Posted June 21, 2007 7:37 pm by with 6 comments

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By Ryan Douglas

Recent news through Internet Retailer reports that the adoption rate of Google Checkout is slightly higher with Top 500 retailers than PayPal?s Express Checkout.

It is not surprising to hear this news as I work for a merchant who has offered Google Checkout since it was released to the public back in the summer of 2006. I?ve felt strongly that Google would be able to use this data to help retailers/advertisers offer more effective ads to potential shoppers. That time is still likely to come, but I imagine Google is working on it somewhere.

Processing Fees:

As many have heard, Google Checkout is offering free transaction processing until the first of 2008. PayPal is only offering free transaction processing for 3-9 months depending on how valuable your business is to them. While PayPal itself may have a larger base of registered users, merchants (online and offline) are always looking for ways to save on operating expenses especially smaller merchants; that?s one area Google Checkout has PayPal beat. Google Checkout is free, at least from a financial aspect. PayPal says that the transaction processing is free, but in reality a merchant has to pay their normal fees associated with transaction processing, then those processing fees are refunded back into their account (I am guessing at the end of the month). With Google, after January 1, 2008 merchants will still be able to receive free processing by way of using AdWords. The amount processed for free is based on the merchant?s ad spend. This aspect will likely support the longevity of attracting merchants and keeping them with Google Checkout. This is also beneficial to Google as it will encourage advertisers to keep spending on AdWords.

The Top 500 online merchants are selling millions of dollars annually, saving 2-4% on those transactions is a significant savings, even if only a fraction of their customers are using Google Checkout. It becomes costly to pay transaction fees, service fees, and currency conversion fees with PayPal or any other payment processing services. International payments are accepted without additional fees via Google Checkout, but PayPal Express will cost an additional 1% on top of the 1.9%. I have read that PayPal will offer bonuses up to $1000 to merchants who integrate PayPal Express on their site. In my inquiries to PayPal executives, the exact amount could not be confirmed.

Winner: Google Checkout

Branding and Identification:

Merchants who advertise on Yahoo will receive some benefit; their ads will display an imitation of Google?s blue shopping cart icon that indicates merchants who offer PayPal Express. One thought that several people have come up with is why PayPal and Yahoo (I?ve jokingly called it Payhoo) don?t use an icon with a stronger background of identification. I suggest they use the small double ?P? logo that can be found on eBay listings. I think that confusion could arise when a Google user ventures to Yahoo and sees a blue cart icon in a sponsored ad. In their environment ?Blue Carts = Google Checkout?, not PayPal. Google has gone through several revisions of the cart icon to improve conversion rates, while I still see the same icon from Yahoo.

Winner: Google Checkout

Additional Offers:

Another recent benefit released via the Google Checkout blog is that merchants who use FedEx can save up to 21% on their shipping costs. Google?s blog post can be read here. PayPal offers a ?Shipping Center? but there are no special incentive shipping rates with carriers, just free USPS and eBay branded boxes for your business.

With postal and shipping rates having gone up this year already, merchants have taken a few approaches in keeping competitive on overall price.

A) Lose profit by continually shipping products for low/ free rates to make shoppers complacent- people love free shipping.

B) Inflate product prices so they can support A. This stance is debatable in either direction. One drawback is lower positioning on comparison shopping engines.

C) Pass on the increase in shipping costs to customers. Approach C is tough because customers don?t necessarily realize that the carriers are the ones raising the rates to combat rising fuel prices and not the merchant turning their shipping department into a ?profit center?.

Winner: Google Checkout


Could this almost ?too good to be true? payment processing solution with benefits from Google have drawbacks? Many skeptics think so, but based on the findings of the mentioned report; it doesn?t appear that many top retailers are afraid of such concerns about giving Google their advertising money and customer data.

PayPal was sitting around getting fat from their 143 million users, whereas Google was out hunting to gain ground on PayPal by spending $58 million in promotions/coupons on behalf of their merchants in the form of $10 off $30 and $20 off $50 instant savings. These instant savings promotions from Google Checkout excite merchants who benefit from increased sales by such offers. Merchants may still be inclined to add PayPal because of shopper comfort levels with the service and high use as a payment method online worldwide. Better yet a merchant could add both services, that is if they could find a way to place both buttons on their checkout page to maximize conversions. Just don?t indicate you offer Google Checkout on your eBay listings or you may be banned.

If using Google Checkout is a success for a merchant to any degree, they will maintain if not increase their advertising budget on AdWords. Although PayPal and Google Checkout have denied being in competition, it appears they are both working hard in an effort to capture new business with similar products. PayPal does boast an enormous user base, but their program has many strict requirements regarding button placement etc. At IRCE 07 they acknowledged to us that they would be making those requirements ?more flexible? to bring aboard more merchants. When it comes to benefits for merchants to adopt a new streamlined checkout service, Google Checkout offers many bells and whistles at a lower cost and still providing comparable increases in conversion rates.

About Ryan Douglas

Ryan Douglas manages search engine marketing and comparison shopping engines for