G'Bye PayPal?

I'm not a big PayPal user, so I don't have a good sense of whether GBuy will prove a convenient alternative.  It does seem to me, however, that of all the online payment services that have tried to dent the PayPal monopoly--Yahoo and Citibank, among others--Google's has the best chance of success. 

The difference between the Google offering and the now-defunct Yahoo offering is the integration with AdWords.  Yahoo never had this, and, consequently, never offered a serious alternative to the eBay/PayPal commerce engine.  Given that Yahoo failed utterly in this business despite a commanding global position in a Google-less world, however, suggests that the success of GBuy should not be taken for granted. 

The best news here is for sellers, advertisers, and consumers.  The 2% payment fee, whether on PayPal, GBuy, or a standard credit card is, in most cases, egregious.  The more serious competition and alternatives, the better.

Comments

[King Troll]

FIRST LOSERS

[King Troll]

Henry I'm an Ebay Platinum Powerseller with over 20,000 feedbacks. I hate paypal because if a buyer disputes you, then 90% of the time you will lose and they get the money and item.

If a buyer commits fraud, Paypal catches it days after , which is also after you ship the item. You lose the item and money too.

Paypals fees are very high and cut margins down added with ebay fees, they become 10% if the cost.

Without paypal, most people won't bother paying. Ebay promotes the shit out of paypal, of course and the simple to pay process is hard to beat.

Some send a money order. Its about 3-5% for this. I was getting 10-20 money orders per week for 300-400 sales per week.

Western union had bidpay.com last year, which many international users were using, but thatbasically died out and I dont get any from this. Its been about a year since anyone has used it.

I consider myself an expert on how Paypal and Ebay work, from account termination, fraud, Vero, suspension, service fees, benefits and so on.

You know what no one has talked about is Ebay VeRO. Ebay used to suspend users with 3-4 VeRO notices within a 90 day period from trademark holders. They did this to avoid lawsuits and allowed sellers to work out issues from the TM holders.

This would destroy a sellers account and business. Even if you had 100,000 feedbacks, if a TM holder contacted Ebay FOR ANY REASON, then you will be GONE after 3-4 incidents.

After Google Base launched Ebay stopped suspending people and began putting them on Seller time out for 3 days -30 days to avoid losing them but to show the TM holders they were going to go after them. This whole VERO issue is very hard to deal with and I believe I have become a pro in how it works. It used to be, if you knew how VeRO worked then you mastred Ebay.

[Henry Blodget]

Thanks. Sorry to be an eBay moron, but can you describe exactly what VERO is? I imagine others are curious as well...

[victor]

Another benefit of GPay is that it's extremely easy to use. I've used it to purchase videos from google video and that worked a treat.

Btw have you seen that a lot of videos are now showing free on google video? they're testing a video advertising system which is kinda cool

[Pradeep bonde]

Verified Rights Owner (VeRO) Program
http://pages.ebay.com/help/tp/programs-vero-ov.html
http://pages.ebay.com/help/community/vero-aboutme.html

[Joe Jackson]

I doubt it's a coincidence that GBuy is being announced almost simultaneously with the CPA test; it seems that GBuy would be an ideal way to police CPA deals.

Forget it, maybe Google should just have McKinsey tell them what to do.

[Steve D]

What’s the value to consumers of another credit card processing system? Do consumers really care if credit card transaction is processed through authorise.net, cybercash.com, verisign, paypal, or gbuy, or whatever? Out of all the above I can only see why one might choose PayPal over others - because when paying with PayPal, one does not share any financial information with a merchant. PayPal on top of credit card (credit card used as a money source in PayPal) is a very powerful concept from security perspective – one still can earn reward points on credit card and still take advantage of inherently secure PayPal layer. Gbuy does not offer that - they are just another credit card processing system - still based on credit card numbers. Who needs it? I don't see consumers are in need of it. The benefits of Gbuy are mostly for Google itself. Also, being more expensive (according to romours 2.3% versus 1.9% for PayPal), even merchants are in disadvantage. If Google plans to give away rebates and discounts, they only shrink their profit margins in addition to all costs necessary to implement dispute resolution and all other overhead stuff. In short, Gbuy solves pay-per-sale problem for Google, but it does not solve any problems for consumers and not for merchants as far as I can see. Being unsuccessful in everything except for search, I don't see why this new experiment known as Gbuy will be different. Many tried (Yahoo, Amazon, CityBank, and eBay itself) to compete with PayPal in 1999-2002 and everyone failed. Since then, PayPal grew several folds and its network effect got exponentially stronger. In the meanwhile, the panic continues and dumb dumb are selling eBay stock on this over hyped non-news. I am buying.

