The Insider's Secrets of an eBay Millionaire

(August 21, 2006) When online auction giant eBay Inc. barred Google Checkout from its marketplace, the move led to widespread industry speculation that eBay, which owns rival online payment processor PayPal, was discriminating against the weeks-old Google Inc. payment product. But a PayPal executive tells Digital Transactions News eBay’s action had nothing to do with Checkout’s competitive position with respect to PayPal. “That’s been overplayed,” says Todd Pearson, who as senior director for merchant services oversees sales of PayPal acceptance to online retailers. “I would expect that as Google proves their track record [in online payment processing], they’ll be treated like any other payment method [on eBay].”

Just days after Mountain View, Calif.-based Google launched Checkout in late June, eBay added the fledgling payment type to a list of payment methods its sellers may not accept (Digital Transactions News, July 10), leading to widespread speculation that the move reflected an effort to protect PayPal. The list of prohibited payment services includes some 36 names, most of them relatively obscure. San Jose, Calif.-based eBay also lists 11 services, besides PayPal, that it does permit, including Bidpay, CertaPay, Checkfree.com, and Xoom, but also less well-known brands such as Allpay.net and Ozpay.biz.

In its official payments policy statement, eBay says it “strongly encourages sellers to offer payments through PayPal.” It says when evaluating a new service, it looks for, among other things, whether it has a track record of “providing safe and reliable financial and/or banking related services,” and adds that “new services without such a track record generally cannot be promoted on eBay.” But the policy also says eBay looks at the “identity, background, and business interests” of the service’s sponsor.

Checkout offers payment processing based on credit and signature debit card accounts users store with Google. It charges merchants a straight 2% plus 20 cents per transaction, a fee that undercuts PayPal’s sliding rate scale for all but the largest merchants. Merchants that spend heavily with Google’s AdWords online marketing service can get processing for free (Digital Transactions News, June 29).

But Pearson says eBay’s policy is nothing new and is aimed at barring new payment techniques until they can prove they control fraud and otherwise protect users. “It’s not a competitive thing,” he says. “It’s about protecting the consumer.” He points to the woes of any number of online processors over the years in managing fraud losses and transaction disputes. “Payments is a tough business,” Pearson says. “There’s a lot of folks who have tried to get into the payments business over the years who have failed.”

He says PayPal doesn’t fear competition. “Competition is good,” he says. “It keeps everybody on their toes.”

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Debit and credit card issuers and acquirers in the UK stand to lose up to 30% of transactions to online retailers offering PayPal and Google Checkout as Internet sales take-off, according to a study by consultancy Booz Allen Hamilton.
The volume of online card payments in the UK has increased five-fold over the last five years, notes the study, reaching 310 million transactions in 2005 for a total of £22bn and accounting for five per cent of all personal card payments.

The UK is currently the e-commerce leader in Europe, with 28 million customers using plastic cards to buy online. The consultancy estimates that UK shoppers will spend on average £1000 online totalling £26 billion in 2006.

Booz Allen says the default payment mechanisms such as credit cards and bank transfers, which currently make up 90% of all consumer transactions, will become increasingly threatened by e-payment services such as those offered by Google and PayPal.

If existing providers - predominantly the card issuers and acquirers - do not find an effective counter strategy they could lose 10-20% of transactions by 2008 and in the long term up to 30%.

Booz Allen, says the development of the e-payment market will be driven by the big players, PayPal and Google, who will succeed in getting sufficient critical mass to be attractive to retailers.

Paypal has gained more than a hundred million customers since its launch in 1999 and handles more than $17bn annually. Booz Allen predicts that Google's new Checkout service will take even less time to establish itself as a major player.

For the new online payment systems to gain acceptance by retailers they will need to have an attractive pricing policy. Nicolas Reuttner, Booz Allen principal, says: "E-payment service providers will have to get exclusive partnerships and services in place, to ensure that online retailers are not able to disintermediate them in the long term, for example by offering their own solutions, or pushing credit cards to lower their charges to meet the new market prices."

