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Google tests Web buying system

Google is testing a system that aims to speed purchases online but bears no resemblance to the popular PayPal payments.

india Updated: Jun 16, 2006 11:36 IST

Internet search leader Google Inc is testing a system that aims to speed purchases online but bears no resemblance to the popular PayPal payments service of Web auctioneer eBay, Google's chief executive said on Thursday.

Analysts had recently speculated whether Google would directly compete with PayPal, dubbing its potential new service "GBuy." Google has not yet announced details of such a service or given it a name.

But Google CEO Eric Schmidt provided limited details about the system on Thursday. The company's payment system will aim to facilitate quicker purchases by a consumer from a marketer, and a beta version is expected soon, he said.

"It's not like PayPal at all," Schmidt said when asked about "GBuy" during a New York meeting hosted by Conde Nast's new Portfolio business magazine.

"It makes no sense for us to go into businesses that are occupied by existing leaders," he said. "We want to solve new problems in the payments space."

He said the system was targeted at advertisers and not general consumers, but he did not elaborate on how it differed from PayPal. Google officials could not be reached for further details.

At least one analyst saw similarities between the two systems.

"Google management is getting off on a technicality" in saying its purchasing system differs from PayPal, said RBC Capital Markets analyst Jordan Rohan of Schmidt's remarks. "A merchant-to-consumer payments system, that's close enough."

In a research note last week, Rohan wrote that Google was likely to launch such a service by the end of the month, saying there was no reason it could not expand to consumer-to-consumer transactions like many PayPal payments.

Google would not charge merchants for the service during the beta phase, but could be expected to take fees of up to 2 per cent after some period of time, Rohan wrote.

"You have to target the advertisers first," he said, referring to the need to get a critical mass of merchants on board to make a purchasing system attractive to consumers.

Google has been expanding the technology underlying its search advertising to send targeted messages to individual consumers using other media, including traditional outlets such as magazines.

Such targeted marketing is viewed as one new frontier for growth in the advertising industry. Schmidt said its adoption could help to boost advertising dollars, and even divert money that companies spend on sales and marketing teams to Google and its rivals.

"Eventually we hope that a targeted ad would be better than a targeted sales person," Schmidt said.

To that end, Google has tested placing targeted ads in magazines based on subscriber zip codes, a system that could be extended to newspapers, he said.

Ads served up to customers searching for information on their mobile phones are being tested in Japan and there are plans for a similar service to test in Europe, Schmidt said.

Google shares closed up $6.61, or 1.7 percent, to $391.