Friday, June 17, 2005

Google to enter Payments to compete with PayPal

Very interesting. I just found an article that confirmed that Google is working on developing an online payments solution. Obviously, they are looking for new growth and also to diversify their growth.

However, there are a few reasons why going into Payments makes perfect sense for Google. First and foremost, they need to be able to better track conversion rates so that they can help their customers better track the ROI of their ad spend.

So, that is a compelling strategic rationale. However, what is also interesting is that what Google is doing is nothing unique. They are simply following down the path that Yahoo! and MSN took a long time ago.

Step 1: Search (Google, Froogle, Google Local, etc.)
Step 2: Communication (Gmail)
Step 3: Payments

Yahoo! and MSN did the same thing. They started with search, then went to communications and then went into payments. Yahoo! (PayDirect) and MSN (Passport) both failed in payments. What will be Google's faith?

It depends on the path they take. If they want to directly compete with PayPal it will be tough. If they start via a simple merchant account solution they will do fine and can grow from there. However, if one thing is clear is that they are now in direct competition with PayPal and eBay. This is going to be an interesting fight!

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