Welcome to Smuggle Me

I have watched with keen interest as rumors and beta tests of Google’s GBuy(now called Google Checkout) have been swirling aroung the internet. I had even posted about how I hoped that Google Checkout would have no transacation fee during initial phase. However, today we found out in their Google Checkout announcement that they will indeed have a transaction fee as follows:

For every $1 you spend on AdWords, you can process $10 in sales for free through Google Checkout. For example, if you spent $1,000 on AdWords last month, this month you can process $10,000 in sales at no cost. The more you spend to promote your business through AdWords, the more you save on transaction processing fees with Google Checkout.

If you exceed your free transaction processing for the month, or you don’t advertise with AdWords at all, you’ll only be charged 2% plus $.20 per transaction.

The cost for google checkout transactions seems comparable or cheaper than many merchant accounts unless you already spend large amounts on Google Adwords. I decided that doing a little example of the various costs of google checkout would be interesting since I am personally interested in using google checkout as a collection mechanism for fundraising.
Imagine that you make 10 sales at $10 a piece, generating $100 of revenue. This would be a good assumption if your average sales price is $10. How much would you pay google if you didn’t participate in Google Adwords at all?

10 Transactions x $0.20 + $100*2% = $4

Google Checkout Transaction Cost: $4

Essentially you’d be paying 4% of whatever revenue you generated. What if you wanted to purchase enough Google Adwords to avoid paying any transaction costs. How much would you have to pay? You just take a tenth of the revenue that you want to generate.

Google Adwords costs for $100 Revenue: $10

So, if you are able to generate $100 of google checkout revenue you would be getting $10 of Google Adwords advertising for only $6. Not a bad deal as long as you can effectively use Google Adwords advertising.

Personally, I hope they get rid of the transaction costs altogether. From many different sources I’ve read on the internet, the data gleaned from google checkout will be very valuable to Google even without the transaction fee. I guess Google wants the cake and wants to eat it too.

However, there is more to think about when working with google checkout than just the cost of the transaction. You have to think about name recognition. What will google checkout offer you that paypal doesn’t already do? Will they be any better than paypal at not freezing your account and not paying you your money? Whole websites have been created on hating paypal and unfreezing accounts. Will google really be like I read in a recent comment that Google aint evil ? They may not be perfect, but I think they’ll be better.

An even more important reason to be cautious with Google comes from an eBay employee who blogged about google checkout and then took it down. Essentially, Google doesn’t have an eBay full of consumers wanting to use google checkout. It is starting with a customer base that is very small. While I don’t think that google checkout is in the same position as Yahoo! PayDirect, Google should definitely learn from Yahoo’s failure.

In the end, will google checkout work? More importantly for me, will google checkout work for fundraisers? I think its a viable merchant account option. However, that is all. It will take a lot of time to really start competing with PayPal.

If google checkout does reach PayPal status, it will be very interesting to see what eBay decides to do. Could eBay, which owns PayPal, really accept google checkout? I think not…but they sure would like to if google checkout is successful.