Rumors about Google starting its own online payment system have been floating around the ‘Net for years now. It all started innocently enough, as most ‘Net rumors do, in June 2005 with a bit of speculation from the Wall Street Journal and sources “close to the matter.” A few days later, Google CEO Eric Schmidt confirmed that the company was indeed working on an online payment system, but because it was not a “person-to-person stored-value payments system” like PayPal’s, the two would not be in competition in any way.
PayPal CEO Jeff Jordan felt differently, and in an interview with the WSJ in February he called the service a “very legitimate competitive threat.” Yet the planned service failed to appear. Later that month, Google added a payment option to Google Base, a service that allows users to upload their own classified ads and other personal information. While technically an online payment service, this was a far cry from the one-to-one system that PayPal offered.
Still, the rumors persisted. A temporary “Google Payments” page appeared briefly on Google’s site before it was taken down. Speculation about a single, secure login for online transactions called “Google Wallet” continued unabated. Now, a full year later, it appears that Google has a target date for the introduction of a new service called GBuy. According to Forbes, GBuy is set for release on June 28.
So is GBuy the long-awaited PayPal killer? Not really. It’s tempting (and I’ve been guilty of this myself on more than one occasion) to think of every new company announcement as being a direct challenge to an equivalent product by another company. While “Company A releases Product X to rival Company B’s Product Y” news items are easy to write, they are somewhat lazy and don’t really offer much new information.
A closer look at the information seeping out about GBuy shows that it is solving a very different problem than PayPal originally did. PayPal was created as a standalone company to make it easier to exchange money between individuals online. When eBay discovered that far more people were using PayPal to complete their transactions than the company’s own online transaction system, it made perfect sense to purchase PayPal outright and leverage the connection that was already there.
Google, on the other hand, has a different problem to solve. As I’ve mentioned before, the company’s primary concern is to maximize advertising revenue generated by their incredibly popular search engine. While speculation about Google Moonbases and Google Wormholes is tons of fun and the company’s three top executives love to joke about such projects themselves, everything that Google does is oriented around this basic goal.
GBuy, from initial appearances at least, is no different. As conceived, the service would allow certain online sellers to become “trusted GBuy merchants” (and indicated as such on their links, either by a special icon or text string) which, in theory, would improve customer confidence and thus lead to higher click-through rates on AdWords and AdSense advertisements. Everybody wins, as the merchants get to sell more of their products, while Google gets to charge more for advertising and collects a small fee for each GBuy transaction. “If harnessed, the precision of this targeting could be revolutionary,” wrote RBC analyst Jordan Rohan in a report last Friday.
While GBuy won’t displace PayPal right away, it may have some impact on that service’s long-term growth. Currently, new PayPal users are most often individual users and small organizations that can’t afford to set up any other type of online payment service. The association with eBay gives PayPal a kind of “online flea-market” stigma and makes it difficult for the company to sign up big-name retailers. Google is hoping that its GBuy service will avoid those sorts of problems and stimulate major growth in online commerce. We’ll have more solid details on June 28.