Google Checkout has not yet made any strong inroads against PayPal:
Google, eBay Go to War
Search giant takes the gloves off in its fight with the auction service for online payments.
January 19, 2007
By Sunshine Mugrabi
It’s official: Google and eBay are at war over online payments. This week, Mountain View, California-based Google upped the ante by offering a link on its homepage to its online payment service, Google Checkout, which included a special offer for a $10 rebate on merchandise.
This is just one of many such promotions, said Benjamin Ling, product lead for Google Checkout, who said that Google is “very happy” with the progress it has gained in the marketplace.
Yet, after six months on the market Google Checkout—hyped by some as a PayPal killer—isn’t close to toppling that dominant player in the online payment arena. PayPal, which is part of San Jose, California-based eBay, commands a 42 percent adoption rate among online shoppers, compared with Google Checkout’s 6 percent, according to A J.P. Morgan survey of 1,100 consumers released Wednesday. “Could it be possible that Google is starting to panic a little bit?” asks Tim Boyd, analyst at Caris & Co.
eBay's shareholders, however, may be a little spooked too. eBay’s stock price has hovered around $30 a share for the past six months, down from $46 a year ago, in January 2006—a sign that Wall Street may still be somewhat spooked by Google’s entry into the online payment arena. Google’s stock price, of course, has been rising almost steadily over the past year, from about $400 per share a year ago, to just under $500 this week.
Meanwhile, eBay has totally frozen out Google Checkout—the system is not allowed on any of its sites. eBay spokesman Hani Durzy denies this is for competitive reasons, saying that it’s not yet a proven payment system. He also said that there is little if any merchant demand for it—though some online forums tell a different story.
eBay is also increasing its emphasis on PayPal as the key payment method. This week, the online auctioneer altered its policy to state that new sellers from the United States or Canada must provide PayPal or merchant credit card payment capabilities. This was for security reasons, according to a blog post by Bill Cobb, president of eBay North America Marketplaces, who announced the policy change at a seller’s conference this week in Burlingame, California.
Nevertheless, such moves will make it tougher to unseat PayPal, which has an already formidable offering. The J.P. Morgan survey found that only 2.3 percent of users intend to use Checkout instead of PayPal. In contrast, 43.4 percent said they plan to use PayPal and not Google Checkout.
Only 19 percent of Google Checkout users reported “good’ or “very good” service experiences, compared with 44 percent of PayPal users, according to the J.P. Morgan survey. Even more damning, 81 percent of those surveyed described their level of satisfaction with Google Checkout as “fair to poor.”
Mr. Ling said that while Google is never happy to hear that a customer had a bad experience, the company’s own internal metrics paint a far different story—finding that less than one percent of customers have had problems with the service. “We’re committed to improving the user feedback,” said Mr. Ling.
While Google Checkout’s user skew male, affluent and young, this could mean that it’s having trouble penetrating the lucrative small seller and online auction markets that eBay has a virtual lock on.
As a result, it may take a lot more than just a link on Google’s home page to dislodge PayPal.
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