Opinion: Do no evil

(until you rule the world)

Google has recently made three moves that should have all e-commerce site owners sitting up and paying attention.

The first two concern the announcements that the Google Adwords team are testing cost per action based pricing rather than cost per click. This has long been a dream for many merchants as it means advertising costs are only incurred when a sale is made and so the risk of running a campaign is reduced to practically zero.  And, Google’s deal with MySpace means it now controls a key marketing channel for those wishing to reach the increasingly popular and influential audience of online communities.

The third announcement was the North American launch of Google Checkout. This new service allows consumers to store their credit card details within a Google account and then allow merchants to access the information directly. Retailers have to join up to the service if they wish to accept this new payment method, but if they do so they get reduced card processing costs and a very natty Google Checkout symbol to add to their site.

The consumer advantage to setting up a Google Checkout account is that it enables a very quick and simple checkout on the site of any participating retailer; enabling Amazon-like “one-click” ordering functionality to the ecommerce site.  These functions are already available through PayPal and the concept is well proven on eBay, so we can expect to see some pretty tough competition between Google Checkout and PayPal. Buy.com is a good example of what will happen; it features its own checkout process, a Google Checkout and a PayPal checkout!

So what does this mean and what will be the impact when both these initiatives reach the UK? 

Consumers love simplicity. So expect to see the rise of both PayPal and Google Checkout as they offer a real consumer benefit; simplicity. With these services consumers do not need to register and enter their credit card details on every single site they want to purchase from. Today typically 50% of site visitors that add a product to a basket and take it to a checkout process still abandon the checkout process, and the hassle of completing yet another registration is one issue that puts people off. The benefits of these services is also that it gives the customer “one throat to choke” if they experience online fraud.

PayPal is a pretty good service, but Google Checkout is the one to watch more closely. The reason is that Google already plays a role in many shopping trips and the allure of the “find it with Google, buy it with Google” service may be irresistible to many. However from the point of view of the merchant this represents a major shift in the relationship they have with their customers. The relationship would then be with Google not the merchant. 

It may be hard for retailers to swallow, but in a world of near perfect information where product price, quality, and availability information are coupled closely with information about the merchant’s reputation and service quality, the consumer need for a relationship with the retailer declines.

It is worth noting that another benefit to the consumer of having a Google Checkout account is that it gives the user the ability to control “commercial spam” by allowing the user to keep their email address confidential and to “easily turn off those unwanted emails from stores”. Sounds pretty compelling doesn’t it?

The key consumer relationship shifts from fulfilment to knowledge; away from the retailer and towards services like Froogle. In fact in this new world Froogle will become an enormous “meta store” by combining all the information with the ability to buy instantly, effectively creating the largest online store on Earth.

The advent of ‘cost per action’ pricing further drives this trend of relegating the role of the retailer by effectively allowing Google to assume the marketing risk and control demand even more tightly. It’s MySpace deal increases Google’s empire further, and just to turn up the heat a little more, ads on Google search from retailers that have Google Checkout will also feature a highly recognisable shopping basket icon, gives those retailers an additional edge! 

So who has the upper hand in this scenario? Would you trust Google to do no evil when they rule your world?

Trust is the key. Will consumers trust Google sufficiently to hand over their credit card details? Will merchants trust Google sufficiently to put Google Checkout on their site? Merchants in fact have very little choice; if the consumer sees value in buying through their Google account then it will be another success, and a major shift in power in the retail world.

Matthew Tod
CEO, Logan Tod & Co.