Friday, June 30, 2006

Google Launches Payment Service, Competing With PayPal

Google Inc. yesterday unveiled its long-anticipated service for helping consumers make purchases online, setting up a potential rival to eBay Inc.'s popular PayPal system.

Called Google Checkout, the service holds consumers' credit card numbers and account information for a "one-click" shopping experience at participating retailers. This means shoppers won't have to spend time entering such information at every online store where they buy something.

The service launched yesterday at with Ritz Camera, Timberland and Starbucks among the companies adopting it.

The search engine company's vice president of product management, Salar Kamangar, said in a telephone interview that the company's goal is to help increase online commerce by making it more convenient.

Online advertisers that support Google Checkout will get a small shopping cart icon by their ads at the search engine. Those companies also will get a break on the fees they would normally pay Google to use the shopping service.

Consumers who use Google Checkout can also track the delivery of their purchases.

Pundits have described the long-rumored service as a potential PayPal killer. But in public comments at a conference in New York earlier this month, Google's chief executive, Eric E. Schmidt, argued that the upcoming service would not compete directly with PayPal because it will be more focused on advertisers than consumers; eBay, which owns PayPal, is a major advertising customer of Google.

Philip Remek, an analyst at institutional stock brokerage Guzman & Co. who follows both companies, said it could take Google years to catch up to PayPal, which he said handles more than $20 billion in transactions in 50 countries.

"Predictions about the death of PayPal are greatly exaggerated," Remek said. "Google may be able to carve out a certain fraction of the market for itself, but I do not see it supplanting PayPal."

Other critics say the complexity of launching the service might not be worth the revenue that Google will derive from it.

Google is not the first company to try to introduce this type of service, which has been called an "online wallet." Companies such as Microsoft Corp., Yahoo Inc. and AOL LLC launched similar services years ago, and none was enthusiastically embraced by consumers.

In recent years, Google has moved into various online businesses, including e-mail and mapping services. The company usually introduces its offerings as a "beta," or test, version; the Google Checkout service is unusual in that it debuted as a finished product.

Frederick R. Kobrick, a former mutual fund manager who recently wrote a book about picking stocks, said he fears that the company has spread itself thin and has started entering markets where it does not offer a unique service.

"If they add too many things too fast, it risks execution problems," he said.

Kobrick cited chipmaker Advanced Micro Devices Inc. as an example of a company that put out too many products too quickly, annoyed customers and ended up losing market share against Intel Corp. for many years.

"You can't go on forever throwing mud against the wall to see what sticks," he said. "Copycatting is not a business model. . . . I think they may be sorry they did this."