Google Checkout Could Change the Game

For example, a seller may currently list on eBay, with eBay -- a major advertiser on Google -- helping to bring in buyers. But rather than have sellers pay eBay for listings, which in turn could buy Google ads, Checkout could enable Google to take eBay out of the equation entirely.

The proceeds that would otherwise go to e-commerce companies that run stores for merchants, such as eBay and Amazon, could then be turned into profit for Google. These would come in the form of higher prices for ad listings as merchants jockey for even more important top positions in Google search results.

"This would allow Google to ultimately build a retail marketplace that replicates what Amazon and eBay have," says Devitt. "And while 'disintermediating' its retail partners reduces their relevance, it accrues value to Google's franchise."

The approach allows Google to circumvent companies that command a total market capitalization of some $100 billion, says Devitt. "That's what makes Google so powerful, but makes Checkout very significant and misunderstood."

Google has what it takes to make a serious dent with this latest effort. The company is in a position to give away a service that others, such as PayPal, which is owned by eBay, charge for -- inspiring Devitt to liken Checkout to what Microsoft's(MSFT) plan was with Internet Explorer.

Though Checkout will start by losing money, Google's deep pockets and wide reach across merchants give the company the resources it needs to pull it off.

The Checkout giveaway may be good news for consumers, merchants and Google. But it's no cause for merriment for Google's competitors.

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