The Steinhorn Stare

There’s been lots of speculation (at least here at eBay, who owns PayPal) about Google Payments and where it’s headed. A couple thoughts…

First, I’ve heard rumors that Google is now contacting merchants who buy volumes of AdWords and inquiring whether they would consider moving all their electronic payments to Google for a break in AdWords pricing. A great tactic on the part of Google who must realize that dropping AdWords pricing for select higher-tier customers is unlikely to impact their bottom line, as these customers will use the savings to further invest in online advertising, likely with Google. So, in the end, AdWords is equally profitable, and Google will entice thousands of merchants into using Google Payments as their exclusive online payment system.

Not a bad strategy, me thinks…

Speaking of payments strategy, another thought crossed my mind this morning. A number of online advertisers have been pushing towards that ultimate online advertising offer — Pay Per Transaction. Essentially, instead of having the merchants pay for each click-through from a Google ad to their site, they only pay for those clicks that ultimately result in a paid transaction. The difficulty with implementing this type of system is ensuring accurate tracking and reporting of transaction data (how does the merchant and advertiser track and audit click-throughs leading to purchases?). But, owning both ends of the transaction — lead-generate and payments — makes implementing pay-per-transaction quite feasible.

Again, this would allow Google to require that merchants use Google Payments exclusively (that’s the only way to properly audit the lead-generation), but merchants might happily acede to this condition if it meant that they’d only be paying for traffic that resulted in dollars in their pockets.

In fact, as a friend pointed out, Google Payments might have been a direct result of needing a back-end audit trail for pay-per-transaction data.

This entry was posted on Monday, December 5th, 2005 at 9:07 am and is filed under Technology. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.