[Clips] Google Aims to Speed the Online Checkout Line

[R.A. Hettinga]

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  Date: Fri, 30 Jun 2006 04:40:19 -0400
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  From: "R.A. Hettinga" <rah at shipwright.com>
  Subject: [Clips] Google Aims to Speed the Online Checkout Line
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<http://www.nytimes.com/2006/06/29/technology/29google.html?ei=5065&en=71f83a648568396d&ex=1152244800&partner=MYWAY&pagewanted=print>

  The New York Times

  June 29, 2006

  Google Aims to Speed the Online Checkout Line

  By SAUL HANSELL

  In its quest to "organize the world's information," Google now wants to
  keep track of your credit card number and where you live.

  The company is introducing Google Checkout today, a service that will allow
  users to make purchases from online stores using payment and shipping
  information they keep on file with Google.

  Google's aim, said Eric E. Schmidt, the chief executive, is to make it
  easier and faster for people to buy products advertised on Google - thus
  attracting more advertisers.

  "The goal here is to make it be one nanosecond from the time the customer
  decides to buy to the time the transaction is complete and the product is
  on the way," Mr. Schmidt said.

  For consumers, this sort of service, often referred to as an online wallet,
  is hardly new. Microsoft, AOL and Yahoo have offered similar wallets, which
  proved to have limited appeal. While the PayPal service of eBay has
  attracted widespread use, it offers additional features like the ability to
  transfer money from checking accounts.

  But for merchants, the service comes with a twist: Google will waive some
  or all of the transaction fees for companies that buy advertising from it.
  That may give the service a leg up on competitors like PayPal and several
  smaller companies that help online merchants accept credit cards.

  It will also add another entry to the list of businesses that have been
  shaken up by Google's innovations, a list that already includes publishing,
  advertising and desktop software.

  Google is charging merchants 20 cents plus 2 percent of the purchase price
  to process card transactions, less than most businesses pay for credit card
  processing. Banking industry executives say that credit card processors
  typically pay MasterCard and Visa a fee of 30 cents and 1.95 percent for
  every purchase, so Google will be subsidizing many transactions.

  What is more, for every $1 a company spends on search advertising, Google
  will waive the fees on $10 worth of purchases. Factoring in the 2 percent
  fee, that represents a rebate of at least 20 percent of advertising
  spending.

  Mr. Schmidt said the company was willing to lose money on transaction fees
  because it felt the package would increase advertising spending.

  "The math works because we can have lower prices and higher volume," he said.

  Google's decision to give free transaction processing to advertisers has
  the potential to disrupt its carefully cultivated electronic auction for ad
  placement. Google has worked hard to ensure that the auction treats all
  advertisers equally, sometimes to the dismay of big companies that are used
  to discounts for major purchases. It has not offered commissions to
  advertising agencies, as most media companies do.

  Online merchants that do not want to use Google Checkout "might be a little
  peeved," said Kevin Lee, chief executive of Did-it.com, a search
  advertising agency. "They might say if you give that credit to some people
  for credit card processing, give it to me for something else."

  Mr. Schmidt said Google had not considered this issue.

  While Google's tactics may be seen as aggressive competition, the company
  is unlikely to run afoul of antitrust laws because it does not have a
  monopoly in the market.

  Yahoo, the other main seller of advertising on search results, recently
  announced an alliance with eBay that among other things will encourage
  Yahoo advertisers to use PayPal for payment processing. PayPal will also be
  promoted as the online wallet for use on Yahoo services. Both companies
  declined to give financial details of the deal.

  Google expects that most sites that use Google Checkout will also continue
  to use their existing method of processing credit cards and may accept
  PayPal as well.

  Advertisements on Google.com from companies that accept Google Checkout
  will display a small image of a shopping cart. Clicking on the ad will take
  customers to the advertiser's Web site, as it does now. When customers
  decide to buy something, they will be offered the option to sign into
  Google Checkout and use the credit card and address information on file
  there. Customers that do not have accounts with Google will be encouraged
  to set them up.

  Google may get several additional benefits from the checkout service. It
  will encourage more users to register and give it personal data, allowing
  Google to display advertising based on specific attributes of the viewer.
  More broadly, the data the company gets from transactions could help it
  improve the way it chooses which advertising to show to which users. Google
  says it does not currently plan to use transaction data in this way.

  For merchants, one concern is whether Google's system, which is unfamiliar
  to users, will reduce the number of people who complete purchases on their
  sites, a measure known as the conversion rate.

  "You have people in your most valuable area and suddenly you are switching
  them off your site to something no one has ever done before," said John
  Bresee, the president of Backcountry.com, an online seller of sporting
  goods that has been testing Google Checkout. "The cost will be stunningly
  high, if they are not great at what they do."

  Mr. Bresee said Backcountry would have people watching the performance of
  Google Checkout around the clock.

  "If they convert at the same rate, and the fees are lower, we will put up
  the biggest Google Checkout button you have ever seen," he said.



  --
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  R. A. Hettinga <mailto: rah at ibuc.com>
  The Internet Bearer Underwriting Corporation <http://www.ibuc.com/>
  44 Farquhar Street, Boston, MA 02131 USA
  "... however it may deserve respect for its usefulness and antiquity,
  [predicting the end of the world] has not been found agreeable to
  experience." -- Edward Gibbon, 'Decline and Fall of the Roman Empire'
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-- 
-----------------
R. A. Hettinga <mailto: rah at ibuc.com>
The Internet Bearer Underwriting Corporation <http://www.ibuc.com/>
44 Farquhar Street, Boston, MA 02131 USA
"... however it may deserve respect for its usefulness and antiquity,
[predicting the end of the world] has not been found agreeable to
experience." -- Edward Gibbon, 'Decline and Fall of the Roman Empire'