Google Checkout Should Capture Small-to-Midsize Market

As Google (GOOG) goes up against Microsoft (MSFT), those in the digital advertising industry stand to take a bruising or become roadkill.

The future for what could be a killer application for Google—its Checkout service—continues to be underestimated and mis-understood. This is less about eBay (EBAY) owned Paypal and more about extending the life cycle of Google’s advertising product [the AdWords connection]. More importantly, Checkout could be one piece of a soon-to-be unveiled, soup-to-nuts e-commerce offering for small to medium enterprises [SMEs]. What would fit more nicely aside document sharing via Docs and Spreadsheets?

In examining Checkout’s potential impact, the questions we should be asking are:

1) Will enough consumers adopt Checkout and, if so, what will drive the adoption?

2) Will enough small businesses embrace Google as a more complete provider: an ISP, host, advertising and e-commerce solution provider?

Please notice the lack of focus on disrupting Paypal and on immediate-term success of Google netting merchant participants.

Arguably, Google does have an opportunity to drive adoption of what amounts to the world’s first widely used “digital wallet.” Pointing at previous wallet failures [Yahoo! (YHOO) and Microsoft] isn’t convincing me that the idea isn’t a good one so much as it suggests it was a premature one. We have seen many ideas born in 1998 and fail in 2001, only to be re-born again and thrive in 2005 [i.e. companies offering Web-facilitated drop-shipping and pre-fab storefront creation]. Additionally, Microsoft [and Rakuten’s Linkshare division for that matter] seems hell bent on making mobile phones the digital wallet of the future [Linkshare, of course, hoping to figure out a way to get affiliate middle-men in between consumers and the checkout point].

Driving Adoption: Privacy, Trust
So what will drive consumer adoption of a secure Web shopping wallet? Ironically, I posit, privacy concerns. I say ironically in that Google has, and continues to, amass THE proprietary data set ranging from corporate marketing ROI intelligence [Google Analytics + AdWords/AdSense = intimate return on investment knowledge] to user surfing behavior [via everything from Google Reader to Google accounts consumers are continually logged into]. There’s nothing private about interacting with Google or any of its sister products, services or companies but so far the company has not stumbled in terms of users/customers being overly concerned with their privacy. They’ve not used any of this data in “evil” ways—or at least they’ve not admitted to it. Google’s trust factor is high.

Is it far fetched to suggest that consumers would trust Google with protecting their charge card number in an age where they are already scattering it across e-commerce sites? Not everyone gives their number out for storage by the retailer, of course, but most merchants are actively asking consumers for it. In the end, what’s safer… storing the number in one place [Google’s server] or storing all over the place?

Driving Adoption: Convenience
Web 2.0 is all about the consumer’s ability to customize and Google’s all over it. Consider Google’s offering, at a centralized location, consumers a place to receive and store customized [again, only from a consumer’s favorite/approved retailers] promotions and coupons. One need not look further than Yahoo’s new “Bargains” shopping tab to predict such a return volley from Google. Again, I suggest the question is when and how… not if.

I posit that this is all about a longer, methodical [uncharacteristic for Google, I admit] race to capture a piece of the wider SME market—one dominated by Microsoft products and services. Does this focus on digital wallets? Not really and Google seems content to let Microsoft lead the masses into a more transaction-focused mobile future.

Google could [although it denies such plans] become a full fledged ISP [Internet Service Provider] complete with site building, hosting and marketing analytics tools. Need to drive visitors to that site? No problem; how would you like to pay for them? [see Scaling ‘Cost Per’ Marketing below]

When and How Google Will Move
I suggest that we’ve only begun to see Google flex its branding muscle [among consumers and SME owners] and the tipping point will be reached when its advertising business revenues take a slowdown. This is another “when not if” question and will be preceded [if not triggered] by a declining housing market and rising interest rates. I am confident that Google will, at such a time, launch sizable TV, radio and print branding campaigns that seek to earn the trust and adoption of consumers across a wide array of its largely free offerings.

Did-It.com’s Kevin Lee seems to agree. Says Lee,

“If I were Google I’d be thinking about how to sell something really cheap in order to get consumers to sign up. For example I’d sell a Google sweatshirt for $4.95 only with Google Checkout. Could be a huge Google logo merchandise store. Google takes a little loss on the merchandise, gets critical mass on Google Checkout and suddenly hundreds of thousands of Google logos are walking the street in the form of hats, sweatshirts, etc.”

Scaling ‘Cost Per’ Marketing
Cost per click [CPC]? Cost per action [CPA], lead or transaction? Not a problem—Google can handle all forms of payment that an advertiser may desire. SME customers relying on Google Checkout as their primary means to process customer transactions [or Google Analytics as their marketing ROI tool] can take advantage of paying on a CPA basis. It’s a snap for Google [an affiliate marketing scenario is all but built into Checkout using simple, industry standard pixel tracking]. Listen up Valueclick, shopping comparison engines and anyone else wishing to sell CPA and CPC visitors to advertisers.

According to Forrester Analyst Charlene Li,

“They [Google] already offer a few things by cost-per-action, but the problem has always been closing the loop. Here they can actually absolutely close the loop.”

A slight tangent: Does any of this sound familiar? How about that age-old appeal of “free branding” [in situations where the ad is shown but no site visit or transaction results] and, in the case of Google’s Checkout, free [at least partially] CPA-based advertising that is flung far and wide across the Web? Such a scenario should catch the attention of affiliate marketing networks like Kowabunga Marketing, Shareasale, Linkshare, Performics, LinkConnector and Commission Junction who are all looking at the SME sector as growth opportunities.

Google has been a mixed blessing for these intermediaries who have come in 3rd place in terms of capitalizing on revenue. Winners have been Google and affiliate sites… trailed by the affiliate networks. Some believe so-called “CPA Networks” like Azoogleads threaten to [or already have?] beat traditional affiliate networks to the punch.

As for scale… well, some have tried to scale existing, relationship-focused affiliate networks but have failed causing the industry itself to come to a realization: “it’s all about relationships” yet I, along side of advertisers, continue to ask “what kind?” In fact, we collectively seem to be answering: “discount-focused [coupon, cash-back], incentive shopping and niche community“ so long as networks like Performics, Commission Junction and Linkshare limit their advertiser customers to a “pure performance” [CPA] payment option. These types of affiliates/publishers offer limited scale and growth for retailers.

If there’s one thing Google knows how to do and has succeeded at at an unprecedented level, it is scale and so far Yahoo! [in partnering up with a coupon affiliate so as to access coupon codes] is scaling the discount/coupon sphere—launching its own coupon portal and potentially taking traditional affiliate networks out of the “retailer relationship discussion.” Google is sure to respond but how? Perhaps similarly.

Again, this is not about disrupting Paypal so much as it is about a wider plan of attack on a big market: the SMEs.

Comments

[Paul Brown]

It's not EBay who has to worry about Google checkout; it's Amazon, since a full Google-backed e-commerce offering would compete directly with Amazon's merchant offerings.

[CouponsFree OnlineOnlineStore Coupon]

I always found google check out to be useful myself.