PayPal vs Google (Buy)

pc-facile.com writes "While Google Chief Executive Eric Schmidt confirmed in press accounts that the company was building a payment service, Mr. Schmidt also denied it would directly compete with PayPal. Mr. Schmidt said Google didn't intend to offer a "person-to-person, stored-value payments system," which many people consider a description of PayPal's service. Mr. Jordan (PayPal chief) says he and his team immediately "dissected the wording" of Google's statements. He says he doesn't believe Mr. Schmidt..." There's also a more in depth WSJ article about the service.

Comments

Why Bite the Hand that Feeds?

[mfh]

How can Google create an online payment system without competing with PayPal? Google doesn't want to piss off eBay, because eBay is one of Google's largest advertisers -- so I completely understand why Google would say that they won't compete directly against PayPal -- I get it. Never bite the hand that feeds. (great NiN tune!)

But what I don't understand is the resulting system... what could it possibly consist of if it can't compete against PayPal? Perhaps they will use PayPal's services within the scope of the new system and defer customers to PayPal for the actual transactions? Partnerships happen when companies fear retaliation or when companies see greater profits by working together, and I think it's possible that is what's going on, in this case. Either that or we'll be seeing a very crippled new system from Google.

Re:Why Bite the Hand that Feeds?

[LiquidCoooled]

It could be some form of micropayments transactional system.
They certainly have the capacity and hold enough information about each of us in the magical cookie.

Pay per click brought to life.

I'm sorry, this link is not available. Please ensure your paypal account is topped up

Re:Why Bite the Hand that Feeds?

[stinerman]

Google mighn't want to piss of eBay, but someone has to provide an alternative to PayPal sooner or later, and it might as well be them. I can recall quite a few times that sellers lost a sale to me because they only accepted PayPal. If there was a viable alternative with a sane TOS, perhaps I'd use it. Until then, I'm stuck ordering from merchants who take credit/debit card orders.

Re:Why Bite the Hand that Feeds?

[HugePedlar]

I got quite excited about the concept of micropayments a few years back. If I could sell stuff (software, music, videos, etc.) for £0.10 per download I might get rich. Maybe not, but the idea is cool.

Unfortunately, even if Paypal weren't the evil beast people proclaim it to be, it has still stifled the online payment market through its outragous fees for transactions. Payments of less than £1.00 are worthless.

If Google can provide a viable model for micropayments it could take over a different sector of the market by catering to the smaller purchasers.

Of course, I'd be just as happy if Google pounded Paypal into the dirt.

Re:Why Bite the Hand that Feeds?

[duffbeer703]

I could see Google doing something like a credit union, where people loan out money to other members. Or even something simple like a billpay service.

Google's MO is exploiting content & social relationships to sell ads. A Google money service would use the same techniques to maximize loan returns or to target ads.

Think about it, as an advertiser, I could potentially use Google to target results to people with $x in their checking accounts.

Re:Why Bite the Hand that Feeds?

[NoMoreNicksLeft]

I remember when paypal was "we'll make our money off the float, totally free for you!". That lasted what, 8 months? Now they fee you to death, police what you can buy and sell, and penalize you whenever they feel like it with absolutely no recourse. I'm trying to set up my own paysite soon, but I can't really use them, and I can't afford a proper merchant account.

I hope google kicks their ass. Hell, I hope google sets up its own auction site.

Re:Why Bite the Hand that Feeds?

[roderickm]

One thing Paypal does not do well is micropayments, or payments under $1, but it's something Google does very well. Consider the millions of virtual pennies they daily count for AdSense. (or is it AdCents?!)

The virtual wallet metaphor has been tried many times with no success, but Google has the clout and expertise to do it. There are thousands of web publishers that want to charge 2c to read a page (NYTimes?) but have no effective means to do so. A micropayment system might even be a necessary prerequisite to a hosted applications model -- some prognosticators are convinced Google will begin selling PCs with a Linux-based OS, hosting applications on a subscription or pay-per-use model. Would you pay 1c every time you opened Google's continuall-improved word processor?

Also, Google enjoys loads more user trust than Paypal. I've moved over $10,000 through Paypal, but they wouldn't lift a finger to help me when I was the victim of a $500 fraud. There are many stories of unduly locked/suspended accounts and a severe lack of investigatory dur diligence on Paypal's part. If Google brings a "Do No Evil" alternative payment system, you better believe I'll switch.

