Online payments move company into retail domain
Tuesday, February 28, 2006
Google Inc. has expanded its online payment service so that users can buy and sell everything from bicycle brakes to Beanie Babies through its Web site, posing an immediate challenge to eBay Inc.
Google added the payment service to its nascent Google Base classified listings Friday, an expected move that nonetheless sends shockwaves through the Internet industry.
EBay dominates e-commerce with its online marketplace and PayPal payment service. Analysts believe Google's entry into both arenas could cause headaches for more established competitors.
"In our view, this is a clear shot across PayPal's bow," Ben Schachter, an analyst for UBS Securities, wrote in a research note Monday.
Currently, Google's payment service, Google Accounts, is available from a limited number of sellers on Google Base. More are expected to be added over the next few months, the company said.
To use the service, users must register with Google Accounts and submit credit card information. To make a purchase, users must click on a "buy" button next to a product and then go through the checkout process, which includes an estimate of the shipping costs.
Google's payment service is without fees or commissions.
The Mountain View company introduced Google Base, online at base.google.com, four months ago for users to post whatever they want online for free, whether it be an article of clothing, a DNA sequence or a job offer. Until the payment system was added Friday, all buying and selling of listed products had to be completed outside of Google's Web site.
"For buyers, this feature will provide a convenient and secure way to purchase Google Base items by credit card," said Google's Chetan Patel, an engineering manager, and Stephen Stukenborg, product manager, in a posting on Google's corporate blog.
Payments aren't entirely new to Google. Users could previously buy online videos, premium subscriptions to Google's satellite mapping service and items from Google's corporate store using Google Accounts.
Schachter, the UBS Securities analyst, said Google faces some obstacles if it intends to make a splash in e-commerce. He noted the limited popularity of Google Base in its early stages. Furthermore, he pointed out that unlike eBay's PayPal, Google Accounts offers no buyer protection against fraud.
Nevertheless, Schachter said, Google could make considerable revenue from e-commerce if it starts charging commissions on transactions.
Spokesmen for eBay emphasized their Web site's success in attracting users, security and history of competition, while declining to directly address the potential threat of Google.
Users of eBay's marketplace bought and sold $44.3 billion worth of merchandise on the Web site last year. The number of PayPal accounts has surpassed 100 million.
"It really remains to be seen how many sellers will use Google Base," said eBay spokesman Hani Durzy. "We remain focused on what we're already focused on."
Separately, speculation that Google is working on an online finance section and an online calendar escalated after several reports. A handful of bloggers posted screen shots and source code, describing it as evidence of an impending introduction, perhaps at a presentation for analysts Thursday at Google's headquarters.
Also, Google has started testing online video ads -- in this case, for a movie by Sony -- on at least one partner Web site, marking a further expansion from its roots in text-based advertising.E-mail Verne Kopytoff at firstname.lastname@example.org.