Google's Checkout Challenges

Problems persist despite deep pockets and tech savvy.
Author:
Publish date:

Michael Rubino was thrilled to have finally found a coveted Nintendo Wii online as a gift for his 9-year-old son this Christmas.

But when the software engineer from New Hampshire made a purchase with

Google's

(GOOG) - Get Report

newly launched Checkout service -- which is set to witness its first holiday season with heavy promotion from the search giant -- the product never arrived.

"I felt so badly burnt," says Rubino, who made the purchase on the Web site of Toys R Us, one of Google's many partners in Checkout, which started accepting payments through the service only about two weeks ago.

"While I am usually impressed by Google, my experience with this service was so poor that I could never see trying it again. It is such a disservice to launch something like this right ahead of Christmas."

Rubino isn't alone. Tempted by the steep rebates Google is introducing to promote Checkout, John Burley of Columbus, Ohio, used the service to place an order with Google partner J&R Electronics.

But when the order didn't arrive, Burley had to try to track down the item himself with the vendor, only to discover that J&R had been overwhelmed by Google Checkout and put the service on hold.

J&R's Web site apologized for any inconvenience and said "we have removed the Google Checkout option from our site so that we can focus on processing existing orders as quickly as possible."

"I do not normally think of Google as a firm that unveils something short of industry standard, but I have to rethink that," says Burley. "Whether it was hubris or ignorance, I do not know, but they have misstepped badly by rolling out a service that clearly is not ready for prime time."

Google Checkout has seen many glitches, says one manager at Checkout partner Starbucksstore.com. Purchases made through Google Checkout often face delays trickling through to the vendor's site, meaning that items can be out of stock when the purchase finally comes through. Crediting customer accounts has also been a problem.

And unlike

eBay's

(EBAY) - Get Report

PayPal service, the market leader in the space that enables users to continue to browse and buy after they have made one purchase, Google Checkout whisks customers away from the vendor's Web site.

That's one reason that Starbucksstore.com (an alliance between Seattle-based

Starbucks

(SBUX) - Get Report

and Santa Monica-based Cooking.com) has yet to launch Google Checkout on its flagship Cooking.com Web site.

"It hasn't been perfect, and it is still in its early stages," says Jae Kim, the general manager of Starbucksstore.com. "But I think it is a great addition to our site, and despite the occasional hiccup, it has been without problems for the most part."

"It's not unusual in e-commerce for very popular items to sell out, particularly during the holidays, and there are many reasons for this," a Google spokeswoman says. "We believe less than 1% of orders through Google Checkout during the holiday season have been canceled by the merchant because the item is out of stock."

But 1% is far too large a number, says a PayPal spokeswoman, for lapses in orders that may be attributable to delays caused by Google Checkout's connection to a vendor's systems.

"That is why we have spent so many resources getting our API

application programming interface exactly right and connecting our services with a vendor's," says the spokeswoman. "Communication with the vendor needs to be seamless."

Google's trials with Checkout are especially revealing at a time when the company is moving beyond the online advertising market it helped pioneer to more established realms such as radio and print advertising.

Here, the advantage can go to older, more entrenched competitors that have deeper relationships and a better grasp of the landscape.

PayPal, a 7-year-old service that raised more than $250 million in venture capital before being picked up by eBay in 2002, has a big lead over Google Checkout in ironing out the intricacies of the payment business.

And whether it's ensuring seamless integration with vendors or fraud protection, much of the behind-the-scenes heavy lifting in the sector is done best when it goes unnoticed.

Moreover, Google's vaunted technological prowess and tendency for clear-eyed thinking is going to be much less of an advantage in businesses mired in history when compared with fresh, groundbreaking frontiers.

In selling radio and print ads, for example, the company will have to deal with competition from pre-existing sales forces at radio stations or publications, and not reveal too much pricing information to avoid hurting its ability to charge rates.

In these circumstances, political seasoning trumps the ability to create a sharp algorithm.

Still, this doesn't take away from

the game-changing potential of Google Checkout, which has the power to help Google recreate e-commerce and offer advertisers a whole new way of paying for its service by charging only for items sold.

With its deep pockets, an obvious commitment to the mission and an exceptional vantage point to begin with, Google has what it takes to see its vision through.

Despite its wealth and brains, however, the company will take its share of bruises as it pushes into the payment market this holiday season. The same goes for other older markets where Google's fresh approaches will, for once, be a liability.