Google Checkout: $20 million AdWords pitch

Is Google Checkout spending $20 million to spread holiday cheer to merchants and consumers? NO. Google is investing big-time in the hopes of 'locking-in' merchants long-term, as AdWords customers.
Written by Donna Bogatin, Contributor on

Upon Google CEO Eric Schmidt’s announcement of Google Checkout June 29, 2006, I underscored: “It’s official: Google launches ‘Checkout’ with predatory pricing model aiming to ‘increase advertising spending’



I have been chronicling Google’s determined, but heretofore underwhelming, Checkout integrated merchant acquisition/AdWords sales strategy since, as I reviewed two weeks ago: “Google Checkout: Free in 2007, still flawed.”


Over the Thanksgiving holiday, I did a “Google Checkout audit: Where are AdWords ‘badges’?” and concluded that Google Checkout enabled AdWords ecommerce customers are hard to come by during typical Google product searches.


Glowing Google Checkout merchant testimonials are not hard to come by, however. Yesterday, two were prominently featured; One at the Official Google Checkout Blog and one in the New York Times.




Our goal at Skates On Haight is to get our skate supplies into the hands of as many skaters as possible as quickly and inexpensively as we can.
Google Checkout helps us reach more skaters -- and convert more of them into customers. It encourages first time buyers to take a chance with e-commerce, and creates a secure, comfortable payment system that gives customers peace of mind when they are buying from an unfamiliar company. For the seller, it takes a lot of the guess work out of identifying fraudulent orders. We used to call every customer to make sure their order was valid. Now, we just process the order, which saves us a lot of time, and the program also puts more money in my pocket with lower transaction fees.
Together, Skates On Haight and Google Checkout have a bright and promising future. It's a very customer- and business-friendly service, and I have found it to be more helpful than other checkout options.

NEW YORK TIMES, Miguel Helft

"Steven Grossberg, who sells video games online from his home in Wellington, Florida, recently sent an enticing offer to 20,000 customers: $10 off any purchase over $30 using a new payment service, Google Checkout.Traffic on his site more than tripled, and best of all, he said, Google picked up the tab for the promotion.

“I think it’s fantastic,” he said. “I’m selling the product. Google is getting tons of customers to sign up for Checkout. Customers are happy because they are getting a monster deal.”

(Grossberg also apparently got a Google Checkout tee-shirt from Google, which he models for the New York Times photographer.)

And Google is not charging merchants any processing fees through the end of 2007. As a result, getting customers to use Checkout will increase profits, Mr. Grossberg said.”

Grossberg’s enthusiasm may be short-lived, however, as well as the Google Checkout-induced “increased profits.”

Goldman Sachs is cited estimating that Checkout promotions will cost Google about $20 million in the current quarter.

Is Google spending $20 million this quarter to spread holiday cheer to merchants and consumers? NO. Google is investing big-time in the hopes of “locking-in” merchants long-term, as AdWords customers.

Benjamin Ling, a product manager for Checkout: “We want everyone who sells online to be a Google advertiser.”

The integrated Google Checkout-AdWords pitch to prospective merchants is Google-centric: Google Checkout badge enabled merchants’ AdWords “Sponsored Listings” achieve higher click-through rates, and therefore obtain better placement and/or lower cost.

In other words, Google gives away one non-core product to merchants with the lure of higher returns from its core, for-fee product, AdWords. Put another way, those merchants that do not take advantage of Google’s free Checkout services will be at a disadvantage vis a vis Google Checkout badge enabled merchants in prospective AdWords campaigns.

Google’s AdWords' economics-focused pitch for Google Checkout ought to give merchants pause, and so ought the inherently Google-centric structure of Google Checkout.

Upon Checkout’s introduction last June, I underscored: “Google Checkout aims to takeover consumer relationships, hinder merchant CRM strategies.”

In “Merchants on Google Checkout: undermines our customer relationships” last August, I recount merchant distrust of Google Checkout, citing concerns about disintermediation and ceding customer ownership to Google.

“There's no such thing as a free lunch,” and Google’s “free” Checkout is costly to merchants.

Editorial standards