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GBuy the Google Wallet is Vital to Googles Future

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Google has a long way to go before it can catch eBay’s PayPal, which has almost 100 million user accounts. But by coupling the power of search to a stored payment system, Google might be able to recruit a critical mass of users quickly, and GBuy could, over the period of just a few months, become a formidable competitor.

Once again, rumors are racing that Google will soon deploy a stored payment system. Last Monday, the Wall Street Journal reported that Google has been quietly beta-testing a stored-payment system (dubbed “GBuy”) for the past nine months. This story reignited speculation that first surfaced in the Spring of 2005 concerning what was then known as “Google Wallet,” a product which Google at the time denied would compete directly with PayPal, the dominant stored-payment system in use today.

The WSJ story focused narrowly on the competitive threat that a Google stored-payment system would pose to eBay, which owns PayPal, but the more relevant question for search marketers is: what would having a PayPal-like system do for Google?

GBuy: The Google Seal of Approval?

The WSJ article stated that “GBuy will feature an icon posted alongside the paid-search ads of merchants, which Google hopes will tempt consumers to click on the ads.”

What’s the big deal about advertisers displaying a GBuy icon? Well, a couple of things: displaying this icon will convey to the searcher two important facts: first, that an electronic transaction for the advertised good or service can be immediately effected (a sure lure for those searchers seeking immediate gratification), and second, that the advertiser is not a fly-by-night vendor from Polookaville, but one whose credit is good enough (a least with Google) to warrant the display of the GBuy icon. In effect, the GBuy icon will function as a stamp validating a given advertiser’s fitness to do business on Google.

Consequently, it is likely that click-through rates for such ads will outperform non-GBuy ads. The result will be an avalanche of advertiser opt-ins to the program. At the same time, curious searchers clicking on ads with the GBuy icon who lack GBuy accounts can be intercepted and politely recruited into the GBuy program before continuing on to landing pages.

Google has a long way to go before it can catch eBay’s PayPal, which has almost 100 million user accounts. But by coupling the power of search to a stored payment system, Google might be able to recruit a critical mass of users quickly, and GBuy could, over the period of just a few months, become a formidable competitor.

Pay-Per View Content

Presently, Google makes more than 99 percent of its revenues by serving up PPC ads, but increased competition from the other engines, along with pressure from Wall Street, are forcing it to diversify its revenue streams, and serving up pay-per-view video content is something it’s already doing.

Although Google’s video store (video.google.com) had a rocky launch, especially because Google’s DRM (Digital Rights Management) software prevents some videos from being transferred to iPods and other portable devices, it has already improved and stands to get better as Google works out the bugs.

Unlike Apple’s iTunes – the dominant video downloading service today — Google’s video site isn’t just a one-way, fixed-price downloading service, but a two-way system designed to serve as a foundation for a genuine video marketplace. For such a market to take hold, a critical mass of video inventory needs to be built, and one easy way for Google to build a large inventory of videos would be to reward video uploaders with “credits” that could be applied to premium downloads. And a stored-payment system would be essential for such a system to work.

EBay also has an incentive to go into the stored-payment model with PayPal. Currently most user of PayPal probably don’t carry a positive balance and therefore a micropayments system is not feasible due to the electronic funds transfer costs and credit card merchant fee costs for small transactions. However, it wouldn’t be hard for PayPal to require a minimum balance of $20 in exchange for the ability to buy content oneBay.

Microsoft’s Passport was probably a generation too early and had some security flaws that derailed wider acceptance. However, if the micro-payments and pay-per-view content business heats up again, Microsoft may not be out of the running.

Adwords-Adsense Integration

Adwords (Google’s platform for PPC advertising) and Adsense (its partner network for running such ads) are already linked through Google’s back-end, which tracks the ads’ performance and calculates payments to the publishers. Unfortunately, the process for paying Adsense program publishers is needlessly clunky: once each month, thousands of checks must be cut and mailed to the publishers, a needless cost that doesn’t make sense for a digital-age company like Google serving hundreds of thousands of publishers. Automating these payouts via a stored-payment system would save costs.

Pay-Per-Search?

This week, Microsoft launched a service called “MSN Search and Win” (msnsearchandwin.com/) which entices users to perform searches on 1,200 pre-identified keywords in hope of winning prizes ranging from flat-screen TVs to charity donations. iWon.com, a division of IAC, pioneered rewarding searchers with prizes, and Amazon already offers users of its A9 search engine small discounts to purchases on Amazon.com. Yahoo is reportedly testing the pay-per-search waters by polling its users on whether to offer freebies in exchange for their making Yahoo their primary search engine.

Google has made no indication that it will offer a rewards program, but if other search engines follow MSN’s examples, it may be forced to follow suit. A stored-payment system would let Google offer “Google points” or even “Google Cash” that could be applicable to the purchase of online or offline goods.

When Will It Happen?

Getting into the stored-payment business is a big step for Google, and one not to be taken lightly. PayPal, the stored-payment leader, has been the target of attacks by fraudsters, phishers, and identity thieves, and narrowly avoided being regulated by the FDIC in 2002. Still, there are so many advantages for Google that it is practically inevitable that Google will launch such a product.

When will it happen? Mr. Frog doesn’t have a crystal ball, but he’s willing to lay even odds that Google will begin a limited public test of its stored-payment system by the end of the second quarter of 2006, just in time for the 2006 holiday season.

Mr. Frog is a leading Search industry visionary. Mr. Frog is a member of the Did-it Search Marketing team which accompanies him to most major
marketing conferences.

GBuy the Google Wallet is Vital to Googles Future
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