google checkout

Rumours of Google launching a PayPal competitor had been rife for months before Google finally moved their new baby 'Checkout' into beta, then finally into full US launch earlier this year. The processing and handling of payments is a massive business, taking a significant slice of the online spending pie. Online spending had reached an estimated $142.3 Billion (Source: Readwriteweb.com) by the end of 2005 and is expected to undergo further growth in 2006 to over $170 Billion. For Google, the world's most popular web innovator, having missed out on this revenue until now seems out of character given their past ability to speedily roll-out competitive products.

The industry had been waiting to see how Google were going to promote their new service and what it would mean for the competitors whose market space was being degraded. PayPal, the online processing centre, has been in an enviable market position since being bought by eBay for $1.5 Billion in the middle of 2002. Suddenly able to heavily promote their payment service across a number of sites and acquire 'preferred' status, eBay secured the ability to not only charge their merchants for their service but their customers too, through the small payment processing fee. Obviously any attempt by Google to dislodge this mini-monopoly was going to cause some discomfort for the established player and would be met with understandable hostility.

The initial launch was met with a murmur rather than a roar. Google's simple service offered similar payment options to many existing products and had the standard privacy parameters and low processing fees that people were expecting. For the customer, standard payment protection and fraud protection was included and granted the obvious benefit of tracking all of their purchases centrally. Google also handle the confidentiality of purchase, optionally hiding your email address from the supplier to prevent unwanted spam. Overall, however the service, backed by the search behemoth, was underwhelming and certainly not unique. eBay immediately (and predictably) moved to ban Checkout as a payment option, protecting their own baby from the potential encroachment of the Big G.

Only when merchants began to examine some of the fringe benefits of utilising the new service, did the power of Checkout become apparent. Google offer to refund $10 worth of processing on their new service for every $1 spent on Adwords, their Pay-per-click advertising scheme. As most online operations rely to a lesser or greater extent on Google's PPC service to supplement their natural search activity, the benefit is obvious in reducing hugely the payment processing fees for a merchants site. Merchants who are Checkout 'enabled' also get a small shopping cart icon placed next to their Adwords ad, which does not immediately jump out as a huge benefit but has turned out to be the real benefit of this service.

Pay Per Click (PPC) advertising involves bidding for a keyword which is appropriate for your product range in order to receive visitors, each time a user is referred to your site a small fee is incurred. In pay per click advertising, the key to good performance is to get high click through rate (CTR) for the lowest possible bid, for the most highly targeted keywords. Until the launch of Checkout this would only be affected by the wording of the advert, its relevance to the search term and to a certain extent the users knowledge of the brand of the target website. Advertising campaigns with high CTRs are rewarded by Google, as the ability to match a user's need to the most appropriate site is still the search engines core business, so anything that increases an adverts performance is highly desirable. The ability to stand out in a line up of similar PPC adverts is crucial to a campaigns success and hence to the profitability and success of a website.

Immediately after adopting the Checkout service, advertisers with the 'Checkout Trolley' icon next their adverts immediately saw their CTR increase significantly against previous performance and against their competitors, allowing them to reduce their cost-per-click (CPC) and therefore increase the reach of their search advertising at no extra cost. User reaction seems to suggest that their trust of Google's brand and search results has risen to the extent where even the addition of a small icon next to a PPC advert is seen almost as a mark of approval from Google, a seal that the site is safe and worthy of a users attention.

Ironically, research shows that users are only slowly moving to adopt the payment service itself but the benefit to merchants is clear. One small icon next to your advert means that your advertising budget stretches further and new customers have a higher level of trust of your site, when coming to it fresh. It seems that the immediate benefit of this boost is worth the small cost of adoption of Checkout alone.

This boost in revenue from advertising is highly desirable and UK merchants are already clamouring for their chance to increase their bottom lines, so when will Checkout be available to UK merchants? The news is predictable, with Google responding that they 'Look forward to offering the service in the UK soon'. Google have a tendency to drop products onto the market in one fell swoop, so watch this space and get your developers ready to integrate when it is released. Your instant reward will be a tangible increase in the effectiveness of your PPC. Once more users use the service for payment, your overheads per basket will also drop.

Will it kill PayPal? Probably not in the short or medium term but it certainly has eBay examining its options for long-term damage limitation strategies. Will it damage other payment providers? Yes. However, if you are an Adwords advertiser, it appears that this is one service from Google that you won't be able to afford to miss.

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