By Lisa Baertlein
Google Inc. on Thursday will launch a long-awaited service called Google Checkout, which some analysts said could help online merchants boost sales and convince them to commit more advertising money to the Web search leader.
Analysts were mixed on whether the product, initially available only in the United States, puts eBay Inc.'s PayPal online payment system in Google's competitive sights.
The new offering, referred to in news and analyst reports as GBuy or Google Wallet, promises online sellers an easy way to add a checkout to their sites and can be used in addition to other options such as PayPal or a merchant's own pay system.
Google said Checkout stores names, shipping and credit card information and eliminates the need for consumers to resubmit that data with each purchase. Google is responsible for processing the credit card payments and keeping data safe.
"We think we're making e-commerce a lot more efficient and easier to use," Salar Kamangar, Google's vice president of product management, told Reuters.
Google charges merchants 2 percent of the value of each sale plus 20 cents per transaction -- a fee that early users said was in line with other options. The company rewards its advertisers by offering them $10 in free sales processing for every dollar they spend on its advertising program, AdWords.
"There is a clear revenue opportunity here," said Greg Sterling, an independent analyst, who noted that Google built its massive business on lots of tiny transactions.
While Sterling said eBay and financial analysts will likely view the product as a PayPal competitor, Forrester analyst Charlene Li and early users such as Buy.com said it will expand the market by giving consumers another way to pay.
"I don't think this was created to compete with eBay. (Google) did this to create more search advertising," Li said.
Li said search ads have become so popular that merchants -- especially sellers of sought-after products like digital cameras -- have seen key word ads become prohibitively pricey.
If Google helps Web retailers sell more, they could be persuaded to spend more money on AdWords, Li said.
"It's a win, win, win all around."
"Google is looking at exactly the right problem," said John Bresee, president of Backcountry.com, which specializes in high-end outdoor gear and had $52 million in revenue in 2005.
The company, along with online stores run by Starbucks Corp., Timberland, Levi Strauss & Co. and underwear seller Jockey, is among the first to try Checkout.
Users will be shown in search results next to a shopping cart icon, and Bresee hopes it can convert a higher percentage of shoppers into buyers.
"What we may discover is that Google knows a lot about search, but they don't know a lot about the way consumers are shopping. We just don't know," Bresee said.
In storing personal data, Google Checkout is reminiscent of Passport, Microsoft's online wallet, which bumped into security and privacy issues and failed to live up to the software titan's expectations after its launch about seven years ago.
While Google is popular, it angered privacy advocates with an e-mail product that delivers ads based on message content.
Li predicted an eventual backlash as Google pushes ahead with its goal to be the world's information clearinghouse and encounters inevitable customer service problems.
"Whereas Microsoft wanted to own the desktop, Google wants the monopoly on your information," she said, noting Checkout also provides buyers with a purchase history that shows where they spend their money. "I'm concerned that they could fall into a situation where they're the next Microsoft."
Copyright 2006 Reuters Limited.
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