The latest voices to add themselves to this chorus are Stu Bykofsky of the Philadelphia Daily News and veteran journalist and author Walter Isaacson, writing in Time magazine. Bykofsky wrote a piece that managed to hit pretty much every highlight (or lowlight) of the crotchety old newspaperman genre: bloggers can’t replace journalists, every other outlet copies the news from newspapers, and if it wasn’t for the darn Internet we would all be a lot better off. Isaacson is less crotchety, but still thinks that advertising isn’t a suitable business model (even though it has been the driving force behind the newspaper business for half a century or so) He and Bykofsky both think maybe micro-payments are the way to go (and the latter recommends a few lawsuits aimed at Google, just for good measure).
Ever use Microsoft Passport (now Windows Live ID)? You sign in once with your Hotmail name and then get access to all sorts of wonderful places on the Web… that is, provided they are controlled by Microsoft. The plan to make Passport a universal ID card as well as a payment portal never really took off. Why? Because people don’t like to play with Microsoft unless they have to, that’s why. In fact, they would apparently rather get taken to the cleaners by MasterCard and Visa.
More recently, Microsoft has been establishing a “points”-based system of payment, both for Xbox Live features and possibly to compensate people for sharing music over the Zune network (assuming anyone ever does that, of course). Although he was irritatingly vague about what the company has in mind, Mr. Gates seemed to be suggesting that this points system could become a micro-payment scheme for the Web.
Let’s be frank. This has virtually zero chance of ever becoming a reality. Don’t get me wrong — I think micro-payments are a great idea, and they would help any number of fledgling Web-based businesses make a living, up to and including blogs. But there are two problems with a Microsoft points system: The first is the word “Microsoft,” and the second is the word “points.”
Points-based systems are much like the system used at casinos, or the payment card used at some restaurants — just confusing enough that you forget how much you are really spending. And the odds of Microsoft somehow convincing thousands or tens of thousands of small retailers and businesses to sign up for a Microsoft payment system? A billion to one.
This is a smart move, and arguably a lot smarter than launching a direct head-to-head attack on PayPal, which has a substantial market share with eBay sellers (which is what compelled the auction service to buy it in the first place). For one thing, as Forrester analyst Charlene Li notes on her blog, integrating Google Checkout and AdWords could make the advertising service that much more attractive to companies and even individuals — provided Google can show that shoppers will “convert” to being buyers at the same rate they do with existing checkout schemes.
Google CEO Eric Schmidt said the company’s intention is to make the process of buying something as fast and as painless and possible, and to a certain extent that’s what PayPal tries to do as well — it just does it mostly for auctions on eBay. But if Google can get sufficient traction from the retailers in its AdWords program, it would be relatively simple to roll the Checkout service out to just about anyone, including individual website and store operators. And the fact that Google’s fees are lower than either PayPal or Visa/MasterCard will make it that much attractive as well (more details here).
It’s not out of the realm of possibility that Google Checkout could become the fast and easy micro-payment system that many Web-heads have been anticipating for so many years. What if a website or blog network or micro-publication of some kind could sell access to stories or other merchandise, and get a deal on their ads to boot? That could be a powerful tool. Whether Google wants to go down that road — and whether consumers are willing to have Google be their online bank — is the big question.
Marshall Kirkpatrick over at TechCrunch is disappointed that it’s not a stored-value system, and wonders what’s in it for him, and Om Malik makes the point that Google’s main interest in launching Checkout isn’t to bash PayPal or even Amazon for that matter, but to enhance its advertising model by moving towards a “pay-per-action” rather than a “pay-per-click” model. Scott Karp of Publishing 2.0 (who should maybe change the name of his blog to Advertising 2.0) says Checkout is a very 1.0 shopping engine.
In fact, it’s been incorporated to the point where Greg Yardley has already bought something – a pink highlighter. Greg says the experience was preferable to that of buying through eBay-owned PayPal.com, which he said he despises. According to the comments on Greg’s blog, John K. of Got Ads has already bought a rock. Inside Ads has more info about Google Base if you’re interested.
On the official Google blog, they seem to be trying to downplay the whole “crush eBay, Craigslist-killer” kind of thing, although they do say that Google has “billed advertisers in 65 countries more than $11.2 billion in 48 currencies, and made payments to advertising partners of more than $3.9 billion.” Not exactly a little startup.
Bill Burnham notes that this is exactly how it is likely to roll out – gradually, but picking up speed. It means that Google has built a payment platform that is large enough and scalable enough that virtually anything is possible. Bill, who is a Very Smart Guy TM also points out that the “Buy It Now” feature that Google appears to have its sights on currently makes up about 40 per cent of eBay’s business. And in a related post, he discusses how the way Google has structured the service implies a greatly expanded role for it in the Google universe.