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Uh oh EBay: Google Base is now facilitating payments

Some very significant, if not predictable, news out of Google today.  Google Base is going to start beta-testing payment intermediation in which buyers can buy items off of Google Base using their Google Account, while sellers can register to have Google accept payments on their behalf.

This is very interesting for several reasons:

  1. This initiative is clearly taking dead aim at EBay's "Buy it Now" business, which as of last quarter was 34% of their volume.  Only Google is not charging listing fees (at least as far as I can tell) they are just going to charge transaction fees.  In my opinion this is potentially very bad news for EBay.  Most of the incremental sellers that EBay has added in the last few years are merchants that are just using EBay as a distribution channel.  To them, the auctions are more an annoyance than anything else as they would much prefer just to sell their wares at a fixed price.  Google Base will now allow merchants to feed all their listings to Google for free and just take a cut of transaction.   What's even better is that this basically obviates much of the need for merchants to buy click-through adds on Google as why would you buy an add if your stuff is already indexed and ready to buy via GoogleBase.  What's more, why wouldn't you sign up for this service if you were a merchant as there's basically no down side.  I don't want to be too dramatic, but EBay could be looking at a collapse of its listings fees by the end of 2006 similar to what they saw in China with Ali Baba if this gets any traction and I don't see why it won't at this point.
  2. You do not just wake up and decide to intermediate credit card transactions between buyers and sellers.  This takes a considerable amount of planning and infrastructure development, particularly on the payments side.   It stands to reason now that Google has essentially completed the infrastructure it needs to launch a Pay-Pal equivalent which one has to believe is now rather far along in its development and will be launched sometime in 2006.  In fact, another post on Google's official blog today basically hints at this pretty heavily.
  3. It is a great example of how search-based edge aggregators can layer a bit of process flow and payments technology on top of a search engine and  all of a sudden become a direct threat to a previously untouchable walled garden.

Personally, I am surprised that they moved this quickly to fill out the payments functionality before putting a better front end on Google Base, but I guess they figure if they build it, people will come.  It will be interesting to see how the market reacts to this monday.

UPDATE:  Murali left a comment below and pointed out that EBay has already announced that they will be offering "Ebay Express" sometime this spring.  EBay Express supposedly offers a similar universal wallet capability however as Scott (who seems to know EBay well) pointed out in a comment on my other post on this topic that Ebay will not be the merchant of record but will just create a multi-seller shopping cart with a separate Pay-Pal account for each seller.  In addition to what Scott mentioned, everything posted in EBay Express will also apparently be an EBay listing and presumably subject to all the existing EBay fees. Also, EBay Express is not integrated into a larger search engine and it's not clear that they will let other engines index their site (which seems unlikely).  So the net is that EBay Express is pretty different from what Google is doing from a payments perspective and the strategic impact of Google's move into the space remains the same.

February 24, 2006 in Internet | Permalink


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The thoughts and opinions on this blog are mine and mine alone and not affiliated in any way with Inductive Capital LP, San Andreas Capital LLC, or any other company I am involved with. Nothing written in this blog should be considered investment, tax, legal,financial or any other kind of advice. These writings, misinformed as they may be, are just my personal opinions.