Google Extends Online Payment Options

Google is attempting to make it easier for merchants that list items for sale on its Google Base service by allowing shoppers to make purchases using their Google Accounts.

“Many of you are probably already familiar with the Google Account. You use it to sign in and pay for a number of Google services, like Google Video and Google Earth. We’re now introducing similar functionality on Google Base,” Stephen Stukenborg, Google product manager, said. “For buyers, this feature will provide a convenient and secure way to purchase Google Base items by credit card. For sellers, this feature integrates transaction processing with Google Base item management.”

The service is currently in beta testing mode. The company is starting with a very small number of sellers and expects to include more over the next several months, Stukenborg noted.

Competing With PayPal?

The move could be viewed as a declaration of war against PayPal, but Google executives are choosing to sidestep the issue.

“There’s been a lot of interest and speculation about what Google is doing with payments. If you take a look at the history of Google’s advertising programs and online services, one thing you notice is that online billing and payments have been a core part of our offerings for some time,” Tom Oliveri, product marketing manager, pointed out.

“To run our ad programs, Google receives payments every day from advertisers and then pays out a portion of those funds to advertising partners,” he explained.

Google has billed advertisers in 65 countries more than US$11.2 billion in 48 currencies, and made more than $3.9 billion in payments to advertising partners in the past four years, according to Oliveri.

“As the number of Google services has increased, we’ve continued to build on our core payment features and migrate to a standard process for people to buy our services with a Google Account,” he said.

Getting Buy-In

Even if Google does intend this service to compete with PayPal, the company needs to get buy-in from retailers if it wants to succeed.

“That’s been one of the most problematic parts for anyone who’s in this alternative billing space,” Sucharita Mulpuru, senior analyst at Forrester Research, told the E-Commerce Times. “They have to get a sales force out providing the power to get retailers to adopt this as another option.” Although PayPal and other nontraditional payment options are growing in popularity, they are far from mainstream, she said.

PayPal had 96.2 million total accounts at the end of 2005, a 51 percent increase from the 63.8 million at the end of 2004, according to eBay’s financial statements. Total dollar volume of payments initiated through the system was $27.5 billion, representing a 45 percent year-over-year increase from the $18.9 billion in 2004.

Despite this apparent surge, the numbers look different when viewed as part of the larger purchasing picture. A recent study by Forrester Research of 200 of the 400 largest online retailers reveals only 12 percent accept PayPal and 6 percent accept other alternatives like Bill Me Later or eChecks.

Building a Business Case

“Nobody’s really made a strong business case for it,” Mulpuru said. “It’s not easy to integrate, it takes several weeks of IT time, and the question is, what’s the quality of the consumer that’s going to come through?” Retailers receive their cash sometimes months later and therefore would have to decide whether the wait time would be offset by more product sales, she explained.

Even if retailers are interested, Mulpuru is skeptical as to how much Google will invest in the effort. “Google has a long history of throwing a lot of things out there and seeing if it sticks and abandoning it or keeping it in beta for years. They spend engineering resources to get products to launch and then move on to the next big thing,” she said.

“You always have to take pause when a company like Google is going after something, but the execution has to be flawless,” Mulpuru said. “It takes time to build a brand in the payment space. I doubt Google is any better off than the incumbents.”