Google Checkout May Be a Dud

On Wednesday, Google announced that it was making its new payment service, Google Checkout, free for merchants through the end of the year. Upon hearing this news, some commentators jumped to the usual Google conclusion: another brilliant move by an infallible company that will soon put Microsoft, Yahoo, and eBay out of business. But is this really the right conclusion?

Last summer, you may remember, when Checkout was finally announced (after months of rumors, speculation, and denials that reduced eBay/PayPal shareholders to quivering jello), analysts almost universally concluded that the AdWords/Checkout combination was so potent that PayPal was toast. Yesterday, while suggesting that the PayPal obituaries were a bit premature, the WSJ noted that Google Checkout had signed up "a few hundred merchants."

A few hundred? Unless that number is at least two orders of magnitude too low, the reason Google is making Checkout free is not that it wants to finish eviscerating PayPal, but that Checkout has been an unqualified disaster. Google has hundreds of thousands of advertisers, the majority of which have web sites that could presumably benefit from Checkout.

Can it really be true that, six months after the PayPal killer was announced, Google has only managed to persuade "hundreds" of these advertisers to try the service?

I don't know the answer--I'm hoping some of you do.

Comments

[Kevin Lee:]

It s a classic catch-22. Unless a ton of merchants have the feature consumers won't bother to sign up, even if they feel comfortable with Google having their credit card info. Merchants won't get much use out of their AdWords credits towards merchant fees unless consumers are signed up. If I were Google I'd be thinking about how to sell something really cheap in order to get consumers to sign up. For example I'd sell a Google sweatshirt for $4.95 only with Google Checkout. Could be a huge Google logo merchandise store. Google takes a little loss on the merchandise, gets critical mass on Google Checkout and suddenly hundreds of thousands of Google logos are walking the street in the form of hats, sweatshirts, etc.

2006 Nov 10 12:32 PM

[Jeff Molander_:]

Kevin points at an issue that few have actually discussed and one that's key to GOOG's success, indeed!

Google is great at injecting its brand to create instant trust where there otherwise might not be any.
googlecheckout.blogspo...

Will this truly work? Time will tell but <i>the bigger story</i> here is the Trojan Horse approach Google is taking with this product. This is less about competing with PayPal and more about feeding short term revenue (advertising)... really throttling that upward and helping cushion the impact of rising click costs (by funding them!). More here

2006 Nov 15 08:28 AM

[Ashish:]

Jeff

I think it is both. I think Google is going to target smaller advertisers as checkout partners. Smaller vendors are going to benefit because the consumers will be more comfortable in giving their credit card to Google.

Every penny counts if the number is huge :)

www.istockanalyst.com

2006 Dec 06 02:18 PM

[Jeff Molander_:]

Ashish:
Indeed. Thanks for your thoughts. Today Google extended the free promotion another full year -- till close 2007.

2006 Dec 06 02:39 PM