[PJ Brady]

Here is my reasons that Ebay is going to be a spectacular rising stock over the next three years.
1. The launch of Gbuy will drop Ebay to bargain levels when also combined with the FED raising interest rates.
2. Ebay is first, ebay is first, ebay is first, put simply you won't beat Coke, you won't beat Microsoft, you won't beat Google in search, you won't beat Caterpillar in machines, you won't beat Boeing in Aircraft, you won't beat Ebay in online selling/auctioning of goods across the internet. also you will not beat Skype in Voip. There have been numerous "technically better" versions of every product I just mentioned but you cannot beat brand and the ability to be first. You might ask Yahoo were first, Google took over in universities by word of mouth in 1999, I can remember being told about it in a programming lab and I'v used it since. So did my friends we were 19 then were 25 now and we still use it. We used it because the page loaded quick on out slow network and the search results were good. Plus was not 100% died in the wool a search engine. There was far more content on the page. The lesson is that you won't beat a strong popularly accepted first to market product.
3. Revenue growth does not matter, it's profit generation year on year that matters. Ebay has 87% Gross profit and 25% net profit. Plus 5 years of 55% revenue growth.
4. Ebay is now selling content with higher net worth. Real Estate and cars. The revenue from these items will be higher.
5. Google search, google earth, gmail, adwords, and prospectively the BEST online auction selling site in the world. No way, it doesn't happen, where is the drive, where is the turning up on a monday morning attitude of "We are going to improve to be the best online/auction site in the world." That will not exist in a company that has a division who have a Gbuy site. They already tried a "Froogle" product that directs you to ebay content!!!
6. Broadband will spread Skype and Ebay.
7. Ebay can cut margins and still generate huge profits every year
8. Ebay does not need to be labour intensive
9. Ebays target market "14 - 64 is becoming ever more computer literate and accepting of buying online especially in the ages 40 - 64.
10. Google do not understand revenue. I know several Gmail users who do not click on Gmail ads. THerefore where is the revenue for all that is invested in Gmail. It's not rocket science when you commonly come across the situation where mail users in Ireland are not clicking on your gmail ads, then it simply will not be the case that users in US, UK, India will click the revenue back to homebase. There is a certain uniformity of user behaviour when it comes to interaction with the internet. GOOGLE IS A SEARCH ADVERTISING COMPANY,
There destiny is to lay off staff, reduce products, increase margins and pay a dividend but not before company ego gets in the way of financial prudence.

[Steve D]

I wish eBay stock keep going down so that I can load on more shares at cheaper prices.
There is so much negativity that is priced in the stock: struggle in china and concerns in Korea, kind of retreat from Taiwan, slowing core growth, Google paranoia, and complete write-off of Skype by Wall Street. But let’s look at where eBay is:

Market cap 40B, cash 3B, enterprise value 37B, free net cash flow 1.8B (2006).
Enterprise value/free net cash flow ratio 20.5.

Buying eBay stock at this valuation is equivalent to having a money-market account at 5% with the difference that eBay is growing at 25% instead of 5% for money market account.

Now, let’s see how 25% of growth is conservative:

Ecommerce as a whole is growing at projected 20% a year through 2010. eBay historically has been growing considerably faster than ecommerce as a whole.

New eBay Marketplace initiatives:
• rollout of Ebay AdContext to distribute eBay items on third party sites – this will drive traffic to eBay while reducing dependence of traffic from Google
• Yahoo's graphic and pay-per-click ads on Ebay US will add incremental $$
• eBay Express should add incremental growth
• Skypinization of eBay should increase conversion rates and growth of higher ticket items
• Launch of new categories with pay-per-call pricing (like services, new cars, real estate)
• Monetization of classifieds (eBay made it known as their intention, I don’t know if through graphic ads or pay-per-click or something else)

New PayPal initiatives (already growing 45% yoy):
• Very aggressive push into merchant services
• PayPal on Yahoo network in US (Yahoo has over 10M of premium subscribers)
• Launch of PayPal mobile should drive incremental growth
• Launch of PayPal micro payments (payments below 2$ cost 5c+5%). Noone ever succeeded in this category and PayPal worked out its business model on this.
• Planned rollout of PayPal to 110 countries from current 55. (rollout in 2006)
• PayPal integration into Skype to enable real time payments for live interactive porn video as one of my friends pointed out (LOL)

Skype:
• Skype on its own is a wild pony. With calls being free, if there are any monetization opportunities, they will be centered around ecommerce. Maybe that’s why not Yahoo is the best partner for Skype, but eBay (it’s just going to take a year or two to implement new Skype enabled ecommerce solutions)

eBay has the above three businesses and they are not just services but platforms – that others build upon – so it’s first kind of network effect – platform network effect. In addition to brand, eBay also has community – so it’s second kind of network effect – community network effect. No other single company can boast off such assets. They have very well defined super brands, laser focus, discipline, vision and plan to execute on the vision, they have exceptional track record of killing competition over the last 7 years, and they are still young (only 10 years old) company with plenty of opportunities ahead.
All this combined in addition to very attractive valuation and it’s no brainer.

