Monday, November 27, 2006

Google Checkout Keeps Chugging Along!

Interesting take on Google Checkout form Scot Wingo of Channel Advisor.

Google Checkout is getting very aggressive. They recently announced a $10 off promotion from selected sellers and they continue to offer free processing for Sellers through the end of the year.

They are also signing up more web retailers: Toy R Us, Dick's Sporting Goods, and Zales Jewelry to name a few. Here is a more comprehensive list.

How will this affect PayPal during the holidays? I don't believe it will have much effect on eBay's PayPal this holiday season but if Google Checkout continues to get traction and finds a way to start signing up eBay sellers, who have launched their own websites, it may cut into the upside of eBay's Golden Child (PayPal). Based on the declining health of eBay’s marketplace business and the fact Skype is stuck in neutral, if the “Shining Light” (PayPal) of eBay takes a hit it could be “Lights Out” for eBay. PayPal was the biggest contributor (growth Y/Y) to eBay’s bottom line in the 3rd Qtr.

From a sellers perspective increasing checkout options will be beneficial and a solid competitor will force PayPal to reconfigure their fee structure and become more responsive to sellers issues. Where Google Checkout has the greatest chance of success is in the ecommerce world outside of eBay. This battleground (the world outside of eBay) is much more difficult for PayPal to get traction. My guess is Google plans to become the defacto standard for checkout on the web and with their $13 billion war chest who would bet against them.

PayPal has an advantage with eBay buyers/sellers because it serves as an in/out account (similar to a checking/savings account) rather than just an online wallet like Google Checkout. PayPal users often use their PayPal balance, which holds revenue generated from their sales, to purchase items rather than use the credit card or checking account that is attached to their PayPal account. This works well for eBay because of the culture of the marketplace but in the rest of the world, where buyers are not sellers as well, it has limited use.

EBay does not seem to be worried about Google Checkout but as my own online selling experience points out; if you take any competitor lightly you are primed for a fall.

Prediction: At some point I see the competitive landscape changing and PayPal being offered through Google Checkout. Of course the only way I see this happening is if Google were to buy eBay. A Google/eBay marriage would allow PayPal to continue it’s upward trend, would bail out eBay’s Skype purchase by putting it in the hands of Google management and it would invigorate eBay’s marketplace business. This makes far too much sense.