This post continues from my previous post Google readies GBuy
Google's Plans for GBuy
Google (GOOG) could potentially tie purchasing of advertised items on Google Search Results with GBuy -- offering lower prices to GBuy users. So if a user found a book via Google Search, then the user could potentially directly purchase the book from the Publisher via GBuy instead of going to Amazon. No wonder Amazon (AMZN) sensed a threat and dumped Google search for Microsoft's search on its website.
I have used PayPal briefly but not deeply analyzed its efficiency, but going by some analysts (e.g Safa Rashtchy, an analyst at Piper Jaffray) there is apparently a gap that GBuy could fill.
Gbuy has been billed by some reports as a "PayPal killer," but it's likely to be much more, Rashtchy and other analysts said.
"I think that if this thing succeeds, it will eventually succeed where PayPal hasn't...as an efficient payment mechanism for a wide range of e-commerce transactions," Rashtchy said.
It would also succeed where Yahoo and Microsoft have failed, he predicted.
I wonder why Yahoo! (YHOO) and Microsoft (MSFT) didn't understand this gap? Or again, is this a case of blind Google love of some analysts and media folks for whom "All the world's innovations are belong to Google"?
Robert Hof quite correctly predicts difficulties for Google in his Businessweek article Google's eBay Challenge where he quotes 4 issues that will come in Google's way:
- Services competition by well-established rivals like PayPal and Credit Card Companies
- Trust established by established rivals (in handling Security and Fraud issues)
- Business Branding for PayPal (has DELL and APPLE among clients)
- Moves beyond online payment services to Mobile etc by PayPal
Robert Hof states:
While Google may have quickly become the dominant force in search advertising, it's unlikely there will be one winner in online payments anytime soon—if ever....That's because no other player is likely to give up without a big fight. There are credit-cards like Visa and MasterCard, of course, which remain by far the leading way for consumers and merchants to handle online payments. What's more, prime GBuy rival PayPal is running all-out to get its payment system used more widely, far beyond transactions involving parent eBay Inc.
....Google will face some big challenges of its own. Indeed, the lengthy gestation of the GBuy service—first rumored more than a year ago—points up the sizable challenges involved with offering a payment service...It's especially tough against an established rival like PayPal, which has 105 million accounts. "Right now, Google's playing catch-up," says Allen Weinberg, cofounder of financial services consultant Glenbrook Partners. "They don't bring anything to the table that other people haven't wallowed in or taken their lumps on."
In particular, most of GBuy's challenges come down to trust. For one, it remains to be seen whether consumers will be inclined to trust a Google payment system more than the alternatives, such as credit cards or PayPal...PayPal has spent years honing fraud prevention. That's something Google would have to hire experts to get up to speed on, not something that could be solved completely with Google's specialty, smart algorithms. "They can't PhD their way out of it," says Weinberg.
A bigger hurdle may be persuading merchants that the information GBuy enables Google to gather will be used in a way that benefits them. Jordan Rohan, an analyst with RBC Capital Markets, noted in a June 9 report that Google would be able to gather transaction data to determine which keywords lead to greater sales, not just clicks. "We expect some resistance from merchants who will fear that Google will use the transaction data to charge them more for sponsored links in the future," he wrote.
Meanwhile, PayPal is already running hard down the road toward becoming much more than a way to (do) purchases on eBay. A flurry of new initiatives, from a PayPal credit card to a virtual debit card that will start rolling out next month, makes the unit's ambitions plain. "We're creating the new global standard for online payments," Whitman told shareholders at eBay's annual meeting earlier this month.
For one, it's quickly moving beyond eBay itself. Last year, PayPal courted other online merchants to accept PayPal in addition to credit cards. It now counts Apple Computer Inc. (AAPL ) iTunes Music Store, and Dell Computer (DELL ) among its merchants. What's more, PayPal is quickly moving beyond just online payments. In April, it announced PayPal Mobile, a way to pay for items using a cell phone. And in May, it teamed with GE Consumer Finance (GE ) to launch a PayPal-branded MasterCard credit card. "We think this is a big opportunity to take PayPal beyond Internet payments," eBay CEO Whitman said recently.
Also of Interest Google's Strategy - Anyone?
