SAN FRANCISCO Jun 29, 2006 (AP)— Google Inc. on Thursday
will unveil a much-anticipated payment service that aims to make online shopping
more convenient and give advertisers another reason to pour more money into the
Internet search leader.
As Google attempts to boost its already lofty profits and become an even more
prominent player in e-commerce, the Mountain View, Calif.-based company risks
alienating one of its biggest advertisers online auctioneer eBay Inc., which
runs the Internet's leading payment service, PayPal.
Although Google doesn't view its service as a PayPal competitor, there is no
question it poses a long-term threat to eBay, said Internet market analyst Greg
Sterling.
"Any time Google does something like this, it has the potential of turning
into a big deal," Sterling said.
At least two merchants, Starbucks Corp. and Buy.com, that have signed up for
Google's new service also accept PayPal, which eBay bought for $1.3 billion in
2002.
EBay spokeswoman Amanda Pires declined to comment on Google's entrance into
online payments, but the San Jose, Calif.-based company signaled its concerns
about the search engine's expansion last month when it formed an alliance with
Yahoo Inc. that will make PayPal the preferred payment provider on the
Internet's most trafficked Web site.
Google has been testing its payment service, called "Checkout," for nearly a
year, spurring widespread speculation among Internet analysts and investors.
The looming showdown in online payments pits two of the Internet's biggest
success stories. Google earned $1.5 billion on revenue of $6.14 billion last
year while eBay made $1.1 billion on revenue of $4.55 billion.
Google's service is designed to serve as an electronic wallet that will
enable consumers to buy products and services from a bazaar of merchants without
repeatedly entering the same personal and financial information at each store.
Users with a Google account simply enter a credit card account number along
with a few other details and the company will deliver the payments to any of the
participating merchants, which must advertise on the search engine to
participate.
Currently, Google is only accepting credit cards for purchases but
remains open to other payment vehicles such as electronic fund
transfers from individual bank accounts, said Salar Kamangar, vice
president of product management for the company.
Merchants that accept Google Checkout will be identified by a green shopping cart symbol that will appear next to their ads.
Google will discount its payment processing fees based on how much
merchants spend on advertising through the search engine a strategy
designed to generate more revenue for the company.
"It's a really smart move by Google, a wonderful way to close the
loop with its advertisers," said Forrester Research analyst Charlene
Li.
Still, Li believes many major merchants with well-recognized brand
names will be reluctant to use the Google service because they prefer
collecting the checkout information themselves so they have the data
for future marketing efforts.
Merchants won't have to pay processing fees on purchases totaling 10
times their advertising volume with Google. That means an advertiser
spending $20,000 per month at Google wouldn't pay any processing fees
on purchases totaling $200,000.
After the spending threshold is exceeded, Google will charge
merchants a fee equal to 2 percent of the purchase amount, plus 20
cents per transaction.
PayPal's processing fees range between 1.9 percent and 2.9 percent
of the purchase amount plus 30 cents per transaction. The model that
has proven successful so far. PayPal handled $27.5 billion in online
transactions last year, generating $1 billion in revenue for the
company. It currently has about 105 million users worldwide.
Except for PayPal, few other online payment services have gained much traction so far.
Google is betting its service will catch on by simplifying the
online checkout process for consumers, encouraging people to shop more
on the Web and use its search engine even more frequently. Citing
industry surveys, Google estimates that 37 percent of all e-commerce
begins with a request entered into an Internet search engine.
"We think Google Checkout will complete the process so people can search, find and buy things quickly," Kamangar said.
Google shares gained $3.79 Wednesday to close at $406.11 on the
Nasdaq Stock Market, where eBay shares rose 50 cents to finish at
$28.75. By MICHAEL LIEDTKE AP Business Writer |
Product Features
