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Summary:

The discourse and discussion in the blogosphere today is Google Checkout. “The goal here is to make it be one nanosecond from the time the customer decides to buy to the time the transaction is complete and the product is on the way,” Eric Schmidt, Google […]

The discourse and discussion in the blogosphere today is Google Checkout.

“The goal here is to make it be one nanosecond from the time the customer decides to buy to the time the transaction is complete and the product is on the way,” Eric Schmidt, Google CEO says in an interview with The New York Times.

End of CPC Advertising?

Read between the lines – this is a dangerous and most brilliant assault on the “cost per click” (CPC) plans of Microsoft, Yahoo and everyone else who is coming to the party … late. This move is about cost-per-action advertising. It is about kicking up the online advertising business … another notch!


Lets compare the two – CPC and CPA based ads. In case of CPA, there are no wasted dollars, no click fraud, and all the revenues are coming from sales. As an advertiser, you have no risk. You sell, you make money, Google gets a piece of the action. Why would you bother with other options?

Who Is Impacted?

This move impacts three companies mainly – eBay, Yahoo and Amazon – because these are the three premier gatekeepers of online point-of-sale info. Google doesn’t have the information, and needed it. If (bold for a reason :-) ) Google can make the Checkout work, the three giants suddenly have lost their advantage over Google.

Having said that – Amazon and eBay are more at risk. Despite having a large number of “proprietary eyeballs,” they lack their own advertising system, and need to depend on third party. Both should have built one, but they didn’t. Costly mistake perhaps, since they have existing merchants & eyeballs, and could certainly monetize their own traffic if they did.

Yahoo is in a better position comparatively speaking since it has its own advertising system. (Maybe there is room for a big merger in the web-space? Sramana Mitra believes eBay+Yahoo should just get on with it.!) A closer alignment might be necessary if these companies need to create a CPA based advertising model, and thus blunt the Google incursion into their e-commerce sales / reduce their advertising costs (many of which go thru Google).

Why Google Is Doing Checkouts?

Going forward, the much talked about Google Payment system (the Paypal rival) could give them even more leverage and hurt rivals in the process. But in a larger scheme of things, it could be trivial. Why because for Google, the real advantage is not just to gain payments market share & revenue, but to increase AdWords sales and reduce click fraud through the creation of a fundamentally better advertising system — that is, CPA-based ads.

Yahoo / eBay / Amazon had one significant advantage over Google the past few years — knowing point-of-sale data. As of today, it is not that much of an advantage. Sure they can launch CPA-based ads themselves also, but by the time that happens….

  1. heyisforhorses Thursday, June 29, 2006

    I believe that should be “another notch”.

    Anyway. I don’t understand why you need a transaction system to do CPA? Other companies do CPA without a transaction system.

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  2. GoogleBase Web merchants Media Mobile Wi-Fi Canvased Cities Advertising Platform Google Checkout = Largest digital economic ecosystem we have ever seen.

    And so you see now small web merchants no longer have to work with ebay or Yahoo Shopping, media companies can sell content and people can purchase easily, small local movie theaters can sell tickets and I can purchase right from my mobile phone.

    Google takes on Skype/Ebay/Paypal, Apple, MS, Yahoo, and mobile carriers all at the same time.

    May be a bit conspiracy theorist or pie in the sky, but you can see the peices fall into place…

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  3. i guess it about more accurate data. sorry cannot type any more right now – my shoulder is all locked up. good catch on “another notch.” fixing it.

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  4. Introducing CPS = Cost per sale.

    The holy grail, if there is one, is the ability to show an advertiser how to make $MONEY$.

    Following the click through to a completed sale allows G to estimate margin and profitability, and therefore a very deterministic ROI.

    It is the future. It’s smart.

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  5. Michael,

    i like CPS> damn, that is even more to the point!

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  6. Seems easy to rationalize from the perspective of why Google would do this from an AdWords perspective but it’s a stretch for me to see what is so compelling about this that it will force consumers to change their behavior and adopt it. I just hope that Google doesn’t start altering my search results so merchants that use this service get prominence.

    Om, you have a pretty sophisticated audience here, why not run a survey on who plans to use Google Checkout as consumer…?

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  7. Yahoo has a checkout program too.

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  8. Here’s where I think they need to go with this checkout system:
    http://uttles.com/2006/06/i-have-idea-for-google.html

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  9. chris,

    that is a good idea. let me do a poll on this. thanks again for the suggestion.

    tom, good post.

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  10. Great article, all too true. It will be interesting to see how advertisers use this new. Even more direct when the sale is for an online service instead of a product.

    In the article though you said that Amazon and eBay have not built advertising networks, which of course is true in the strict sense. But Amazon’s Associates system is very close, especially when you look at how well targeted they tend to be.

    Just a thought.

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