Google is trying to ramp up use of its Checkout payment system by essentially bribing Web merchants to use Checkout instead of eBay's Paypal or some other competing online payment system. For every $30 purchase through Google Checkout, Google will pay $10 (and double that for a $50 purchase). Google is using its gushing search advertising dollars to try to jump-start its payment business. One estimate puts the amount Google is spending on these kickbacks (er, promotion) at $20 million this holiday season.
Google is not just funding the initiative with search ad dollars, it is trying to use its dominance in search advertising to push Checkout by highlighting those advertisers that are also Checkout customers with a little shopping-cart icon in regular sponsored results. If that tie-in results in higher click-through rates on search ads that merchants are paying for anyway, the incentive to join the Google Checkout network will be higher. As I noted last June:
Google would have no problem giving the financing away for free if it helps them make more money on AdWords and further undercut Amazon and eBay in the process. But Google still has to get a critical mass of retailers to sign up for that to work.
Can Google bribe its way to critical mass? There are millions of PayPal merchants, compared to the few thousands that have signed up for Google Checkout so far. And $9 billion worth of transactions go through PayPal each quarter. Google still has a lot of catching up to do.