10 Possible Consequences of Google's GBuy
The first reason is obvious: Google makes money on click conversions. The more clicks done quickly, the more money for Google, and the happier the advertiser. The second reason is that by automating the click cycle, Google will be vastly improving the efficacy of its search results, and how searches correlate with AdWords. Unlike destination sites that measure success by how much time is spent on a page, Google measures success by how quickly a user navigates off Google. The company is constantly testing out data centers to see which center returns the best results that get users off Google quicker. There are other reasons: Google will begin compiling transactional data. That data alone, even without trending analysis, is worth billions. Google will also become the first company to own not only the method of advertising, but also the data on what advertising works best. Perhaps most importantly, GBuy, when combined with Google's new Cost Per Action feature, has the potential to significantly reduce click fraud. But there's the rub. Will merchants actually use GBuy? Of course, you say, why would they not? You could use Google for everything! AdWords, Page Creator, Analytics, GBuy ... it's a virtuous circle of Googledom. And yes, even a curmudgeon like me is attracted to the idea of one Google to rule them all. But let's not forget this has been tried before. It was called Yahoo PayDirect. Yahoo started the service as a competitor to PayPal. Unlike Google, Yahoo had a product incentive for this service. That is, Yahoo had a then-robust classifieds and auctions business that it wanted to tie PayDirect into. The math was simple: User browses Yahoo products, user buys with Yahoo system, Yahoo gets profit. PayDirect was free (most of the time), but it didn't work. Yahoo folded PayDirect in 2004, mostly because PayPal simply owned the market. Of course, Google has several competitive advantages that Yahoo did not have. But what Google doesn't have -- and this is important -- is product to sell. The main reason PayPal succeeded was because eBay was developing at the same time. There was no other easy way to pay an auctioneer, so users turned to PayPal. The two companies became so closely intertwined that eBay decided to buy PayPal and integrate it directly. Purchasing PayPal made perfect sense. As a merchant, why would eBay want give another vendor control of its clients? This is the challenge that Google faces with GBuy. If you talk to a lot of retailers, I think you'll hear them saying the same thing: "Why would I give Google control of my customer?" Google's not selling anything. And traditionally, the merchant takes payment for an item because it's the merchant -- not Google -- that has to fulfill the order. Of course, there is a new breed of merchant online that just aggregates content and has no interest in owning customers at all. Think Shopzilla. For sites like those, perhaps GBuy is the golden ticket. But back to the traditional merchants. Online merchants already track purchases made via Google AdWords. They've already bought software to track orders, or they've integrated a code into their inventory systems that correlates a sale with an AdSense referral. There's an entire marketplace of shopping cart software that's already integrated PayPal. So the question inevitably becomes: If I'm a merchant, and I've already gone through the trouble of integrating PayPal, and PayPal is cheaper and it's trusted, why would I switch to GBuy? One possible answer to that question is that GBuy is free for AdWords customers. Yes, that's a great incentive. But don't expect GBuy to eclipse PayPal with that feature alone. Companies with large marketing budgets will be advertising over multiple sites, not just with Google AdWords. Does it make sense to switch to GBuy for a 1-2 percent gain? Perhaps. At any rate, the market will decide. I'm still cautiously optimistic about GBuy. If merchants can be incentivized by the potential to reduce click fraud, and if they're not leery of giving too much control to Google, perhaps they'll switch. Below, 10 possible effects that GBuy might have on Google, search and other companies. 1. Google changes how AdWords are bought. As more and more advertisers use GBuy, Google will collect data on which AdWords are most effective at converting clicks, and which clicks convert to sales. Google would then be able to set AdWords prices based on the average ROI to advertisers for that word. 2. Google personalizes your search results like Amazon. You may start seeing "people who searched for this also search for..." Google may be reluctant to do too much with its core search though. This feature could be a powerful add-on, like Google Desktop search. 3. eBay steps up their advertising campaign and partnership with Yahoo. eBay throws more dollars at its contextual ad system, AdContext, and its keyword-based text ad product, eBay Keywords. (In the Yahoo PayDirect days, Yahoo allowed both PayPal payments and PayDirect payments on its auction site. I wonder if Yahoo and eBay will have anything to do with GBuy.) 4. GBuy fails. The feature fails to fulfill a marketplace need, since PayPal owns the space and does it cheaper. Ad money starts flowing back to the content providers, a la Leo Hindrey's famous prognostication. 5. Google begins offering targeted ads to users based upon users' purchases. 6. GBuy will change how search results are returned by factoring in which online stores convert the most sales. 7. Merchants will devote fewer resources to design and more resources to structuring of data. 8. Google builds a valuable offline database of consumer information. 9. GBuy will alienate site owners who both sell their own products and have AdSense on their site. If the Google ads that appear on those sites are for competing products, and those ads have a GBuy icon, then Google will be competing with its own customers. 10. Nefarious site owners will use all the old tricks to raise their SEO for all the terms that use the most popular GBuy AdWords. I leave the rest to you, my smarter and more resourceful audience. What other effects do you see coming from Google's GBuy? I'm especially interested in the merchants out there. What payment system do you use now, and will you switch to GBuy? |
