Google Checkout: Free in 2007, still flawed

Does Google generosity know no bounds? YES.The Google Checkout model is inherently and fundamentally flawed, as I have been underscoring since it was announced with much Googley fanfare last June.

UPDATE: Checkout promotions will cost Google about $20 million in the current quarter, see: Google Checkout: $20 million AdWords pitch.

12/6/06: Why is Google willing to pay the fees of transaction processing on behalf of merchants till the end of 2007?

Google Checkout announces: 

From November 8, 2006 through December 31, 2007, we'll process your Checkout transactions for free, even if you aren't an AdWords advertiser.

Does the Google generosity know no bounds? YES.

The Google Checkout model is inherently and fundamentally flawed, as I have been underscoring since it was announced with much Googley fanfare last June. SEE:

Google Checkout to merchants: Give us your customers, and your advertising””

It’s official: Google launches ‘Checkout’ with predatory pricing model aiming to ‘increase advertising spending’ "

Google Checkout aims to takeover consumer relationships, hinder merchant CRM strategies

Google CEO Eric Schmidt unveiled Checkout proclaiming Google is:

willing to lose money on transaction fees because it felt the package would increase advertising spending…The math works because we can have lower prices and higher volume.

Google Checkout has now taken that rationale to the Googley extreme!

In Google’s current “math,” Google does not receive a penny from merchants, even though it provides them transaction processing services at a cost to Google. Google is inspired by a mathematical formula; Has Google nevertheless lost its math groundings?

Google is apparently still counting on Google Checkout to drive more sales of Google’s $150 billion market cap crown jewel: AdWords!

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.

Nevertheless, Google is doggedly determined to convince merchants of the power of a Google Checkout badge to make their Google AdWords lives cheaper and better.

The Google Checkout blog features a gushing testimonial from Golfballs.com:

Google Checkout has been a great complement to our goals by providing a safe, secure, and most importantly, a very usable checkout option for our customers. We've seen that visitors who use Google Checkout convert at a significantly higher rate than our own checkout. The addition of the Google Checkout badge to our AdWords campaign has resulted in an increased CTR and a decreased average CPC. Our visitors seem to place a higher level of trust and confidence with us because of the badge. Customer experience aside, the savings we've experienced in credit card transaction fees have been very significant and is always a welcome addition to our P&L. When our finance department is happy, we are happy.

Perhaps happy, happy, but not representative!

Why not? As I put forth in June:

What merchant would say no to a proposition such as Google’s to “sell more and spend less?” Those merchants who consider Google’s own financial objectives that motivate the integrated Google Checkout - AdWords scheme and those merchants who value:

  • Transparency in advertising pricing and cost
  • Advertising budgeting via published rate cards
  • Avoiding disadvantages in media placements
  • Diversification in media buys
  • Clarity in vendor pricing and motivation
  • Lowering customer acquisition costs
  • Maintaining customer relationships
  • Providing direct customer service
  • Developing customer value through CRM strategies