Google and future of eBay & Paypal

Google has expanded its online payment service so that users can buy and sell everything, from clothes to recipes, on Google Base, writes Puneet Mehrotra.

business Updated: Mar 06, 2006 12:31 IST

Anything that Google does is much more than news. It directly impacts the lives of millions of entrepreneurs, webmasters and netizens alike. In June 2005, I had written a column titled "Google Plans to Nuke Paypal". You can view it here thebusinessedition.com. There were noises if this was part of some corporate communication plan of Google to scare Paypal and submit itself to Google?

Ten months down they have finally done it. In fact, the whole affair has been done in the true subtle Google style. Google has expanded its online payment service so that users can buy and sell everything from clothes to recipes to just about anything on Google Base. Sounds so nice except that now the future of eBay and Paypal is at stake.

Google Base

Launched in November 2005, Google Base is a place where you can easily submit all types of online and offline content that they host and make searchable online. You can describe any item you post with attributes, which will help people find it when they search Google Base. In fact, based on the relevance of your items, the items may also be included in the main Google search index and other Google products like Froogle, Google Base and Google Local.

Google added the payment service to its upcoming Google Base classified listings Friday, an expected move that nonetheless sends shockwaves through the Internet industry.

A bang without even a whisper

Google hasn't announced a Google Payments, but did post an "update on payments" on its official blog on googleblog.blogspot.com. The characteristic subtle style is so typical of Google. Such an important event and this is what their official blog says:

As the number of Google services has increased, we've continued to build on our core payment features and migrate to a standard process for people to buy our services with a Google Account. Examples of this migration include enabling users to buy Google Video content, Google Earth licenses, and Google Store items with their Google Accounts. We also just began offering similar functionality on Google Base.

Just a small sentence and its impact so much that the future of two huge businesses is at stake.

The Future of eBay and Paypal

EBay dominates e-commerce with its online marketplace and PayPal payment service. Google's entry into both arenas could cause headaches for more established competitors. An online blogger describes it as "shake up the landscape of buying things online". SF Chronicle described it as "sending shockwaves".

In 2002, San Jose-based eBay.com bought PayPal for $US1.3 billion. Presently Paypal accounts for a substantial portion of eBay's profits. During the 1st quarter Paypal accounted for $233.1 million or 23 per cent, of eBay's revenue.

On the face of it eBay isn't to perturbed. That's what they are claiming at least and have denied it saw any reason for concern. Ebay has a strong base of 96 million accounts. It says it is better equipped with fraud prevention and risk management measures. Its position is unchallenged, especially now that it has the eBay Express which allows users to get past auctions and directly to the merchants from where they can buy new products at a fixed price.

Is that believable? I have my doubts. Google is Google is Google. Too big for eBay and Paypal. Look at any recent launch from the Google stable and it's been superlatively popular.

The Importance of being Google

Google receives payments every day from advertisers, and then pays out a portion of those funds to advertising partners. Over the past four years, Google has billed advertisers in 65 countries more than $11.2 billion in 48 currencies, and made payments to advertising partners of more than $3.9 billion. Noteworthy is why is Google is making this move?

The Google move and war time equations

Google versus Yahoo, corporate rivalry is understandable. Google versus MSN, Microsoft the bully and its hunger for rival companies, again comprehensible. But Google versus eBay and Paypal which is an eBay company, not comprehensible to many. Consider this, Google relies mainly on advertising for its revenues and eBay one of its biggest advertisers. So why is Google so hell bent upon crippling one of its biggest customers?

What Google is probably doing is following the ancient war maxim of minimum casualties. The reason for its move probably lies in the Google versus Yahoo versus Microsoft war and Google has good reasons to look into this market considering a bulk of their revenues come from the online advertisement market which is expected to get complicated with the entry of Yahoo! and possibly Microsoft services later this year. The cost of this probably killing one of its biggest customers, eBay. The payoff will be survival. Google seems to be making the former choice.

For Google, a payment service could represent a significant expansion beyond online advertising, which generated 99 per cent of its $3.2 billion in revenue last year.

Watch out this column for more on the Google move.

Puneet Mehrotra is a web strategist at www.cyberzest.com and editswww.thebusinessedition.comyou can email him on puneet@cyberzest.com

First Published: Mar 04, 2006 18:41 IST