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Comments (20)
9. GBuy will alienate site owners who both sell their own products and have adSense on their site. If the Google ads that appear on those sites are for competing products, and those ads have a GBuy icon, then Google will be competing with its own customers. People who have adsense have the ability to block their competitors ads from their site... "10. Nefarious site owners will use all the old tricks to raise their SEO for all the terms that use the most popular GBuy adWords. " Google will simply punish these sites page ranks (which will undoubtedly be enhanced by this service) and evoke their adsense accounts for violation of TOU, it's not complicated. "3. eBay steps up their advertising campaign and partnership with Yahoo. eBay throws more dollars at its contextual ad system, adContext, and its keyword-based text ad product, eBay Keywords. (In the Yahoo PayDirect days, Yahoo allowed both PayPal payments and PayDirect payments on its auction site. I wonder if Yahoo and eBay will have anything to do with GBuy.)" Who cares about e-bay? Between Google Base and Gbuy it's a sitting duck. E-bay offers useless ads and thus has low payouts towards Google (as you bid per keyword), cheap keywords don't make Google money...this isn't even an issue.
Posted by Josh | June 27, 2006 7:35 PM
What’s the value to consumers of another credit card processing system? Do consumers really care if credit card transaction is processed through authorise.net, cybercash.com, verisign, paypal, or gbuy, or whatever? Out of all the above I can only see why one might choose PayPal over others - because when paying with PayPal, one does not share any financial information with a merchant. PayPal on top of credit card (credit card used as a money source in PayPal) is a very powerful concept from security perspective – one still can earn reward points on credit card and still take advantage of inherently secure PayPal layer. Gbuy does not offer that - they are just another credit card processing system - still based on credit card numbers. Who needs it? I don't see consumers are in need of it. The benefits of Gbuy are mostly for Google itself. Also, being more expensive (according to romours 2.3% versus 1.9% for PayPal), even merchants are in disadvantage. If Google plans to give away rebates and discounts, they only shrink their profit margins in addition to all costs necessary to implement dispute resolution and all other overhead stuff. Are they going to hire people to do dispute resolution and analysis of chargebacks? I doubt it. In short, Gbuy solves pay-per-sale problem for Google, but it does not solve any problems for consumers and not for merchants as far as I can see. Being unsuccessful in everything except for search, I don't see why this new experiment known as Gbuy will be different. Many tried (Yahoo, Amazon, CityBank, and even eBay itself) to compete with PayPal in 1999-2002 and everyone failed. Since then, PayPal grew several folds and its network effect got exponentially stronger. In the meanwhile, the panic continues and dumb dumb are selling eBay stock on this over hyped non-news. I am buying.
Posted by Steve | June 27, 2006 8:14 PM
A clue would help. PayPal does not charge merchants 1.9%, they charge their BIGGEST merchants 1.9%. The rest of us pay between 2.5% and 3% based on volume. PayPal can be PayPain for many. The first problem is security. It's true that you don't have to give your card number when you use PayPal to pay but it's also true that if you pay with PayPal and the merchant vanishes your chance of getting the purchase charged back is almost nil. Why? Because simply PayPal will pay with your balance if you have one and if you don't they will first opt for a bank transfer to make up the deficit. Unless you are savvy about how your PayPal account is setup and how it is used you could be SOL when trying to recover funds from a deal gone bad. If you use PayPal and you want to be protected from shady merchants and scams you must not have any balance in your account and you must attach only a credit card and not a bank account to your PayPal account. PayPal wants you to link a bank account because it's cheaper for them compared to a credit card. The margins are much higher. There is as much to know about PayPal as there is to know from reading your credit card subscriber agreement but hey make it just so damn easy to skip over the boring bits and get right to the spending. If you had to answer a quiz about how credit cards worked before you could use one you would run for your financial life. Regardless of what Google does it won't be the last word on how people spend their money. Google is starting to reach the top of their bell curve. The innovators are starting to butt heads with the bean counters. Google/Kleenex, soon they will look the same and the next wave of great ideas will be coming forward from somewhere else. This is not exciting stuff anymore, it's $ and cents. This is not innovation. It's not intelligent design or ground-breaking thinking. We are still transcribing long strings of numbers from a plastic card to our keyboards and we do it regardless of which payment gateway we are talking about, even Google. Same skim, different skimmer. This is little more than the first of many accountant driven projects we can expect to see from Google in the future. I'm not a hater, just a realist. Google pays my mortgage and then some. I love Google.
