Google Checkout – Ecommerce Friend or Foe?

Back in June of 2006, Google released Google Checkout amidst a flurry of predictions and press coverage that it would soon be the number one payment choice for buyers. It looked like Google wanted to go head to head with PayPal and enter into the payment gateway and ecommerce world with a bang.

The Past…

In fact, Google spent around $100 million dollars in 2006 and 2007 to push Google Checkout with merchants. They initially offered large Adwords credits to merchants (For every $1 merchants spend on Adwords, they could process $10 in sales through Google Checkout at no charge). They then introduced *zero* fees for all payments processed through Google Checkout. They waived all percentage and per transaction fees to entice merchants to sign up and use their new service. Google also gave out $60 million in coupons to consumers to get them to use the new service. This resulted in holiday sales of over one million transactions in December 2006 alone.

Today…

Fast forward to 2009, and Google got rid of both the adwords credit and the zero fees to merchants. Today, the rates offered to merchants are almost identical to PayPal’s fees. Additionally, PayPal offers more features, and is a more well known brand when it comes to online payments. With this move, many have said it signals Google’s resignation to not be able to be the leader in this field. And some have suggested (I don’t believe this) it is the first step towards Google eliminating this service in the future.

Recent Analysis has shown that Google checkout is only offered by 11% of the top 100 online retailers, only rising 1% from 2007 (source: Rosetta). This stagnation does not bode well for Google’s chances of being a major player for online payments.

We analyzed statistics of our hosted ShopSite merchants and found that only 6% of all ShopSite merchants are offering Google Checkout. In terms of total numbers of orders, only 1.5% of all orders placed used Google Checkout. This would seem to indicate (albeit a small sample) that smaller online merchants have a much lower adoption rate as compared to the larger online stores. There may be a number of reasons why this is, and we’ll explore a few below.

Limitations…

  • Realtime Shipping Rates:
    Google has a limitation of a 3 second maximum response time to receive realtime shipping rates. This means that for every address saved in a customer’s Google Checkout account, all shipping rate lookups must be completed within 3 seconds. If not, default rates are returned, which may not be close to accurate for your shipping needs as a merchant. In real world practice, limiting realtime rates to 2-3 options (from one carrier) usually gets in under the limit.
  • Shipping and one time use coupons:
    Google Checkout does not work with shipping coupons such as free shipping or discounted shipping coupons, or unique one time use coupons.
  • Gift Certificates and surcharges:
    These features will not work with Google Checkout.
  • Customer Registration (in your ecommerce application):
    Due to Google’s privacy policy, it is prohibited to have a customer account created in the ecommerce store. This restriction prevents a customer from being able to be logged in on your site and see past order history, save their address, etc… as all of this is now handled through Google directly.
  • Limitations on the type of products that can be sold:
    Google has a long list of prohibited items that can’t be sold through Google Checkout. Make sure you read this list carefully before signing up as a merchant.

Ebb and Flow…

One of the more major changes when implementing Google Checkout is the alteration of the flow a customer goes through when placing an order in your store. Due to Google’s tight licensing agreement and implementation requirements, the placement and size/text of the Google Checkout button itself is quite limited. Additionally, they require that their button appear before the cart’s regular tax, shipping, and other payment options appear. If you’re using a cart such as ShopSite where the customer can normally see shipping, tax, surcharges, payment, and gift certificate options, enabling Google Checkout inserts a “pre-cart” screen where all of this is hidden (except for the prominent Google Checkout button).

The end result of this sort of change in an ecommerce cart could lead to confusion for customers who are not familiar with Google Checkout or would never use it in the first place. It requires the merchant to clearly mark and label the process (with easy to follow instructions) to avoid this confusion. In addition to the altered flow of the cart, a shopper who chooses Google Checkout is taken to Google directly to complete the purchase (and is not offered a simple “return to cart” link/button), and is not returned to the store’s checkout system. The merchant simply hands the customer off, as opposed to PayPal, which allows the customer to return to the cart once signed in to complete the purchase (giving merchants flexibility in how they implement PayPal).

The bottom line is a merchant must weigh these limitations and changes with how much increased revenue and customer satisfaction will result from offering Google Checkout. It will depend heavily on the type of customer your store attracts. If they are very technically oriented, chances are good they know about Google Checkout and may use it often. If your customer demographic is not technophiles (I’m sure my parents fall into this category), then adding Google Checkout may result in few added benefits (and possibly some major downsides).

To put it into perspective, I’ve never heard anyone say “I will not shop at this online store because they do not offer Google Checkout”. However, I have heard people make this statement if a store does not offer PayPal as a payment method.

Feel free to share your experiences with Google Checkout and whether you offer it or not in your online store…

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14 Comments

  1. AlgoZone says:

    I think paypal has done a good of giving customer the ease of paying online. It has already been in the business for quite a long time that’s why most people likes using paypal than any other payment options available. As for google checkout, I have never tried using it and with your description of how it works it seems that a first time user like me will definitely be confused.

  2. Phil says:

    The big benefit to Google of using gCheckout, is that the last-click wins converted words are recorded.

    You will see that Google web search drops a tracking pixel with the parameters “action=” and “tran=” I suspect these are linked up to the google checkout cookie.

    http://www.google.com/csi
    v=3
    s=web
    action=
    tran=undefined
    e=21480,21486,21766,21771
    ei=Vy2uSvrKG5T6-AarndW0Bg
    rt=prt.72,xjs.109,ol.606

    Also the advent of the plusbox and finalisation of the DoubleClick / GoogleAffiliate network integration with Adsense mean that Google is moving towards a CPA model (rather than CPC) model.