P.S. but those who are focusing on the trees don’t see the forest.

[KK]

IMO that Pay pal will have not much to fear from Gbuy as clients will be reluctant to change atleast in the short term...

The bigger issue though for google is the lost lawsuit against LVMH that google owes damages on. How much longer before other clients will enforce damages on copyright violation as people bid to place advertisements when people bid on words like ROLEX which is a trade mark and how much revenue may be lost from ads like those....

[PJ Brady]

Good post Steve D. There is a consistent revenue stream for Skype. My fiancee is Polish. She was living in Poland the last 9 months. She has a landline in her house and I ring her at a paltry 1.7c a minute. It does not sound like much, but you stay online longer and will get through 10$ surpisingly quickly. I estimate I have spent 50$ on skype already. Skype is headed for 100 million users very soon. If 10% of those spent 30$ in one year that is $300 million $ 30$ is a pittnace of spending in one year.

[victor]

Google Checkout is finally here:

http://www.nytimes.com/2006/06/29/technology/29google.html

[gg]

The reason paypal will dominate is because buyers trust it so much. The only reason i will shop on ebay is because i have the protection of paypal. For that matter, I am very reluctant to buy online at all without fraud protection. Paypal is extremely easy to use, integrated with checking and credit cards, and provides reliable protection against fraud. to boot, they are expeditious in reimbursements.

Gbuy...google has a lot of cool tools, but in aggregate, doesnt seem to fit well..Yahoo is a better meld of online tools...and gosh, it would fit well in mr. softee's arsenal...!

[gg]

i wouldnt buy ebay stock...multiple is way too high...i think 20+ forward eps is excessive...lets face it, it shouldnt trade any higher than gap or jcrew...after all, its a consignment e-tailer...i think you get more compression...skype will go from value add to a necessary expense...yhoo is a better buy. i think justin posts comments are spot on..mr softee needs online presence and msn is a second tier player...of course, they need to ditch steve "delayed release" balmer...

i thought my IT dept was bad with new software releases...how come the worlds largest software company cant get it right...?

[Dick]

great way for goog to match your google searches to your name, number, credit card # and billing address. other than than the peterson trial fans and the dumb IE users with spyware and google pack running on their $300 systems, who will sign up?

[victor]

GG makes an excellent point: ebay wouldn't haven't taken off had it not had a unified payments mechanism. Take froogle as a case study. It's a miserable failure and the main reason, in my opinion, is that it never had a unified payment system. There's no way i'm going to sign up to a new 2-bit web merchant every time i use froogle just to save 50cents. Think about that. If froogle had a unified payments system a few years ago, it would have been much more successful.

Also, think about how valuable this system will be for google in terms of gathering data. Jordan Rohan is on th e money spotting this. If google knows how much people are selling a product for through GCheckout, they'll know the real value of the ad that links a user to that product. With that data they'll finally be able to put to rest all the ridiculous click-fraud bromides that people keep reciting like parrots.

A user clicks on an adwords ad that costs $1 and buys a product worth $50 using GCheckout. Just think of how valuable that information is to Google. Once you've absorbed that realization, you'll be able to appreciate the potential for this launch. The only person so far who has, in my opinion, is Jordan Rohan

[victor]

Excellent article from the New York Times discussing how google is as much about infrastructure (which most of us who follow Henry know through CAPEX numbers) as it is about search engine algorithms:

http://www.nytimes.com/2006/07/03/technology/03google.html?_r=1&oref=slogin

[P.]

>>The 2% payment fee, whether on PayPal, GBuy, or a standard credit card is, in most cases, egregious.<<

How do you put a new black mini on a paypal? Just doesn't sound right. Just a thought.

Borrowed that from Shanice.

[john]

I am kind of surprise that I am not seeing any new merchant taking up the google checkout. I have search numerous terms such as camera, aeron chair, etc. I have not seen any of those google checkout symbol next to anyone else other than those already announced vendors.

It does not make sense to me. I would jump into it if I were a small merchant. Small is the keyword.

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