Posted by Erik | June 27, 2006 10:15 PM
I used to love Paypal until I stopped using it for a while and opened a new account after several months. Paypal let me use it for a short period and after racking up quite a bit of money in my new account, they realized I had an old stagnant account and decided that I wouldn't be aloud to access my funds for at lease 180 days and maybe even a lifetime. I know lots of merchants who have had the same experiences with Paypal that might lead them to Gbuy, so let's hope that Gbuy is all it's racked up to be. I will probably use both, after my problems with Paypal are worked out and I have my own merchants account, but sometimes, people want that "point and click" instead of fill in forms. Another option won't hurt at all. Customer service will be something Gbuy should be sure to have as that is the biggest failing with Paypal. You get several different answers to the same question and calls are just left in a "rinse and spin" cycle most of the time.
Posted by CJ | June 28, 2006 5:51 AM
I think this is great that Google is doing this... I for one cannot stand Paypal as I have been ripped off before and when I had an account I was a victim of Identity theft. In trying to work things out with them, they were complete a**holes. They even accused me of stealing which is totally false because I had it researched by my CC company and bank. It took numerous hours over the phone with paypal and several months to get my money back. Paypal IMO has lousy service and charges too much... Google will defintely be welcome with open arms by many as I have known quite a few people who have had similar issues with paypal. Thank you Google!
Posted by AG | June 28, 2006 9:20 AM
gbuy will start off with more people than anyone - press or google - anticipate. there is a significant portion of the paypal community that grudgingly uses paypal. not 50%, but a lot more than 1 or 2%. i've heard of ebay sellers who state that they would pay MORE to use gbay, just as a way to get off of paypal. that was surprising to me, and wouldn't be a good business strategy on google's part. but i think that paypal's (ebay's) bottom line will take a hit when gbuy is up and running. 2 sidebars: 1) ebay has tried to put out a "you can only buy through these vendors" message. will they allow gbuy to become one of these? 2) a few months before ebay bought paypal, a couple of the pinks were posting on the ebay boards mocking paypal because the ebay bid program was so much better, you couldn't trust paypal, etc. needless to say, all the negative comments stopped soon after.
Posted by bobg | June 28, 2006 9:25 AM
11. Google moves into the one area payment-method sector where there is no real competition, micropayments. This is similar to Wal-Mart's intial model: open stores in towns that were perceived as too small to support such a store. If Google can start in an area where it has no real competition, it may make it easier to flourish and then spread into more competetive segments of the market. Just a thought.
Posted by Gymbrall | June 28, 2006 9:27 AM
I believe people do not really care who provide the service as long as they get a better service. If GBuy can do a better service than Paypal then it is good for the consumers. I have heard of many complaints about Paypal from my readers before. Google wants to expand in their services and GBuy is just one of many coming from Google. However, as mentioned above, Google shouldn't really mix Adwords, Adsense and GBuy together. -Guna
Posted by DotsMedia | June 28, 2006 10:01 AM
Here's a good comment I found on Digg about this blog: This article fails to mention the most important thing: There are thousands of merchants that depend almost 100% on Google for their business (all traffic comes from Google Adwords). These merchants will do whatever they can to 1) Increase the number of potential customers coming from Google to their website and 2) Reduce the price-per-click or the total amount they have to spend on Google. Googles new Cost-Per-Action method is paradise to merchants - they only pay Google for actual paying customers instead of all the tire-kickers and click-fraud-robots. The only way to prevent CPA fraud (fake purchases) is for Google to control the transaction method (GBuy). When Google releases CPA+GBuy to the public, millions of merchants will gleefully jump at the chance to reduce their cost-per-customer.
Posted by Steve Bryant | June 28, 2006 10:21 AM
For not having a product to sell Google sure is making a lot of money (not selling a product).
Posted by C | June 28, 2006 11:21 AM
Why don't you use a photo program to remove the red devil eyes from your picture at the top of this page. It's creepy dude.