Finally, eBay might not like Google developing a competitor to Paypal (assuming it actually will be... RTFA), but eBay's bread and butter is listing and final value fees, not Paypal transaction charges. I'd bet eBay is much more concerned about Google Base than about a payment system. Of course, the combined threat (of Google Base and a Google Payments) is massive.

roderickm

Re:Why Bite the Hand that Feeds?

[squoozer]

I have a merchant account and while the fees are lower than PP they are still a total rip off. Perhaps it's cheaper on the US side of the pond but over here in the home country (sorry) if you are shifting less than £5000 worth of stock a month you probably would be better off with PP. Having said that, I think a real merchant account makes a business more professional looking so there are some pay backs.

I'm going to go back to dreaming about selling £5k worth of stock in a month.

Re:Why Bite the Hand that Feeds?

[thrillseeker]

One thing Paypal does not do well is micropayments, or payments under $1, but it's something Google does very well. Consider the millions of virtual pennies they daily count for AdSense. (or is it AdCents?!)

Exactly. Paypal could eliminate much of the incentive to produce an alternative by simply eliminating the $0.35 charge. The 2.9% is (barely) bearable, but the fixed-price charge eliminates the entire world of micropayments.

Additionally, when they started charging percentages for both personal accounts, a requirement to deal in any significant amount of money, they made a lot of people's shit lists. Paypal needs to get aggressive about being viewed as cost-effective at all price levels - their relatively high percentage rate and fixed minimal fee causes them to only be attractive to a general audience (which is most of the potential world) for a narrow price range. If a company can't make a profit by skimming a single penny from every online transaction then the problem is internal to the company.

Re:Why Bite the Hand that Feeds?

[Superfreaker]

The times they are a changin'
That old MP argument is not going to hold up forever:

PayPal Announces Micropayment pricing:
http://www.paypal.com/activate_micropayments_5pct_ plus_5cents_new_account_pricing

On August 31st, 2005, PayPal announced new Micropayments rate of 5% + $0.05 per transaction.

The rate is available now, to U.S. merchants who sell digital content to U.S. customers, when PayPal is the sole payment solution offered to customers for micropayments transactions.

Merchants who wish to use PayPal's micropayments pricing will need to open a new PayPal account through the account registration link at the bottom of this note.

Each PayPal account is associated with only one merchant processing rate. That rate determines the fee that's applied to funds received into that account (additional information on PayPal's Standard Fees is available at: http://www.paypal.com/cgi-bin/webscr?cmd=_display- fees-outside ). For example: if your Premier/Business Account rate for receiving funds is 2.9% + $0.30, using PayPal's 5% + $0.05 micropayments rate would reduce the total transaction fee charged to payments received below the value of $12 (per payment). However, if you accept payments that are greater than $12, you would pay a lower processing charge by accepting the payment into the account set with the 2.9% + $0.30 rate.

If you wish to leverage PayPal's micropayments pricing, please open a new browser window and paste the link below into the URL field to open your new PayPal account with micropayments pricing of 5% + $0.05.

Re:Why Bite the Hand that Feeds?

[TClevenger]

Would you pay 1c every time you opened Google's continuall-improved word processor?

No. I'm happy with OpenOffice, and despite what Microsoft tries to tell us every other year, word processors have not improved substantially since Office 97, and are certainly not worth the $200 or whatever the hell MS is charging nowadays.

But for services that require work to keep current, such as Google Maps, or hosted apps without a good open-source alternative, I would be happy to pay.

Re:Why Bite the Hand that Feeds?

[Rude Turnip]

"If there was a viable alternative with a sane TOS, perhaps I'd use it. Until then, I'm stuck ordering from merchants who take credit/debit card orders."

On a similar rant, I generally won't do business with anyone on eBay who doesn't explicitly say that they will accept US Postal Money Orders. Personally, I prefer to use Paypal, but accepting USPS money orders is the gold standard for any merchant in my book. Why? In my book, anyone that won't accept such money orders is a potential fraudster, afraid of the law. If anyone screws around with a transaction that involves a USPS MO, it turns into a mail fraud case.

Re:Why Bite the Hand that Feeds?

