2006 saw Google launch a service which would offer online shoppers a one-click method of paying for their purchases, while also helping minimise the risk of their credit card information being stolen from a website. The service, Google Checkout, works by linking to credit card accounts, but is faster and more secure than typing in a 16-digit card number.Despite being utilised by one hundred of the top 500 online shopping sites, including Toys R Us, Linens N Things and Buy.com, the past three months have still seen Google's drive of an aggressive marketing campaign to lure shoppers away from its more established market-place rival, PayPal - a similar service owned by internet auction giant, eBay. Incentives such as $10 discounts off first purchases throughout Christmas and around Valentines Day, in addition to waiving the standard fee of 2 percent per purchase until the end of 2006, has cost Google around one per cent of its revenue, estimated at $32 million during the final three months of 2006.
With more options now available for making online purchases, consumers stand to benefit from the rival service offered by Google. At stake for Paypal, however, will be its stranglehold and near-ownership of the online payment market - a highly lucrative business that contributed 25 per cent of eBay's revenue and accounted for around $11 billion worth of transactions during the final four months of 2006. Paypal differs from Checkout in that it can also be used to draw on funds from a bank account - so account holders can use Paypal to make payments between individuals in a similar manner to writing cheques.
Paypal currently handles 70 transactions for every one made through Checkout and can lay claim to having 133 million account holders according to Hitwise, a firm that measures online traffic. Furthermore, since eBay bought PayPal in 2002, it has become a profitable business for the online auctioneer. However, neither eBay nor Amazon, the internet's biggest retail store, currently allow customers to use Checkout on their site. Furthermore, eBay claims that Google's Checkout service lacks a proven record in terms of security.
Google service highlights the complicated relationships shared among internet companies as they strive to expand their audience; after all, web-based companies frequently advertise with one another while simultaneously competing with their own array of competitive services.
Up to now, Google and eBay have enjoyed a mutual relationship: the companies had a multi-year advertising deal which saw eBay's advertisements appear alongside Google SERPs and Google placed advertisements on eBay auction sites across the globe. However, Checkout now seems to place Google and eBay as rivals.
For consumers though, Checkout's biggest virtue is the fact that it is free. Despite teething problems during the early months of its release, Google now says it has made improvements to the service and are happy that the service is secure and customers are satisfied. Now, eBay merchants are petitioning the auction giant to allow Checkout to be used on the site.
Some analysts claim that the Google service is just another part of the company's bigger push into the e-commerce market, further encroaching into eBay territory. Google already has Froogle, a rival service to price-comparison site Shopping.com, and Google Base, an online classifieds site similar to the eBay service, Craigslist. Other analysts claim, however, that the Checkout service offered by Google has less to do with e-commerce revenue and more to do with harvesting data relating to how online shoppers respond to advertisements. Google claim that 37 per cent of online purchases begin with an internet search, and that information regarding sale closure after clicking on an ad will help the company's advertising business.
