Google Unveils Payment Service, Raising Fears Over eBay's PayPal

Strategic Insights -

Google Inc.'s newly unveiled payment service, "Checkout," is designed to simplify the online checkout process for consumers, potentially disrupting eBay's payment dominance through PayPal. The service, which has been in testing for a year, allows users to buy products and services from participating merchants without repeatedly entering personal and financial information. Google's payment service aims to serve as an electronic wallet, enabling consumers to make payments through credit cards, with the company open to other payment vehicles.

Key Takeaways:

  • Google's payment service, "Checkout," poses a long-term threat to eBay's PayPal, according to Internet market analyst Greg Sterling.
  • The service allows consumers to buy products and services from participating merchants without repeatedly entering personal and financial information.
  • Google will discount its payment processing fees based on how much merchants spend on advertising through the search engine.
  • Merchants will not have to pay processing fees on purchases totaling 10 times their advertising volume with Google.
  • After the spending threshold is exceeded, Google will charge merchants a fee equal to 2% of the purchase amount, plus 20 cents per transaction.
  • PayPal's processing fees range between 1.9% and 2.9% of the purchase amount plus 30 cents per transaction.
  • Google estimates that 37% of all e-commerce begins with a request entered into an Internet search engine.
  • The service is designed to simplify the online checkout process, potentially encouraging people to shop more on the Web and use Google's search engine even more frequently.
  • Google's shares gained $3.79 Wednesday to close at $406.11 on the Nasdaq Stock Market.
  • eBay's shares rose 50 cents to finish at $28.75.

Statistics:

  • Google earned $1.5 billion on revenue of $6.14 billion last year.
  • eBay made $1.1 billion on revenue of $4.55 billion last year.
  • PayPal handled $27.5 billion in online transactions last year, generating $1 billion in revenue for the company.
  • PayPal has about 105 million users worldwide.
  • Google's payment processing fees for merchants who spend less than $20,000 per month on advertising will be 2% of the purchase amount, plus 20 cents per transaction.

Sources:

  • Dow Jones Commodities News via Comtex
  • Dow Jones Newswires
  • eBay Inc.
  • Google Inc.
  • Yahoo Inc.
  • Forrester Research