Thoughts on Google Payments

by oneafrikan on March 7, 2006

Google have started an interesting discussion after the launch their Payments service on Google Base, which will allow people with a Google Account to buy Google products/services. Still in it’s early stages, Google Base is a logical competitor to eBay (and Craigslist), so the offering of Payments is potentially an answer to eBay / PayPal dominance as well as another revenue generator.

As stated in a more recent Google blog post the Payments service is a logical one which is intended to match up the needs of Google customers.

Over the past four years, Google has billed advertisers in 65 countries more than $11.2 billion in 48 currencies, and made payments to advertising partners of more than $3.9 billion. When one of our consumer services requires payment to us, we’ve also provided users a purchase option.

and…

Looking ahead, we want to continue building payment services that meet the needs of Google users and advertisers. We expect to add payment functionality to Google services where our users need a way to buy online.

So far so good… but an interesting conversation has started around the announcement, and so far there doesn’t seem to be any clear consensus as to whether this is a really smart strategic move or not. Some people have pointed to Google diluting their focus by diverting resources to projects which are not core business, whilst others have welcomed the move for various reasons but in the main for creating a potentially viable competitor to PayPal and eBay.

If you’re interested in what it all actually looks like, the screenshots over on Techchrunch go into quite a lot of depth. At first pass it looks like they’ve made the purchase process look a lot easier and smoother than the current eBay / PayPal model, so it seems Google has retained the simplicity and ease of use that we’ve come to expect.

However, user interface and experience aside, there are inherent challenges which seem to have raised a few eyebrows, chief amongst them how Google will tackle the refunds and fraud problem that everyone in this space has, as well as a reputation system (not yet implemented) which would need to be better than eBay’s to be competitive. So far their work has been in-house and fairly independant, so it remains to be seen how they will interface with 3rd party banking and financial organisations, and what that will do to their cost model. Providing fast search and targeted cost-effective advertising on your own platform with your own bespoke technology stack is one thing, but working with banks and preventing fraud globally is another altogether, so apart from the obvious brand and customer base issue, there may be more practical issues for Google to overcome, where PayPal and eBay are already ahead of Google.

Since Payments is not their core revenue producer, Google can afford to enter the market pricing low to gain market share quickly, and as they are also the merchant of record (taking payments from customers then paying proceeds to their vendors) this could sway the adoption rate in Googles favour. At the end of the day, the service which makes it most easiest to get an every day online transaction done is the one that you think would dominate eventually. eBay has shied away from this model thus far, so either Google is onto something good (providing they can overcome the above challenges) and eBay will find themselves in a pickle against a potentially bigger brand; or not – either way it will be interesting to see how it all plays out.

Speaking of brands, I’ve long wondered when eBay were going to revamp user interfaces / process, making them easier to use and more pleasing to the eye. It’s not like they’re short of the cash needed to do it so it must be about management and incentive. With this Payments move from Google, maybe the incentive will be there to compete with Google on a brand and experience level. Since eBay can’t compete directly against Googles existing user base, brand mindshare and current Adsense and Adwords clients, then they can at least compete on interface, useability and experience… which can only be a good thing for the end user.

Which brings me to another interesting point. Another consideration is that at present PayPal is for all intents and purposes a monopoly, and when combined with eBay, becomes a pretty big duopoly with very few real alternatives. Either Payments will offer a choice over PayPal / eBay, which is good for the consumer of that choice whether it be for content micropayments or merchant facilities for people in far flung countries; or it will force eBay and PayPal to improve their service to compete, which again is probably good for everyone.

I find it hard to believe that Google wouldn’t first research, understand and explore the problems and weaknesses with both eBay and PayPal before starting this project, and then work to correct them in what we know as the Google way (clean, simple, effective) as they have the time, money and brains to do it; but then I also know someone who yesterday went for an interview at Google and he came away talking about it being a big startup full of crazy people, and we all know what crazy people are capable of.

What do you think?

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