Although Google may think of its Checkout service as an extension of its existing payment system, but it also presents a business shift that portends both risk and reward.
A report by the Gartner research firm noted how Google is no longer just a search advertising company. That change could be one which provides a reliable revenue stream for Google.
Handled clumsily, Google Checkout poses some hazards to the company, analysts Allen Weiner and Andrew Frank claim:
Google Checkout goes well beyond Google’s stated mission of indexing all of the world’s information….By intermediating payments, however, the company has also taken on significant liability well outside of its demonstrated area of competency.
In addition to the economic risks posed by Checkout, however, Google also puts its brand at risk by accepting a customer-facing role in moderating disputes and dealing with fraud. Checkout will be a true test of Google’s ability to grow beyond the keyword advertising business and pioneer a new category.
The brand has grown beyond just a recognizable name. Recently, “google” joined the lexicon when Merriam-Webster added it to their Collegiate Dictionary as a verb meaning “to search.”
Few rewards come without risks. The Gartner report suggested Google look past short-term profitability to longer term goals by accomplishing tasks, like these:
• Deepening relationships with merchants and consumers
• Pre-empting competitive threats
• Laying the foundation for additional identity-based services
Google has positioned itself to be a one-stop shop for online businesses. By offering substantial discounts on Checkout’s fees to AdWords clients, Google has position Checkout as a loss-leader to its multi-billion dollar advertising business.
Yahoo has a partnership in place with eBay, where PayPal will serve as Yahoo’s payment processor. That positions the duo to take on Google directly, should they choose to offer a competing bundle of payment and search advertising services.
Microsoft has entered the search advertising business on the self-service side, and with its wealth and clout could partner or even acquire a small financial institution to handle its payment chores.
Until Yahoo or Microsoft act, Google looks like it has a first mover advantage in this area. Gartner cited the potential for third-party developers creating security or identity management tools to work with Checkout, and advised the company to “embrace such added features with open arms.”
For existing online merchants who are AdWords clients, and enticed by the appeal of free or low-cost payment processing, Gartner counsels caution:
(I)t’s wise to proceed with caution, because such a platform could easily attract those looking to “game the system,” which could force Google to institute more restrictive policies over time.
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David Utter is a staff writer for murdok covering technology and business.
