Google Checkout Flexing Muscle

Includes: EBAY, GOOG
by: Jeff Molander

Google (NasdaqGS:GOOG) is serious about its new Checkout service.  How serious?  Serious enough to invest in it -- forking over more cash to all of its participating merchants.  This time it's not just advertising credit or low shopcart fees, Google is funding deep discounts on anything its participating merchants stock.  Example below.

Considering the predicted focus consumers will have on discounting this holiday season, merchants should enjoy the added promotion.  Google's bet is that it will help merchants adopt the Checkout shopcart even faster.

Momentum: Distributors

Surprisingly, Google is also securing serious traction with its advertising distributors.  A closer look at how Web merchants and their distributors (affiliates) are using Checkout provides more insight.

Established affiliates and distributors (i.e. comparison shopping engines) show strong signs of embracing (not fearing) Google Checkout as a serious conversion (turning browsers into buyers) enhancer through use of that same exclusive, deep discount.  Distribution partners of Web merchants, like Dealtime (see below), are wasting little time in pointing consumers at the cash incentives offered by Checkout.

Why is this a surprise?  Not all affiliates provide "native visitors"; many, rather, provide arbitraged visitors (via paid search media) which retailers are, themselves, increasingly getting better at netting.  Established affiliates, however, rely less on use of paid search advertising to attract shoppers.  These affiliates are not threatened by Google's interest in offering merchants a very attractive, self-funding direct-to-consumer advertising solution like Checkout. They're embracing it!

Does Google risk driving away its once cherished affiliate advertisers?  Perhaps but Google has managed to reduce inventory, improve ad quality overall and raise prices quite well in 2006.  In fact it's taken a fairly anti-affiliate stance in many cases, weathering the storm very well as it weans itself off of affiliate dollars and moves to "go direct" to advertisers.  Affiliates and distributors who in the past relied on search to garner visitors are increasingly turning to other forms of Web selling such as drop shipping.

Momentum: Retailers

Will advertisers continue to tolerate the higher click prices?  Time will tell. 

Consider Google’s heavy courtship of National Retail Federation (via members this week in NYC.  Consider the quantity of large, medium and small advertisers jumping on board and the rate at which Google is signing them up since rolling out the service just a few months ago. 

Finally, consider’s bold move into Google’s turf (using both a shop cart and cost-per-acquisition approach).  [ is owned by eBay (NASDAQ:EBAY).] It would appear that smells blood as does eBay who bans the use of Checkout among its merchants.

Momentum: Partnerships

Google hasn’t waited long to strike up some interesting partnerships such as a promotion with Citibank credit & debit cards that rewards shoppers who sign up for both services.  They’ve even got a merchant referral (affiliate!) program.

What other partnerships has Google stricken to enhance the growth of Checkout and what are advertisers themselves saying about Checkout so far?  Will be the first shopping comparison [SCE] engine to go “back to the future” by returning to (don’t forget this is how all SCE’s were born) a cost-per-acquisition fee model?