Google Scores With Checkout

The online payment service could be a strong new revenue stream.
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While its trouncing of the online ad market gets all the attention, one of

Google's

(GOOG) - Get Report

smaller endeavors offers another insight into the company's untapped potential.

Monday marked the official start of the first online holiday season for Google Checkout, the search giant's online payment site launched earlier this summer. The service, which posted a market-share gain of 30% during November alone, according to the research firm Hitwise, could be poised for another big gain amid strong numbers overall for online commerce and Google's aggressive promotion of it.

On Monday afternoon, 3.5 million users per minute rushed to e-commerce sites tracked by the Akamai Net Usage Index for Retail, which follows real-time Web shopping traffic. That new peak is up 14% year over year, and a strong performance for online purchasing also is reflected in recent numbers from researchers ComScore and Nielsens Net Ratings.

Internet companies ranging from

Yahoo!

(YHOO)

, with its shopping division, to

Amazon.com

(AMZN) - Get Report

stand to benefit from the trend -- but Google may be a "lesser-known" beneficiary.

Google is putting considerable muscle behind its Checkout service, offering hefty rebates to customers of $10 for purchases of $30, and $20 for purchases of $50. And it's offering bonuses between $5,000 and $10,000 to Web developers to incorporate Checkout technology into their e-commerce sites, says Trip Chowdhry, an analyst at Global Equities Research.

While Google Checkout is still in its infancy -- it has yet to contribute to Google's revenue materially, and it trails market leader

eBay's

(EBAY) - Get Report

PayPal -- its quick uptake illustrates how Google can use its immense balance sheet and far-reaching ad network to muscle into new markets.

Retailers such as Amazon.com also offer big incentives to customers. But Amazon had only $630 million in cash in the bank at the end of September, compared with Google's $3 billion. This gives Google plenty of room to make sure it gets its approach right in the long term, rather than worry about its short-term position.

"Google has patience and a different mentality than anyone else when it comes to launching products," says Chowdhry. "They want people to try the product, like it, use it and then pay for it down the line. And once there is an installed base, they will come in with price points that are 15% to 30% cheaper than for PayPal."

Google can make Checkout even more attractive to merchants by bundling it with its dominant AdWords online ad platform. This will give merchants new insights into how customers are drawn to their Web site to begin with and how they go about making purchasing decisions.

And early reports say the Checkout platform is more secure than others that are available, says Chowdhry.

Google's experiments in new markets are particularly important at a time when online ad sales finally show signs of slowing again, a rising fear that several observers felt contributed to the stock's retreat on Monday. Shares fell 4% to $484.75, after scaling the $500 mark last week.

But while the company is often criticized for deriving virtually all of its revenue from one source, the upshot of this means that there are still plenty of money-making opportunities that the company has yet to uncork.

With a range of lucrative possibilities extending from Checkout to video ads in its YouTube property, a topping of the text-based online ad market would not be the beginning of the end for Google. It would be more like the end of the beginning.