Google’s Payments Moves Excite Comment, But May Not Threaten PayPal

Search-engine giant Google Inc. may be ramping up its electronic-payment capability for users, but it's a long way from competing with PayPal Inc. as a processor of general-purpose Internet transactions, a payments-industry researcher says. “It will take a few years for Google to even consider competing with PayPal, if they are ever going to do so,” says Gwenn Bezard, research director at The Aite Group, Boston. Instead, says Bezard, Mountain View, Calif.-based Google may pose a greater threat to PayPal by creating a serious competitor to the eBay marketplace. San Jose, Calif.-based eBay Inc., PayPal's parent, contributes more than two-thirds of PayPal's transactions. Google, which became the subject of widespread speculation about its plans in electronic payments last summer when rumors began circulating that it was building a processing capability to rival PayPal (Digital Transactions News, June 20, 2005), sparked further outsider comment Friday when it posted messages on a pair of company blogs in which the notoriously closed-mouthed company talked about its payments activities. Discussing Google Base, a new marketplace that allows users to post content ranging from recipes to collectibles to classified-ad listings, one blog said buyers and sellers can now use so-called Google Accounts to effect credit card payments. “For buyers, this feature will provide a convenient and secure way to purchase Google Base items by credit card,” this message says. “For sellers, this feature integrates transaction processing with Google Base item management. We're starting with a very small number of sellers and we expect to include more over the next several months.” The other post says Google has already processed $11.2 billion in payments from advertisers in 65 countries over the past four years, while remitting $3.9 billion to advertising partners. The Google Account, already functional with services like Google Video and Google Earth, is now being extended to Google Base, it says. “Looking ahead, we want to continue building payment services that meet the needs of Google users and advertisers,” this message says. “We expect to add payment functionality to Google services where our users need a way to buy online.” Characteristically for Google, the messages gave no details about the volume of payments so far or how the payments are being handled. Calls to Google from Digital Transactions News have not been returned. Even though the payment capability appears to be confined to users of Google's platforms, including Google Earth and Google Video, the appearance of the blog messages has renewed speculation among many observers that the online search king intends to take on PayPal. “This seems pretty blunt to me,” said Scot Wingo, chief executive of ChannelAdvisor Corp., in a blog of his own. “We want to crush PayPal.” (Research Triangle Park, N.C. -based ChannelAdvisor sells online-auction software.) Wingo predicted Google would ultimately move its payments offering “off-Google” to online merchants. Indeed, in a story published today, the San Jose Mercury News says Google is looking at the idea of showing a small “G” icon next to paid search results to denote that goods can be purchased through a Google Account payment. On the few occasions Google has been willing to speak publicly on the subject, it has denied it is trying to compete with PayPal to process e-commerce transactions. Payments experts like Bezard doubt Google will have an offering competitive with PayPal any time soon?if that is the company's intention. He says Google has its hands full with its mainline search business as well as new offerings, such as Google Maps and Gmail, its e-mail service. “Payments are not an easy game,” he says. “There is a huge difference [from the current business], even if you are Google.” Rather than pose a head-to-head challenge to PayPal, he says, Google might threaten eBay's payment processor indirectly by challenging eBay itself in the online-auction business. Ebay's auctions account for about 70% of PayPal's transaction volume. “The challenge for eBay and PayPal is that Google could come up with a value proposition that blows away the proposition of eBay,” says Bezard. “That could spell trouble for PayPal.”