    Thus gCheckout forms am important method of confirming a conversion has taken place and awarding the affiliate commission. It will even handle canceled commission from refunds. There is “0” possibility Google will abandon gCheckout!

    Google gain valuable trend information is from checkout sales:
    http://googlecheckout.blogspot.com/2008/01/new-on-hot-list-google-checkout-trends.html

    Also gCheckout increases CTR from Search and Google Products (which even has a filter for only show Retailers who uses gCheckout). Also conversion rates are increased for existing Google users, as users only enter billing details once & then they are remembered on google servers:
    http://searchengineland.com/google-says-google-checkout-increases-conversion-by-40-clicks-by-10-16012

    Thanks

    Phil.

    • Phil,

      Thanks for providing more details on how Google is using gCheckout. I doubt Google will abandon the service, but innovation with regards to checkout has been slow as of late.

      Per the conversion boost (and CTR), it’s important to note the statement is “for existing Google Checkout users” which is a small group overall. There is no data available that I know of that analyzes overall CTR and ROI for Google Checkout merchants.

      I just wish Google would loosen their policies a bit so merchants can more easily integrate the service seamlessly, and add a simple “Return to Cart” link on the checkout page. 😉

  3. I offered Google Checkout as a payment option for over a year, got in when the fees were waived for a while. I turned it off about 6 weeks ago, so far no one has asked that I reinstate it or refuse to purchase my goods because I don’t offer it.

    The number one thing I didn’t like was having to have a pre-Checkout page in ShopSite, this totally confused my customers as to why they had to press the button twice just to see shipping charges. Initially I had the BIG Google Checkout button placed before my regular checkout button, sure I got lots of Google Checkout orders and I suspect many customers who gave up and went away as my other payment methods were not being used at all. I quickly added text clarifying the buttons and sales picked up.

    Second, I didn’t like having to enter tracking information in Google as well as Order Status, if I didn’t, I could lose a battle of not shipping in a timely manner. One time I forgot, then entered the tracking number after the customer received the goods, took a few emails and phone calls to calm that confused customer down. I learned to be very careful after that one. I wished there was some way to check orders as closed or shipped without notifying the customer, but there wasn’t the last time I checked.

    Third, I found out when you do a return, you had better have the right amount typed in before you press the button because there is no verification and chance to take a second look. You guessed it, I had a typo and a lucky customer got a bonus. We live and we learn.

    When I looked at my stats, Google Checkout was my least used payment method…well that is after I got the button issue clarified. I also offer Pay Pay and have a merchant account for Visa, Master Card, American Express, and Discover. Considering the amount of extra work it caused, I decided to lighten my workload and don’t miss it one bit.

    BTW, my sales have drastically increased since I turned Google Checkout off. I just figured I was getting lucky, but could it be it Google Checkout was turning my customers off with the pre-checkout page and confusion? I’ll never know as I don’t have stats to verify this one.

    Janice

    • Janice, thanks for the details on your experience with Google Checkout. I did not know that Google doesn’t give you a chance to confirm a refund amount. That sounds like a horrible idea.

      Hopefully your painful lessons can help other merchants decide if Google Checkout is worth it for their online store.

  4. Jace says:

    I was wondering why there hasn’t been many additional features added to Google Checkout. I had been looking at adding it when it was first released, but was frustrated by the lack of features. I have since revisited it and was surprised to find not much had changed. That isn’t what I expected from Google.

  5. robert says:

    I offered Google Checkout as a payment option for over a year, got in when the fees were waived for a while. I turned it off about 6 weeks ago, so far no one has asked that I reinstate it or refuse to purchase my goods because I don’t offer it…

  6. steve says:

    I tried offering google checkout as a PayPal option on my web site, but in my case, Google made the decision for me.

    My site sells wine and beer making kits. They are a homebrew supply legal in all 50 states and have sold in malls and homebrew supply stores throughout the USA.

    Google said that they suspended my account for selling alcohol. (I have never sold alcohol) And it looks like the payment on some orders that were placed may get reversed even though I have already shipped the product. Don’t know for sure yet from their brief message. There is no way to appeal their decision.

    Too bad for google, PayPal has made a fortune on me in transaction fees over the last serveral years. I was going to give google a share of that pie but it appears that they are allergic to money. No wonder their project is failing.

  7. steve says:

    One last point that should be made: PayPal is owned by eBay. eBay is google’s single-largest advertiser. I don’t think google ever wanted to go “head to head” with paypal, it would sort of be like sleeping with the enemy.

  8. Langmuir Blodget says:

    When Google kicked this off I was excited to implement it, but when I ran into the reality of Google’s arrogance demanding that they have super-prominence and would not allow us to put their payment option in a pull-down list of other options I opted not to participate.

    But a compromise was eventually reached and I did implement it. I just offer that button next to the “proceed to checkout” button and no extra landing page hassle.

    I get about $200k per month in on-line sales and only about $500 in Google, so it looks like all my friends couldn’t handle the arrogance either.

    It just shows how a high power team of product developers can do a survey and find that customers don’t want to click more than once, and turn that into a marketing disaster.

    I just hope that they launch it again without all the arrogance.

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