This post continues from my previous post on Google Checkout where I had stated:
I am tending to feel that eventually Amazon (AMZN) will not be hurt that bad and Google will just benefit from bigger business coming from small-medium businesses and its exististing Advertising Partners.
Why Amazon may not be seriously hurt by Google Checkout
Amazon has developed a unique configuration of services that goes beyond seeing a search result at Google's Web Site and making a spot decision to Purchase.
For example in online books sales -- Amazon allows readers to review the book, check out the comments of other readers of the book, find used books from various vendors, send a book as a gift, put books in a wish list, see related books etc.
Thinking that Amazon will lose out to Google checkout would be assuming that online purchasers will don't want all the conveniences that Amazon offers. The only scenario where a buyer may pick a book right from Google would be when a reader has pre-determined the book she wants to purchase and just wants to make a transcation. In all other cases Amazon will continue to rule.
Understanding how Google is targeting its Advertisers and Small-Medium Businesses
Saul Hansell in a NY Times article quotes Eric Schmidt the CEO of Google on Checkout and explains how Google's Checkout plan will pan out for Consumers V/s Advertiser's that work with Google:
"The goal here is to make it be one nanosecond from the time the customer decides to buy to the time the transaction is complete and the product is on the way," Mr. Schmidt said.
For consumers, this sort of service, often referred to as an online wallet, is hardly new. Microsoft, AOL and Yahoo have offered similar wallets, which proved to have limited appeal....But for merchants, the service comes with a twist: Google will waive some or all of the transaction fees for companies that buy advertising from it. That may give the service a leg up on competitors like PayPal and several smaller companies that help online merchants accept credit cards.
Google is charging merchants 20 cents plus 2 percent of the purchase price to process card transactions, less than most businesses pay for credit card processing. Banking industry executives say that credit card processors typically pay MasterCard and Visa a fee of 30 cents and 1.95 percent for every purchase, so Google will be subsidizing many transactions.
What is more, for every $1 a company spends on search advertising, Google will waive the fees on $10 worth of purchases. Factoring in the 2 percent fee, that represents a rebate of at least 20 percent of advertising spending.
Mr. Schmidt said the company was willing to lose money on transaction fees because it felt the package would increase advertising spending. "The math works because we can have lower prices and higher volume," he said.
Also of Interest Amazon and the third rule of Information Economy
