Why Google Is Doing Checkouts?

The discourse and discussion in the blogosphere today is Google Checkout.

“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,” Eric Schmidt, Google CEO says in an interview with The New York Times.

End of CPC Advertising?

Read between the lines – this is a dangerous and most brilliant assault on the “cost per click” (CPC) plans of Microsoft, Yahoo and everyone else who is coming to the party … late. This move is about cost-per-action advertising. It is about kicking up the online advertising business … another notch!

Lets compare the two – CPC and CPA based ads. In case of CPA, there are no wasted dollars, no click fraud, and all the revenues are coming from sales. As an advertiser, you have no risk. You sell, you make money, Google gets a piece of the action. Why would you bother with other options?

Who Is Impacted?

This move impacts three companies mainly – eBay, Yahoo and Amazon – because these are the three premier gatekeepers of online point-of-sale info. Google doesn’t have the information, and needed it. If (bold for a reason 🙂 ) Google can make the Checkout work, the three giants suddenly have lost their advantage over Google.

Having said that – Amazon and eBay are more at risk. Despite having a large number of “proprietary eyeballs,” they lack their own advertising system, and need to depend on third party. Both should have built one, but they didn’t. Costly mistake perhaps, since they have existing merchants & eyeballs, and could certainly monetize their own traffic if they did.

Yahoo is in a better position comparatively speaking since it has its own advertising system. (Maybe there is room for a big merger in the web-space? Sramana Mitra believes eBay+Yahoo should just get on with it.!) A closer alignment might be necessary if these companies need to create a CPA based advertising model, and thus blunt the Google incursion into their e-commerce sales / reduce their advertising costs (many of which go thru Google).

Why Google Is Doing Checkouts?

Going forward, the much talked about Google Payment system (the Paypal rival) could give them even more leverage and hurt rivals in the process. But in a larger scheme of things, it could be trivial. Why because for Google, the real advantage is not just to gain payments market share & revenue, but to increase AdWords sales and reduce click fraud through the creation of a fundamentally better advertising system — that is, CPA-based ads.

Yahoo / eBay / Amazon had one significant advantage over Google the past few years — knowing point-of-sale data. As of today, it is not that much of an advantage. Sure they can launch CPA-based ads themselves also, but by the time that happens….