Google Payments

v.

I don't mean to rain on the Google Payments parade, but I do think it's worth asking why Google will succeed in "killing PayPal" when Yahoo! failed miserably in its own effort several years ago.  Please feel free to explain...

Comments

[jay]

PayPal has many weaknesses.

[no]

Because it's Google, of course.

They just invented a way for people to BUY THINGS ON THE INTERWEBS. That must have taken 20 phds, at least.

[Still Inside]

This will be a cornerstone battle for Google.

Between Google Payments and GBase, they are going directly after eBay's business, which is a) quite considerable; b) much more sustainable than fashion-driven Search business (still not MSFT lock in, but better). In other words, of ALL of the directions GOOG is going, this direction is actually one that could provide a long-term path for the company.

Here is where we, as potential and current stockholders, can sit in the stands and watch GOOG execute. In the next year, GBase/GPay is either going to cut directly into eBay/PayPal and be on its way to crushing them, or GOOG is going to blow this opportunity (which would be a huge blow to the company in general).

I've been a GOOG bear here for the most part, but THIS is where they could turn it all around.

GOOG going into the banking+retail business (i.e. eBay's current domain) may have nothing to do with the advertising market (the danger), but is a far more secure place to be in the long term.

Will GOOG succeed? They would need to do two things: 1) give away both products for free, thus scrunching eBay's margins and forcing the company to wind down, crushing their stock, etc.; 2) integrate and leverage their current market share in Search to essentially force these products on their users (i.e. include GBase results in every search in a more prominent place than the current paid-search ads).

In other words, GOOG needs to "Microsoft" eBay if they are going to have any chance.

The only problem is that another key to GOOG's long-term viability is to be able to call the cops on MSFT if they start competing with them seriously.

Unlike other laws, antitrust laws are whimsical, and GOOG using their leverage to decimate a competitor WILL absolutely have an effect (and most likely preclude altogether) GOOG getting anywhere with the DOJ. This would leave the door wide-open for MSFT to be the even-bigger-fish leveraging a cost-structure that doesn't need revenues from the entire Internet market at all, let alone small parts of it like GOOG.

So, GOOG Bulls and Bears, sit back and watch the show. This will be the FIRST TIME we're going to see the GOOG management go up against ANY serious competitor and get to know what they are made of.

SI

[bart]

Google payments allows them to close the loop on tracking ad effectiveness. Once payments is deployed/adopted, they will know which ads are not only driving clicks but also transactions. They could even include paypal - if enough customers demand it. If they can go after paypal's biz at the same time, thats fine but its not really the key goal with this product launch.

[Scot]

I must be blind, or stupid, or both, but I don't see how Google will get beyond it's own yard (so to speak) and kill PayPal with this product. I do see the immediate benefit it provides to users of it's other services like Google payments as Bart mentioned, but beyond it's current user base I don't see it taking share away from PayPal.

Isn't Google Base a current example of a ho-hum pre-existing supposed product killer? "Google Base: A New Rival for eBay and Craigslist?" quoted from BusinessWeek Online last October... So where is Google Base in that fight? I know I'm jumping the gun here because it hasn't been around long enough to make a meaningful impact, but there's so much hype surrounding anything Google releases out into the world, and I'd categorize this in that same realm of hype.

Online payment systems to me have the greatest to do with perceived trust, and eBay has spent almost it's entire existence gaining user's trust. I don't see PayPal users defecting to Google anytime in the near future because they've spent a long time giving it's service their trust.

I don't feel they can simply offer a payment service, and shareholders/investors expect that because they've come up with the service, the world at large will dive in. There's a reason PayPal has not come up against any meaningful competition in this business - I feel it has nothing to do with the technical ability, and everything too do with trust.

As far as my earlier mention of Google Base, part of the reason Craigslist and eBay have become so popular is community, and I feel that's missing from Google. This missing community may be a roadblock to Google's perceived market stealing ability.

