Posted March 13, 2007 11:14 am by with 12 comments

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Nathan has uncovered the dollar amount Google spent in promoting Google Checkout in 2006 – $58 million. As Nathan points out, that’s the amount spent in promotions and $10-$30 coupons by Google, in an attempt to take some market share from PayPal.

Nathan adds…

If $58 million a drop in the bucket for megabucks Google? Maybe, but its not the way I’d want my company to do business. Google is pushing Checkout by buying its way into the market, not on any perceived merits of its product. If your product can’t at least perform reasonably well without you dropping $58 million to get it there, maybe it doesn’t deserve to exist at all.

I add…

$58 million to rapidly gain market share in an industry that is currently dominated by just one main player? Bargain! Think about how much Google is saving in traditional marketing and advertising costs, by recruiting merchants to do their advertising for them. Every time a merchant uses Google Checkout – which they can do for free until the end of the year – they’re telling their customers about an alternative to PayPal and traditional credit card options. Why spend hundreds of millions on advertising, when you can get the merchants to do the hard work for you? And, once those merchants take the time to set up Google Checkout, integrate it with their shopping cart, add logos to their site, etc., they’ll likely stay with Google beyond 2007, so long as the transaction fees are competitive (or cheaper than) PayPal or their merchant account.

Of course, the proof is in the pudding. We won’t know how much of a smart move this is, until we see Google Checkout’s market share at the end of 2007.

  • Now there’s a post I’ve seen before. Nice to see BlogNC posts covered here. Whether the Google money was well spent will be decided by whether visitors return.

  • If it is not successful, it was still money well spent – it is just market research

    Google also has some nice leverage, for instance their conversion tracking could in the future require Google Checkout, by linking in to what was actually paid for each order in some proprietary way.

  • That’s not to mention the hundreds of new Google accounts that people are opening up to conduct transactions. I’m sure that Google will be happily tracking and pushing personalised results at all these new account holders.

  • I agree, this is a very good strategy by Google. Google certainly could use some (or at least a) revenue streams that are not ad based. And it seems like a market in which Google could very well succeed. Google can afford to invest some money today for a long term payoff. What could Google buy outright for $68 million – not much probably? Investing in this strategy to gain a significant share of a profitable market seems very wise to me.

  • Andy, think about it: $58 million in advertising would have brought Checkout more dedicated users than the coupons did (which just brought bargain shoppers). Google could have bought twenty Super Bowl commercials, guaranteeing that the general public would know what Google Checkout is. Instead, they’ve spent $58 million, and most people have still never heard of it!

  • Google isn’t chasing PayPal’s market. This is widely assumed but weak on the supporting evidence. Google has a bigger plan for Checkout and it’s all about the Small to Medium Enterprise market.

  • I tried out Google Checkout and it’s a bit tedious to use. I’m selling advertising, and it’s to people who are members of my site. However I’m not allowed to put the code on a page that requires a login, so I don’t know which user is buying the advertising package. Instead I get to email them and ask them. No thanks.

    (And when I asked if I could pass a username, the support person basically said “Why in the world would you want to do that?”)

  • I think you’ll find plenty of arguments for and against Google Checkout, supported by different interpretations of facts and fueled by personal biases and prejudices.

    Was Google’s strategy to spend $58m to buy market share bad? That depends on what your definition of good is – are we talking about effective, or are we talking about deserving market share based on product quality?

    Two different arguments, and if you were to put both up it amounts to hunting for reasons why Google is doing a bad job.

    I’m sure someone who is a Google fan could bring similar arguments in favor of Google to the table.

    Nathan, in the above comment, says:

    Google could have bought twenty Super Bowl commercials, guaranteeing that the general public would know what Google Checkout is. Instead, they’ve spent $58 million, and most people have still never heard of it!

    SuperBowl commercials? Where were you during the effective vs ineffective advertising debate? 🙂

    Google is relying on the power of free stuff combined with good old word of mouth to promote Google Checkout. They pushed a product out in beta and will be working to improve it as market share builds.

    Like Andy said, wait and see the impact and eventual quality of the service.

    Or you could go on a rant about how good / bad Google is 🙂

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    The 58 Millions is used to buy time, worth it!