The report says security continues to be a key concern, with 20% of consumers in 2005 deterred from shopping online for security reasons. But secure e-payment systems mean that consumers don't need to share credit card details with merchants.

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The online auction refuses to accept Google Checkout, which was launched in June and is likely to compete against PayPal, eBay's own payment service, in some arenas.

By K.C. Jones
TechWeb.com

Jul 10, 2006 05:03 PM

Though Google's new online payment service offers fraud protection and payment guarantee, it didn't make the cut for the Internet's largest auction site.

eBay recently listed Google Checkout among the companies whose payment services it will not accept.

eBay states on its Web site that it chooses payment services based on safety and convenience, but it also lists several other factors that come into play. They include financial, privacy and fraud protection; simplicity of the payment model; a company's regulatory status; the identity, background and other business interest of the payment service sponsor and whether there is a track record demonstrating reliability.

"New services without such a track record generally cannot be promoted on eBay," the company states on its updated payment policy page. "Payment services that are not permitted on eBay may, in fact, be outstanding services for consumers in other contexts. eBay's evaluation relates only to whether a particular service is appropriate for the eBay marketplace."

Google Checkout, launched in June, is likely to compete against PayPal, eBay's own payment service, in some arenas. eBay also has a partnership with Yahoo!, a move that signals competition for Google.

A Google spokesperson did not immediately return a call or e-mail seeking a response Monday.

eBay allows 12 other online payment services on its site.

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Meg Whitman, chief executive, announced the departure in the autumn of Jeff Jordan, president of its PayPal online payments service.

Mr Jordan joined Ebay in 1999, led its core North America division from 2000 to 2004, and took over at PayPal in December of that year.

Both services saw strong growth under his leadership, PayPal's payment volume growing 89 per cent to $8.8bn and user accounts up 85 per cent to 105m.

Ebay said Mr Jordan, who had been seen as a potential successor to Ms Whitman, was leaving to spend more time with his family.

The company?s shares hit a 52-week low on the news, down more than 5 per cent at $26.85 by the close of trading in New York. They have lost nearly 40 per cent of their value this year.

The company has suffered from slowing growth in its core US market and setbacks abroad, including loss of market-share leadership in Korea and a sliding share in China.

Last week, its PayPal service was hit by the news that Google had launched its long-awaited online payments service - Google Checkout. Ebay this week banned Checkout as an online payment service for its users, saying it was part of a policy to promote payment methods that "are safe, easy to use, reliable, and offer high levels of protection for users".

Citigroup on Thursday lowered its long-term earnings growth estimates for Ebay from 22 per cent to 20 per cent because it had concluded that Checkout was a greater challenge to PayPal?s long-term growth than was widely recognised. It said Checkout had leapfrogged PayPal in terms of speed of checkout for consumers and cheaper transaction fees for merchants. While that was not expected to effect forecast revenues of $1.4bn from PayPal in 2006 ? 24 per cent of Ebay?s total ? it could do so later, Citigroup said.

Mr Jordan will be succeeded at PayPal by Rajiv Dutta, who was chief financial officer and head of strategy from 2001 to 2005, before becoming president of newly acquired Skype, the internet telephony service. Alex Kazim, head of products at Skype, will become president. Ebay has been trying to boost Skype adoption in the US with an advertising campaign and free fixed-line calls.

Ebay also named Lorrie Norrington as president of Ebay International. She was previously president and chief executive of Shopping.com, a price comparison website owned by Ebay.

INet-Bridge

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Posted by Donna Bogatin

I have been reporting on, over the last several weeks, the tenuous "collaborative competition" Google and eBay have been fostering as the two powerhouses seek to grow by entering each other's core markets (see story links below):

While Google and eBay rollout the new, competing services, however, each company asserts that it is not in competition with the other. Each company has a vested interest in keeping the other as an ally, while they become competitors; eBay is one of Google’s largest AdWords customers and, as such, Google delivers much traffic to eBay, in exchange for much money from eBay.

