Google Offers Web Payment System
Google Inc. plans to introduce a long-anticipated payment system for Internet purchases today as the search-engine giant attempts to wriggle into all facets of life online.
Google Checkout will let Web shoppers save their credit card and shipping information in a Google account, then quickly buy products from participating merchants, including Starbucks Corp., Jockey.com Inc. and Buy.com Inc.
Analysts and Google rivals had expected Checkout to compete head-on against EBay Inc.’s PayPal, which holds buyers’ cash for online transactions. However, the service, outlined Wednesday, also resembles Amazon.com Inc.’s 1-Click ordering system, but for the broader Web.
Google Chief Executive Eric Schmidt has often said that Google searchers are only one click away from defecting to competing services. Storing their credit cards in Checkout ties them a little more closely to the company. “There’s a convenience and loyalty” involved in the relationship, said Internet analyst Greg Sterling.
Google plans to take a 2% cut of all transactions, but the Mountain View, Calif.-based firm will offer substantial subsidies to merchants who use AdWords, Google’s advertising system that places keyword-based ads alongside search results.
The company will allow merchants to conduct fee-free transactions worth 10 times the amount they spend on Google ads. For example, a merchant spending $1,000 a month on Google ads would engage in $10,000 in transactions through Checkout before paying a commission.
More searches and faster purchases could attract more advertising dollars, said Salar Kamangar, vice president of product management at Google. The company reported profit of $1.5 billion last year on sales of $6.1 billion -- 99% of which came from advertising.
“I really think it’s important for Google, as it matures its company, to come up with revenue streams other than advertising, and this is big,” said Allen Weiner, an analyst with technology researcher Gartner Inc. “It’s a nice, predictable revenue stream that will go a long way as more and more competitors come in and offer advertising.”
Participating merchants will be designated by a green shopping cart icon in their search-engine ads.
“It unifies the customer experience,” said Chris Smith, a vice president with Jockey.com, the online unit of underwear seller Jockey International Inc. “It doesn’t make search a completely independent event from the buying.”
The service also seeks to address Web surfers’ concerns about identity theft, spam and other issues. Google will charge customer credit cards on behalf of merchants, Kamangar said, so buyers can avoid giving their payment information and e-mail addresses to unfamiliar vendors.
“It’s really all about trust,” said Sterling, founding principal of Sterling Market Intelligence. “If Google can establish that, then this will be adopted.”
A spokeswoman for EBay’s PayPal unit said the company does not comment on rivals’ products, but she noted that PayPal processed $27.5 billion in transactions last year. During the first quarter of 2006, one-third of PayPal business was conducted through merchants including Apple Computer Inc. and Dell Inc. The rest was on EBay.
Google struck a deal to have Citigroup Inc.’s Citi Cards promote Checkout on its website and encourage its credit card customers to use the service by offering reward points or cash back for signing up.
“Concerns with security on the Web are as high as they’ve ever been, so the timing is perfect,” said Rob Rosenblatt, an e-business executive with Citi Cards.
