June 14, 2006

There are observers that suggest Google is only a few days from offering a payment feature meant to directly compete against eBay's PayPal Internet payment gateway.

Jordan Rohan, a market analyst at RBC said a few weeks ago that Google would launch a service called GBuy on or around the June 28th date.

With Google's GBuy feature, Internet merchants can engage in a payment system that empowers online consumers to make purchases using Google's new payment system.

Although it could potentially erode some market share from PayPal, Google's new proposed payment service would offer valuable data about certain shoppers' buying habits. In turn, that information could be used by the search giant to better improve its search results and ultimately its targeted ads.

In a nutshell, GBuy would take a service available to a small number of users who are already shopping within Google Base and expand it to the next level using Google search, which currently reaches ten of millions of people daily.

"Google's new GBuy feature has the potential to be important for the company and there is very little that competing vendors can do to diminish its success," Rohan wrote in a research brief.

He also said Google intended to designate merchants accepting GBuy as "trusted GBuy merchants" in its main results page, which he said could help increase click-through and purchase rates. Rohan also said the GBuy system would initially be offered free to merchants, though Google would likely move to charge a percentage of all purchases eventually.

Google has been rumored to be targeting PayPal since last year, when word emerged that it was developing Google Wallet and after it rolled out Google Base, its online database system where users can store information, making it easily searchable.

Word of GBuy's impending launch spread even as eBay was hosting its annual gathering of its devoted members in Las Vegas. eBay Live was expected to feature a number of new feature announcements from eBay, including the integration of its Skype voice chat feature into some auction listings.

Google declined to comment on the reports about GBuy. In a post to the official Google blog in February, product manager Benjamin Ling noted that "online billing and payments have been a core part of our offerings for some time" within Google's search advertising and services businesses.

"To run our ad programs, Google receives payments every day from advertisers, and then pays out a portion of those funds to advertising partners," Ling said, with Google billing more than US$11 billion to advertisers in 48 different currencies all using the Web.

Ling noted that within Google Accounts, consumers have also made those types of payments, such as when they want to download premium video or to license images from Google's satellite mapping service. "When one of our consumer services requires payment to us, we've also provided users a purchase option," he added.

"For us, it's all about bringing our users a better online experience whether they're searching or buying." Rohan said GBuy could be expanded to become a portable payment and log-in storage system for users, much like Microsoft hoped to create with its Passport system.

That view has its share of skeptics, but the possible launch of GBuy is causing quite a stir, given the competitive possibilities it creates with not only eBay but also Amazon.com, other e-tailers and comparison shopping sites. However, some believe Google's online retail approach remains too unfocused to be a significant threat in the short-term to established players.

The company's own comparison shopping search engine, Froogle, is still in beta form two years after it launched, for instance.

Having a payment system may be as much about preventing eBay from growing PayPal's reach as it is about expanding its own, said Piper Jaffray analyst Safa Rashtchy. eBay has done well in convincing eBay auction users to make PayPal their payment choice, but the option has not found as much traction in other parts of the Web. eBay recently bought part of VeriSign's online payment authentication business, a move seen as designed to help it spread PayPal-like solutions to other merchant sites.

"A Google payment system may not compete directly with PayPal, but it could limit PayPal's expansion beyond eBay," Rashtchy said in a recent research note.

Search expert John Battelle said it's not clear to him that Google has earned the type of trust consumers will need to let it handle payments to multiple merchants.

"Given how important this particular launch is to Google, I am sure it will be a good product, not the spaghetti against the wall we sometimes see from them," Battelle said. "I sense the overall cultural vibe on Google is that it's gaining too much power.

Google's expertise at micro-payments -- it literally tracks and collects pennies for each ad click -- may put it in a position to create a strong payment option for things such as music, video and text content downloads as well, noted Forrester Research analyst Charlene Li.

Source: eCommerce Times