[Srinivasan]

Google is reading too much into the success of GMail.
Then they said, if we can get search right, and then email right,then maybe we can get everything about the internet right. okay start.

directions
free listings
free home pages
payments
traffic analysis

what a waste of phds.

[Srinivasan]

Google is reading too much into the success of GMail.
Then they said, if we can get search right, and then email right,then maybe we can get everything about the internet right. okay start.

directions
free listings
free home pages
payments
traffic analysis

what a waste of phds.

[Larry Fox]

Yahoo never had the cult folling that Google enjoys today. Yahoo was never a verb. People use Google because every one thinks every one else is using it.

[mark evans]

one thing we should realize about google is to never over-estimate its ability to get into a new market. despite its dominance in search, it has yet to take control of another market - be it e-mail, blogging, comparative shopping, blog search, etc. while it is getting all kinds of attention, i'll believe the hype surrounding GPay when it actually starts to win share away from paypal.

[Still Inside]

Google Payments is going up against the battle-hardened, undefeated, fairly-entrenched, ready-for-a-fight PayPal. It is going to be a tough fight.

GBase on the other hand, is potentially devastating to eBay, and I personally don't see what eBay can do about it. Once again the upside is not clear for Google, but the downside for eBay is their whole business. The biggest challange for GBase is not eBay, but rather the model itself. GBase has tons of structural problems that could kill it (viz. how to keep it from becoming one giant ball of spam), but if they can make it work--again, big IF--but IF they can, then it could a success for them.

SI

[Scot]

After reading a bit further about GBase and GBuy I came across a TechCrunch post about it, and in it one of my biggest concerns with the payment/auction combination from my earlier post was confirmed:

"What Google does lack at the moment, and something they are working on, is a reputation system so that you can authenticate who the seller is and how trustworthy they are. Building a good reputation system is a very big problem, one that eBay has yet to completely solve so it will be interesting to see what Google will do about this. I don’t know if launching without a reputation system is a good idea, their short-term solution may be to restrict sellers using their payment system to more trusted sources."

So, according to this writer at TechCrunch they're working on a reputation system that may or may not appear at the same time GBuy (or Google Payments - whatever you want to call it) launches. As far as I'm concerned, until this system is put in place and proven to be trustworthy eBay can sleep soundly at night about being overtaken by the GBase/GBuy combo.

All of this though is a bit off topic from Mr. Blodget's original question...and I should comment on it. My opinion is that today's internet user is quite a bit more ready for an online payment system that in the days that Yahoo came up with theirs. So at least they have that going for them. But, will their system overcome PayPal? Not in my view. The only exceptions may be the people who were burned in some way by PayPal in the past.

But we're missing another albeit smaller part of the equation - the non eBay payments crowd. Those people may jump onboard by simply adding it as another form of payment similar to Visa and Mastercard. PayPal and GBuy. It's an added value they'd be foolish to pass up. However, this is a much smaller crowd, and still points to PayPal continuing to hum along.

In the most optimistic scenario I'd say GBuy would be another Google connected service in their stable that is relevant mostly to Google users (with the ad systems crowd gaining the most), with the non eBay related payments crowd adding it as an extra option in addition to PayPal.

[Henry Blodget]

SI and Scot raise an important point about GBase, one that killed Yahoo! when it tried to enter the auction business. Namely, free listings aren't always good. You get a lot of them, of course, but as soon as the database gets clogged with crap, its usefulness will drop significantly. Add the need for a reputation system, and it becomes much easier said than done.

To Scot's point about Yahoo!'s payments flail, I actually remember Yahoo!'s service following Paypal's, which at that point was still tiny. So it seemed the world was ready for a payment service, but that Yahoo!'s "generalist" model wasn't the best way to go. Do I have my timing wrong?

[Sterling]

Ouch!! George Reyes now even admitted publicly a few minutes ago that growth from search is slowing, and in order to keep their growth forecasts they will have to find new lines of business. One of the ideas cited was to get into cell phone advertising. Hmmm...

GOOG has gone from almost $400, to $340 in less than 10 minutes.