Google’s diligent attempt in becoming a leader in e-commerce is unstoppable! After its success on launching various services such as Google Base, Google Earth, Google Store, Google AdWords, Google Video and many others, the search giant is still keen on spreading its wings. This time around their aim is to try their hand on online payment services.



Since early June of last year, various rumors had been circulating on the net about Google’s new payment system. Although the exact plans and details of Google’s new service remains in the shadow, millions of online enthusiasts all across the globe were running on fevered pitch trying to uncover the mystery behind Google’s so-called payment system dubbed the “Google Wallet”.

Fortunately, the yearlong mystery will finally unravel since Google Inc. announced that they are set to launch their highly anticipated payment system this week, possibly as early as Wednesday or Thursday. Naturally, its main objective is to make shopping online faster and more convenient. But even before its launch, the search giant’s new service seemed to be facing various obstacles already.

One of the biggest obstacles in its way is the risk of antagonizing one of their biggest advertisers – eBay. Why you ask? Well, majority of Google’s revenues are derive from online advertising and one of their biggest patron is eBay, who bought PayPal, the current leading online payment service, for $1.3 billion in 2002. Moreover, PayPal comprises about 25% of eBay’s total revenue. Now by launching an online payment service that could be a possible competition for PayPal would cause a serious blow not only to PayPal, but to eBay as well.

At the moment two merchants have already signed up for Google's new payment system, namely Starbucks Corporation and . Incidentally, these two merchants also accept PayPal. Experts are already making their own predictions regarding the possible turn in the relationship between the two companies and the rivalry that is currently brewing between them.

However, about two weeks earlier Google Chief Executive Eric Schmidt finally faced the press and acknowledged that Google indeed have plans to launch a payment system. But he firmly denied the allegations that they would be directly competing with eBay’s PayPal. According to Schmidt their system will target the advertisers alone and not the general consumers as most of the speculations implied.

Without going through the exact details, Schmidt explained that the solution they are working on is more of an extension of their existing programs. Most people believed that it's likely an extension of the payment service that Google utilizes in handling their paid search ad program, though this time it will probably encompass different kinds of content.

So, just how does Google's new micropayment system works? Well, most people assumed that Google’s payment service would have the same premise as PayPal. It would act as some sort of electronic wallet that will allow consumers to purchase products as well as services from different merchants without giving out their personal and financial information repeatedly. This is actually a preferred payment method among consumers since it reduces the risk of credit card fraud.

With Google Wallet, users need only key in their credit card number together with some other information and the company will send out the payments to the participating merchants. Now this is where Google’s payment service differs from Paypal, merchants are required to advertise on Google in order to participate. In turn, merchants need not pay for the processing fees on purchases that sum to about 10 times their advertising volume with Google. For instance, an advertiser who spends $10,000 a month at Google need not pay any processing fees on purchases that amount to $100,000. But once the merchant exceeds their spending threshold, Google will then charge them a fee equal to 2 percent of the purchase amount, plus 20 cents per transaction. Either way, it is still relatively lower than Paypal’s fee.

In conjunction with the “Google Wallet” rumor is the speculation that the search engine king will soon begin charging people for streaming video content from their site. A lot of people believed that the problems that had been encountered during the streaming of several videos in the previous weeks are clear indications that Google is about to switch to a pay-per-view model.

The rumors surfaced after Google Video head Jennifer Feikin mentioned in passing that they have plans to offer video content on a pay-per-view model, with the content owners giving their own price tags. The company even began soliciting videos, where uploaders are requested to tag the files with a corresponding per-view price. Google also aims to take a share of the price and possibly even charge a hosting fee.

Although a formal announcement is yet to be made, most consumers are already resigned to the idea that Google will indeed offer videos on a pay-per-access basis in the not so distant future. Most people also believed that Google’s new micropayment system, Google Wallet will be used to send and receive payments for the video content.

Micropayments can be a double edge sword. Sure, micropayments are generally more secure and more convenient compare to using other payment method. On the other hand, it has a mental transaction cost that makes people think twice whether the product is indeed worth purchasing or not. Another risks to micropayment-based system is that they are prone to competitors who ends up with the notion that it is more effective to simply give the content away for free and then make money somewhere else.

But then again, once Google manages to overcome these hurdles (which they eventually would) it is highly possible that they will eventually succeed where PayPal, Yahoo and Microsoft failed – to become an efficient payment system for a wide range of e-commerce transactions. As the old clinch goes, timing is everything and Google’s timing is indeed truly perfect. What with Paypal’s customer services issues and other such outrage still fresh on the consumers’ mind it will not take long before the consumers start looking for other options.