Safa Rashtchy’s note today on Google reads like analyst notes I’ve read for the last couple years about the contentious relationship between travel supplers and online travel agents (OTAs)/Global Distribution Systems (GDSs).
In my first interview for ComparisonEngines, Brian Barth, the former CEO of SideStep explained “through working with us, [travel suppliers] develop closer relationships with consumers as users go directly to the airline site vs. booking through a Travelocity or Expedia call center.” For those of you who aren’t familiar with the travel industry (I’m posting this on ComparisonEngines and VerticalSearch), 3 years after the travel suppliers signed long term, unfavorable deals with the Global Distribution Systems (GDSs) due to poor overall health for the industry (9/11, SARS), the suppliers have played hardball in their current negotiations with the GDSs as they now realize the incredible benefit of direct booking and owning the customer relationship.
With ecommerce booming, retailers aren’t in the same precarious position that travel suppliers were in years ago. However, all is not perfectly rosy for retailers as many are addicted to Google AdWords for traffic, and I think many retailers are losing the loyalty game and paying Google Adwords for each sale (search is where the game starts). Now here comes Google, positioning checkout as a way for retailers to:
1) get better clickthrough rates on Google AdWords
2) increase conversion rate
3) process sales for free (for every $1 you spend on AdWords, you can process $10 in sales for free).
Sounds pretty attractive, but playing devil’s advocate, Checkout is just a way for Google to look a little less threatening to retailers already hooked on AdWords. More importantly, as Safa put it, the retailers have concerns about ceding customer ownership to Google.
Before implementing Google Checkout, retailers would be wise to consider some lessons from history – in this case, what the travel suppliers learned in ceding control to the GDSs/OTAs (a little background here).
With Safa’s permission (thanks!), here are the relevant paragraphs from his note today on Google.
Proprietary Survey Indicates eTailer Caution. Last week we spoke with more than 30 online retailers at the 15th Annual eTail Conference in Philadelphia. 81% of the online retailers indicated that they probably will not implement Google Checkout primarily due to the concern about ceding customer ownership to Google. Specifically, online retailers were concerned that Google limits online retailers’ ability to market to customers directly. The online retailers we spoke with also expressed concern about disintermediation, lack of system flexibility and the perception that Checkout provides Google too much visibility into their business, especially relating to Google search driven conversion rates.
Concern about Ceding Customer Ownership to Google. Among the online retailers who are not using Google Checkout, 81% indicated concern about ceding ownership of a customer to Google. Specifically, online retailers were concerned that Google stores all customer information, and Google Checkout limits an online retailer’s ability to directly market to a customer via e-mail. Given the low cost of e-mail marketing once a customer has been acquired, the e-mail marketing limitations placed on online retailers who implement Google Checkout may slow the rate of adoption of Google Checkout. We note that the online retailers we spoke with may not have a complete understanding of Google Checkout as Google Checkout currently provides users the option to “Keep my e-mail address confidential or “I want to receive promotional material from X.”
Concern about Disintermediation. Online retailers also expressed concern that Google undermines the ability of an online retailer to directly connect with a consumer by requiring Google Checkout users to go to Google Checkout to make changes to orders and transactions instead of to the online retailer’s site. This requirement once again prevents an online retailer from marketing or cross-selling to a user when they return to the site to check order status or to make changes to an order. Similarly, some online retailers did not like how a Google Checkout transaction ends with a Google Checkout page instead of on the online retailer’s web page.
I posted this elsewhere, but it is worth repeating in connection with your very clear statement.
Another issue sellers should be aware, and one Google must be extremely cautious about, is the potential for Google to solely “decide” that a seller acted fraudulently on a transaction using Google Checkout. Google is on the record saying if they find such fraudulent activity, they can (and seem to indicate they will) ban the seller from ever using Adwords. Thus, along with giving up significant customer control with Google Checkout, there is a potential that a seller could get banned from ever using Google Adwords — which could be the kiss of death for a seller.
eBay’s “TnS” can turn off a seller’s listings and ban them for life on eBay in one simple key-stroke. Just ask any powerseller how they live in fear of eBay’s Trust and Safety group.
It now seems quite likely that Google will create a similar group which will act as the Google judge, jury and executioner regarding buyer complaints made through Google Checkout.
Ina Steiner, the editor of Auctionbytes.com, did a very recent video interview with one of the Checkout product managers who confirmed that if Google found something they deemed fraudulent within a Google Checkout transaction, they (in their sole discretion!) could and apparently would, ban the seller from using any other Google service. Here’s a link to her video:
http://digbig.com/4mkwr
This seems to be an increased risk. One should ask if the risk in using Google Checkout warrants the risk of being banned from Adwords for life…..
I can easily imagine a single disgruntled buyer who used Checkout, petitioning Google to certify a seller as acting “fraudulent.” Without a proper hearing and without all the facts, Google could ban that seller from using Google Checkout (and ban them from accessing their buyers who used Checkout) PLUS they could ban the seller from using Adwords.
I have great respect for Google as a company — and I believe they do strive to “do no evil.” However, I also believe the maxim: “Absolute power corrupts absolutely.” Sellers should go into Google Checkout with their eyes wide-open.
Checkout is a seismic shift in power into Google’s hands.
[...] Google Checkout and Customer Ownership Brian Smith at ComparisonEngines has an interesting post (citing research from Piper Jaffray’s [...]
There’s also the issue Scott Karp highlighted last week (see: http://qurl.com/62nn2) that advertisers don’t want to pour their transaction data into the Google black box: “I’ll never put my data into Google’s black box, because then they will know how much I’m making on keywords and they can raise prices to squeeze my margins.” Avoiding Google Checkout isn’t just about retaining the customer relationship, its about not shovelling your entire business model over to Google so they can squeeze every penny out of it.
[...] 27 Aug 2006 01:24 pm Entrepreneurship and Technology Google Checkout and your Business Comparison Engine has a good write up about things to consider [...]
[...] ch that Google Checkout is increasing CTR or Conversion Rate. I still have concerns about customer ownership. But I’m busy dealing with server iss [...]
[...] nnel and Shopping.com could completely take away the ability for a merchant to re-market. The concerns Safa Rashtchy uncovered in talking with merchants [...]
I thought I would come-back and add to my post above. I’ve recently gone through a payment transaction with Google Checkout. A new (at least to me) and positive step added to the process is check-boxes on the checkout page which allow a buyer to opt-in or confirm they wish to keep their email private.
I think this addition is a big step in giving sellers more direct control of the buyer and being much more forthright with the buyer.
I like it.
Kudos to the Google Checkout team for making this addition.
Actions speak louder than words, and this is the kind of step that I can really appreciate for sellers.
I’m swinging my vote over to the Google Checkout side of the equation.
Brian
[...] riteria…thinking short term and only about top line revenue growth. Ok, ok, you know my opinion on this one. Even with the $50K? $100K? in free AdW [...]
[...] zed merchants are going to pay any attention. They see dollar signs and that’s it. I just really wish that these small guys would talk to a couple air [...]
[...] doled out, and it has just snowballed from there. I’ve voiced my concerns – especially around customer ownership – but that’s not stopping 94% of merchants from making a quick buck or [...]