Google Checkout: Amazon's worst nightmare

On Thursday, Google is launching its buying service, Google Checkout (known previously by Google watchers as Gbuy). It is going to make purchasing easier for Web users. You'll just enter your credit card billing and address information once, and then on any commerce site you go that's Checkout-enabled, you won't have to enter your data again.

This is not much of a competitor to eBay's PayPal, as some have predicted. Checkout is designed for serious merchants more than for individuals unloading old Star Trek snow globes on eBay. To be sure, the few merchants that are considering adding PayPal as a payment option (and that don't already have it) might divert their energies to signing up for Checkout. However, there's no reason a commerce site couldn't offer both PayPal and Checkout, if it desired.

Checkout is, however, a huge threat to Amazon.com. The biggest thing the online superstore has going for it is convenience. Once you buy an item on Amazon, buying the next one is a one-click affair. But go to another store, and you've got to enter your credit card info all over again. Amazon wins for convenience, and over time, it's earned buyers' trust.

Will people trust Google? I bet they will. Google will push its high-end partners--Buy.com, Starbucks, Timberland, and Levi Strauss are all part of the launch--and the Google Checkout logo will appear on AdSense items from these and other vendors. This flag will take on a Visa-like pervasiveness. If Google is good enough at handling dispute resolution, people will come to trust it, they'll enjoy its convenience, and Amazon's value-add will be thwarted by 10,000 other stores all sharing one payment system.

Stores will pay Google a small fee for their transactions. This is a potentially gigantic revenue stream for Google, but more importantly, if successful, no other online company will end up knowing as much about the spending behaviors of online consumers as Google. This data is no doubt going to go toward making online ads even more targeted and effective (and thus possibly more expensive), which will also add handsomely to Google's income.

For this reason, I think the Checkout fee structure is backward: Google should be paying its merchants for the privilege of capturing all their transaction data, rather than charging them for each transaction.