchandise, handles the entire online shopping experience including search, checkout, and payment, and provides inventory management and accounting tools to the merchants. For some merchants, Amazon even warehouses the inventory and does the shipping.

Google will get there at some point. If they integrate Froogle with Google Checkout and build some additional merchant tools for accounting and inventory management, that would have a good start. But, they are not there yet.

For now, I think eBay's PayPal has the most to lose from Google Checkout. Small merchants who turned over their credit card processing to PayPal in the past will now consider switching to Google Checkout. PayPal's person-to-person business segment will not be at risk, but their business-to-consumer will.

Google Checkout appears to be the same as the rumored GBuy and Google Wallet that we heard about a while back. Charlene Li says that GBuy was the internal code name for Google Checkout.

See also my May 2004 post, "Google vs. eBay?", where I talk about what it would take for Google to get into e-commerce, and my Feb 2005 post, "Google and eBay pursue sellers".

As for how Amazon and eBay should respond to Google Checkout, see my previous post, "Yahoo and eBay, Amazon and Microsoft".

Update: An insightful post by Om Malik looks at Google Checkout as a step toward cost-per-action advertising (instead of cost-per-click).

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