As you might imagine, I read with great interest a summary of Google’s new payment service release today under the name Google Checkout. The benefits are pretty limited at this point and you can read great summaries of the service at Search Engine Journal, Search Engine Watch, TechCrunch, and SearchBlog, among many others.

Although Checkout may not be a PayPal Killer, I think the big take away is that Google will now be watching and collecting buying data from its Checkout customers and will have the ability to track user behavior from their first search to their final purchase. Elise Ackerman at the Mercury News summed this up nicely in her article today:

Since its birth more than five years ago, Google’s mighty Internet advertising machine has suffered from a major flaw. No matter how much information the Mountain View company collected from users of its popular search engine, it has no idea if, at the end of the day, people bought anything after searching for “Nike shoes” or “hip sunglasses” or “doggie sweaters” or “Toyota Prius.” That will change today, when Google launches its own payment service called Google Checkout.

Is this a bad thing? Forrester analyst Charlene Li predicts today “an eventual backlash” because “Google wants the monopoly on your information” and expressed concern that they “could fall into a situation where they’re the next Microsoft.” But I don’t think Google has current plans to do anything evil with this data (sorry, I couldn’t resist). What they will do is use it to extract more and more money from the advertisers trying to reach you. Again, Elise Ackerman sums this up nicely in her article:

If Google checkout is successful, the company could reap big rewards. The transaction data for each person who makes a purchase, combined with their search history, could lead to advertising that takes into account their favorite stores and preferred brands. The more targeted the advertising, the more advertisers are willing to pay.

Marshall Kirkpatrick in the post at TechCrunch, sings a similar tune, saying:

Maybe someday all of this data on my shopping habits will be used to better serve ads I’m interested in via Minority Report type billboards, Google Style.

Is this a fair trade off? I give Google all of my purchase data (what I buy, when I buy, how much I buy) and they use it to benefit me by: 1) offering me the convenience of Checkout; and 2) giving me more advertising that will be more targeted to things I’m potentially interested in (to quote Marshall Kirkpatrick “Minority Billboards”). And you know what Google gets? They get to jack up their ad rates, charging bigger dollars to the companies that have to pay to reach you because you might buy what they are selling. I’m pretty sure Google has done the math here and fully expects their increased ad rates to outweigh the cost of the Checkout service. And you, as the end consumer will have no idea what that increase will be because Google’s advertising market isn’t transparent.

At Jellyfish, we don’t think this is a fair trade off. Targeted ads are nice, but the ad’s Google will likely show you are from the advertisers that paid the most to get to you (Just because company X outbids Company Y to get in front of you at Google doesn’t mean that company X is the most relevant for your needs). And most importantly, you won’t benefit from the competition that is fueled by Google having access to your buying information (or what we would call your historical record of buying intentions).

At the end of the day, I think Google is doing some major free riding on the extreme value you create by allowing them to store and sell off the database of your buying intentions (e.g., your purchase history) to the highest bidding advertisers.

We intend to do this much differently at Jellyfish, because with our VPA advertising we always share back at least half of the advertising dollars that a merchant pays for your attention (both historical buying intention and present intention to buy when you search for a product at our site). Thus, anytime a merchant pays more to get your attention at Jellyfish, you will get a direct, tangible benefit in the form of lower prices. It’s the way we hope to show consumers that when it comes to their buying activity and attention, there is a better way.

This entry was posted on Thursday, June 29th, 2006 at 8:11 pm and is filed under Industry News, Google Checkout. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.