We've been reporting growing reports of a purported "Amazon Paypal killer" that have been increasing from a low hum to a deafening buzz lately.
Well, Tuesday Amazon (NASDAQ:AMZN) launched the Amazon Checkout website. (No press release yet?) Amazon Checkout (AC for short) is the next logical step for them in payments, moving them from a simplistic payment API to a full-blown portable checkout system. Like Google (NASDAQ:GOOG) checkout or Paypal express checkout, AC gives internet retailers the ability to provide an Amazon checkout experience on any website.
This is an interesting entry into the market for several reasons. Let's look at the pros and cons:
81m reasons to love AC - Amazon reported in Q2 that Active buyers at Amazon grew 18% to 81m. I'm going to guess that easily 95% of those have their 'wallet' at Amazon. AC gives that wallet portability. Personally Amazon has the best wallet information for me of anyone. They have several personal/biz CC's and probably 25 different addrs that have been used over the years for gifts, etc. Giving that portability is the single biggest attraction of AC.
- Note that Paypal has 62m active accounts, growing at 18% y/y so Amazon leaps ahead on this metric. Paypal does not break out this metric by 'paypal classic' (payment mark) vs. paypal express checkout [PPEC].
- Google Checkout does not release these metrics.
- 1-click. Amazon owns the patent on 1-click and it looks like this could/will bring 1-click to any site.
Volume! Remember that this is the dog food that Amazon has been eating for a long long time. This payment system already enters the world with $4b/Q or a $16b/yr TPV rate thanks to Amazon direct-TPV alone.
- Note that Paypal does about $16b/Q and Google doesn't report, but it's much smaller than these so AC enters the race with a solid second-place showing. Also, Paypal doesn't break out PPEC. PPEC has been very buggy for our customers and most have it turned off because it doesn't work with many eBay (NASDAQ:EBAY) features. If you defined the market as "checkouts" then AC could very well be a significant leader by TPV.
- Robustness - Volume has the side-benefits of increasing robustness. Robustness means many things such as: excellent fraud technology, up-time (if AC is down, Amazon is down), etc.
- Amazon's biggest weakness in general is that they are trying to be both a technology provider and a competitor to retailers. Large retailers (TRU, Borders, etc.) have left Amazon's third party business en masse because of this and I don't imagine they will be jumping for joy to add Amazon's checkout to their sites. For example, you won't be seeing Wal-mart.com add this any day soon. This actually plays to PayPal and Google's advantage and I'm sure as a first response we'll see them play up these fears: "Do you REALLY want Amazon seeing all of your transactions, learning about your top sellers and then using that data to compete with you?" The fact that Amazon has a well documented history of using partner data to their advantage in the third-party selling world will make this argument very believable.
- Fees - The fees are pretty standard, if not on the high side. I was hoping we'd see something bold like ACH for a nickel or something like that. As-is they are kind of a 'yawn'. It could be that this is initial pricing and maybe by the holidays they will run some special pricing. It could be they are also looking to understand the fraud models.
- Traffic? - GC and PPEC both offer traffic benefits as they are tied to search engines and enhance CTR via a cart icon/badge system. Amazon doesn't have anything like that at this time. It would be interesting to see Amazon explore something like this. I'm warming up to live.com for product-based searches, so maybe there's an angle there.
- AC not on eBay - How fast do you think it will be before eBay adds this to the banned payment list because it isn't "proven to be safe" like they did Google checkout?
Amazon Checkout - what to watch
Given the pros/cons outline above, I think what we'll see is AC get some initial traction in the mid-tier and SMB areas for internet retailers. Then there are some verticals like travel that are so hungry for user acquisition that I can see them adopting AC much as they have PayPal and GC. I don't think you'll see any of the top 100-200 retailers adopting it due to the competive threat, but I could be off base here, we'll be keeping a very close eye on that.
Given the SMB/mid-tier likely sweet spot, I think Amazon will need to sweeten the pot some and offer better fees as well as some ability to get in front of those 81m active buyers. Maybe AC could be tied into the Product Ads system?
PayPal vs. AC - eBay vs. Amazon - a second battlefield opens up.
PPEC has several advantages over AC, but in that mid-tier and SMB space is going to be hand-to-hand combat. Given that Paypal is the jewel in eBay's grown, if AC can knock 1-4% points off of of the Paypal merchant services (off-ebay biz), that could be a significant headwind for eBay corp. It's also interesting to note that the two companies are now engaged in two battles vs. the one (ebay marketplace vs. Amzn 3P)
ChannelAdvisor and Amazon Checkout
We're taking a wait and see approach on AC. We know that it won't be able to be used on eBay, thus it would be most applicable to our ecommerce customers. Right now we're spending cycles on a premium version of our store offering as well as (ironically) lots of work on the Amazon 3P system for the holiday selling season. I'd love to hear what customers and non-customers think about AC and if they would want to adopt it or do the cons outweigh the pros?
Disclosure: Author is long eBay and Google.