Posted by bob | June 28, 2006 11:22 AM
there was a comment about Micropayments. That naive reader who said there is no competition in micropayments... That's mostly true. Why is it mostly true? Because noone ever found a good way to make money on this - it just costs 30c + at least 1.9% to process a credit card transaction. And Google is not different - they are bounded by the above contraint. Noone on the entire internet can do it except for one company - PayPal. Why can they do it? Because about 45% of their transactions are funded with PayPal balance or checking account and not credit account. So thier cost constrain is (30c+1.9%) * 0.45. Because they are also a credit card gateway, they also save 5-10c out of 30c. Together this enabled them (with no competition) to offer micropayments on iTunes and Napster with pricing 5c+5% per transaction. Google is nothing here. PayPal is the king of internet payments and just because Google changed the world of search when noone really cared too much about it because there was business model around it (no pay per click in 1997-2001), by no means Google's progress is assured in other areas and historically they pretty much failed to gain traction in everything they do except for search. Is MapQuest killed? Is YahooMail killed? YahooFinance?
Posted by Steve | June 28, 2006 11:48 AM
You've got the general idea I think. The 0% fee for AdWords/AdSense users will draw people in, just to have it as another option. And some people have had accounts frozen by Paypal. The big deal about this is like you said: all that data, combined, and how they can use it to improve the query results. And then you can use Google Analytics to track your $.
Posted by "PJ, Knowing Art" | June 28, 2006 1:04 PM
Re: the red eyes. I blame Google. The G-Poppa has turned me into a vampire.
Posted by Steve Bryant | June 28, 2006 1:08 PM
Why would Google want to make it free to AdContext customers? They will lose about 2% of entire purchase amount (order of 1000$ will lose Google 20$). In addition to this, they will have to invest in dispute resolution and anti-fraud personnel - algorithms will not help here. PayPal (from eBay's Q12006 conference call) has over 1000 dedicated people working on this stuff. If pay-per-click is so attractive to merchants and growing so fast, why introduce additional incentives? Maybe the growth is slowing so much that Google has no choice but to spend extra on incentives?
Posted by Steve | June 28, 2006 2:15 PM
>> Who needs it? I don't see consumers are in need of it. No the people providing web development need it. From a developers standpoint PayPal, in a word, sucks. PayPal’s API is horrid and the PayPal Pro API is a nightmare. Of all of the PayPal Pro SDK’s and examples provided by Paypal (Java, ColdFusion, PHP, ASP.Net and ASP 3.0) I could only get the ASP 3.0 version to work. So I am SOL for my *nix boxes. >>> Do consumers really care if credit card transaction is processed through authorise.net, cybercash.com, verisign, paypal, or gbuy, or whatever? No. Nor should they. Having used PayPal for several years as the payment gateway for our entry-level E-commerce clients I am looking forward to Gpay. Anything is better than Paypal. Most payment gateways charge just as much (or more) as Gpay. And Authorise.net (and it’s resellers) charge a set up fee (often $50+) and $20+/month to use their service. If Gpay is anything like Google’s other offerings in terms of ease of use, development tools and API’s it will be embraced as an welcomed alternative to Paypal.
Posted by Cozmo | June 28, 2006 7:06 PM
Steve, my thinking about micropayments goes something like this. People have a Google account that they put money into (min $10 maybe) So Google makes one credit card transaction for the $10 and then at the end of each month moves money around for payments made over the course of the month. Maybe that wouldn't work, but it seems reasonable to me. Google's alrady basically handling micropayments of the same sort for it's adsense network. Take care, G.
Posted by gymbrall | June 29, 2006 9:48 AM
Morpheus : Welcome.....to the desert of the real...We have only bits and pieces of information, but what we know for certain is that some point in the early twenty-first century all of mankind was united in celebration. We marveled at our own magnificence.... Neo looks confused Morpheus : .....as we gave birth...to A.I. Neo : A.I. - you mean Artificial Intelligence? [We only know the creator of it all was named "Google"]
Posted by Michael | June 29, 2006 1:24 PM
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Posted by Recently referred to Xcoin | July 1, 2006 6:29 AM
I as someone who buys alot of stuff on the internet cannot wait for Gbuy. They are going to have one user name and password to shop on the whole internet. Which means buying stuff without filling out forms everywhere and creating passwords and new usernames. They are going to make email address optional to share with merchants! Which means buying stuff with NO SPAM after the sale. Gbuy is very, very, very appealing to the consumer! I cant wait! I also cant wait for Gbid google auctions.
Posted by Gbid | July 1, 2006 3:56 PM