Both Meg Whitman, eBay CEO, and Eric Schmidt, Google CEO, in fact, have taken pains to stress they are "the best of friends"; Whitman says, Google "is both a competitor and one of our best relationships" and her and Schmidt (a Princeton classmate) speak several times a month.

Given eBay's determination that Google Checkout is "not permitted" at eBay, (Google vs. eBay: collaborative competition? ), however, the next Whitman-Schmidt conversation may be uncomfortable. For now, company spokespeople have been the only ones talking publicly.

eBay says:

From time to time, as new payment services arise, eBay will evaluate them to determine whether they are appropriate for the marketplace. Payment services that are not permitted on eBay may, in fact, be outstanding services for consumers in other contexts. eBay’s evaluation relates only to whether a particular service is appropriate for the eBay marketplace.

Google indicates:

Google Checkout…is designed to make online shopping faster, more convenient and more secure for Google users. We rigorously tested this new service before launch and have used this same service to process Google Video, Google Earth, Google Base and Google Store transactions for months.

FOR MORE ON GOOGLE VS. EBAY SEE:

Google Checkout to merchants: Give us your customers, and your advertising

Google Content Referral Network vs. eBay Affiliate Network

Google and eBay CEOs agree: growth through more partnerships

eBay PayPal vs. Google GBuy: Skype to 'send money'

eBay AdContext aims to mine collective buyer behavior to optimize network ad delivery

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Mark Holton
Occupation: software
Comment: Google and FireFox SPECULATION ON "GBUY" EXTENSION
It would be a foolish political move to alienate the open source fanatics... and Google is not foolish. The media often times lacks a real clue -- they take the easy assumption that they're hiring browser guys to create a browser. No thought or knowledge goes into that assumption.

Since Google is not going to make any money on a free browser, why reinvent the wheel? This makes it a foolish business assumption on top of a foolish political move.

But if Google can PARTNER with a pool of fanatical and talented developers, then they have free labor and much more importantly MOMENTUM. Plus these FireFox guys admit to media they will be working for FireFox at the same time. All signs point to partnership.

While Microsoft has market dominance with IE, there is no way that Google would ever approach them with regards to partnership, as they are a clear competitor in search, albeit a VERY WEAK competitor in terms of the technology. Ironically, Microsoft just released its weak and very late search technology today. However inferior, Microsoft has substantial cash flow and means, and have proven they enjoy taking over ideas which are in their sphere of influence, and having browser market dominance gives them leverage Google wouldn't want. FireFox is the perfect choice because it has momentum and is frankly a superior browser technology. (If you haven't tried FireFox, download and try printing a webpage from both, as one of many examples... not to mention the tabbed format FireFox has, the many extensions, etc)

THEORY: It is my speculation and theory that Google is working with the FireFox experts to create a "Killer Extension". (replacing the Killer App) Now, what extension could Google charge a small fee for or a small % fee for that would make it ubiquitous and worth their while to pursue? A company with this wide of a scope doesn't look for niche applications, they look to change the world. What does Google do best -- search for text, products, and services, right? Perhaps they could team with FireFox and create a killer extension that had functionality similar to EBAY but was on everyone's browser? I'll coin the term "GBUY" to go along with their recent GMAIL naming convention. Since Google already dominates search, they could then continue leverage their search position to dominate the commerce through which many internet items were purchased. GBUY could provide a service to not only consumers, but also vendors making it easier to setup and transact all type of business over the web. They already have AdWords which accepts payments from Vendors on a per-click basis, and they already have AdSense which delivers payments to millions of website owners. The payment infrastructure is essentially there, and as everyone knows, the search dominance and capabilities continue to expand (see Google TV, Google Images, Froogle, et al).

Instictively, this might be the clue that shows Google going after such a market and that something is there. You heard it here first.

http://holtsblog.blogspot.com/

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