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.