Posted by : Anonymous on Jun 30, 2006 - 10:43 AM General

SAN FRANCISCO - Google Inc. will unveil a much-anticipated payment service today that aims to make online shopping more convenient and give advertisers another reason to pour more money into the Internet search leader.
As Google attempts to boost its already lofty profits and become an even more prominent player in e-commerce, the Mountain View, Calif., company risks alienating one of its biggest advertisers - online auctioneer eBay Inc., which runs the Internet's leading payment service, PayPal. Although Google doesn't view its service as a PayPal competitor, there is no question it poses a long-term threat to eBay, said Internet market analyst Greg Sterling.
"Any time Google does something like this, it has the potential of turning into a big deal," Sterling said.
At least two merchants, Starbucks Corp. and Buy.com, that have signed up for Google's new service also accept PayPal, which eBay bought for $1.3-billion in 2002.
EBay spokeswoman Amanda Pires declined to comment on Google's entrance into online payments, but the San Jose, Calif., company signaled its concerns about the search engine's expansion last month when it formed an alliance with Yahoo Inc. that will make PayPal the preferred payment provider on the Internet's most-trafficked Web site.
Google has been testing its payment service, called "Checkout," for nearly a year, spurring widespread speculation among Internet analysts and investors.

The looming showdown in online payments pits two of the Internet's biggest success stories. Google earned $1.5-billion on revenue of $6.14-billion last year, while eBay made $1.1-billion on revenue of $4.55-billion.

Google's service is designed to serve as an electronic wallet that will enable consumers to buy products and services from a bazaar of merchants without repeatedly entering the same personal and financial information at each store.

Users with a Google account simply enter a credit card account number along with a few other details and the company will deliver the payments to any of the participating merchants, which must advertise on the search engine to participate.

Currently, Google is accepting only credit cards for purchases but remains open to other payment vehicles such as electronic fund transfers from individual bank accounts, said Salar Kamangar, vice president of product management for the company.

Merchants that accept Google Checkout will be identified by a green shopping cart symbol that will appear next to their ads.

Google will discount its payment processing fees based on how much merchants spend on advertising through the search engine - a strategy designed to generate more revenue for the company.

"It's a really smart move by Google, a wonderful way to close the loop with its advertisers," said Forrester Research analyst Charlene Li.
Still, Li thinks many major merchants with well-recognized brand names will be reluctant to use the Google service because they prefer collecting the checkout information themselves so they have the data for future marketing efforts.

Merchants won't have to pay processing fees on purchases totaling 10 times their advertising volume with Google. That means an advertiser spending $20,000 per month at Google wouldn't pay any processing fees on purchases totaling $200,000.
After the spending threshold is exceeded, Google will charge merchants a fee equal to 2 percent of the purchase amount, plus 20 cents per transaction.

St.Petersburg Times
Thursday, June 29, 2006
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