[rockwood]

I hear what you are saying as I feel that I am in the same boat. I have a website where my wife an I sell primitive countr crafts. We're averaging $2000.00 to $3000.00 in gross profits per month, netting about half of that. We are currently using paypal as well, though out largest problem is refunding. Items become out of stock and with the current paypal system the customer is charged immediately upon checkout. That leaves us with estimating S&H and providing refunds when only partial shipments can fulfilled. I feel that this leaves a unprofessional after-taste in the consumers mouth (and wallet). Some previous businesses we've had were good, other not so good, and with previously being divorced, our credit is not stellar. This poor credit holds us back from obtaining a virtual terminal; which would allow us to process CC's after the sale when we know the exact correct amount charge. Out efforts to provide our custoemr with more accurate (and sometimes lower rates) are shot down by our credit. So as it stands the consumer is the one that hurts the most, and becomes a mere inconvenience for us.

A non-interactive virtual terminal would suit the industry much more. Example: Paypal system current use their (PayPal's) trustworthiness and not the business, since it hides the consumers CC from us. A virtual terminal would need to be approved based on such things as credit ratings to avoid shady business from over-charging or errounously charging customers CC's because with a Virtual terminal we (the business) have the CC # in order to process this.

What would be more beneficial would be to have a combination of the two - allowing the customer to check-out, provide their personal information and CC information. Then when we've determined tha exact amount to charge, we'd access the limited virtual terminal. Enter the amount to be charged, the customer receives a confirmation email asking them to accept or deny the charges. They accept and we get paid.

I'm sure this has potential holes in it yet, but the foundation of what it could pave in regards to new doors opening for lower level new businesses, and home based businesses that have concepts that are working, but do not have the credit history to back it up with conventional means.

For the professionalism alone I'd pay .25 extra per transaction. The demand is there, it's just time until someone with the large bank account can deploy it. Hopefully this will be Google.

Re:Why Bite the Hand that Feeds?

[adisakp]

I remember when paypal was "we'll make our money off the float, totally free for you!". That lasted what, 8 months?

And they make plenty of money off the float. However, they end up returning it to you -- in exchange for your social security number and other personal details -- if you elect to "invest" in the PayPal money market. They pay something like 4.28% which is the highest paying money market fund available right now. Until now, they charged nothing to you for administrating the account but soon they're going to lop 0.25% off for administration which is still cheap.

Paypal has obvious costs for credit card transactions but I'd like to see a business account where cash (paypal funds) or check transactions were discounted or free. The limit the personal accounts to the point where they're nearly useless.

Yes, please.

[jfisherwa]

PayPal is top on my list of evil Internet companies. Maybe it's top on Google's as well.

Re:Yes, please.

[putko]

What is so evil about PayPal?

I've mostly been struck at how irritating their website is to use. I went through most of the hassle of registering an account, but never finished, because it was just too irritating and long. Way to much reading and clicking.

Disabling my account when I moved countries was also a huge pain in the ass. In the end I figured it was easier to just never do business with them.

In the end I decided that I didn't trust their competency enough to give them my card info. I trust Amazon, and Yahoo! Store, but that's about it.

Re:Yes, please.

[ionpro]

Google doesn't do anything of the sort. Google.com is provided completely uncensored to Chinese audiences. However, the government disables cached pages, translation, and a few other services. It's also very slow, because it has to go through the firewall. All Google did was provide a point-of-presence inside China for google.cn. They would be shut down for this point of presence if they didn't at least pay lip service to Chinese Internet law. As the silly ways to break the Google filter show (searching in UPPERCASE, adding a period, ...) it's obvious Google is doing as little as possible to ensure the government doesn't shut them down. But people are protesting their so-called human rights violations. It's rediculous, and the only reason people do it is because Google has become big enough that it's cool to bash them.

Google philosophy is that they can make more money, long-term, by doing no evil. I've yet to see anything from them that shows they've abandoned that philosophy.

Re:Yes, please.

[thrillseeker]

Google aids in the censoring of the Chinese populace for profit

Anytime you buy a product that is made is China you have aided the government of China in thier domination of the Chinese people. Are you going to quit buying anything made in China? - good luck with that endeavor.

While (mostly) all of us would like to see the Chinese people free, it's not gonna happen overnight or simply by us wishing upon a star. It will either happen quickly with war (damn unpleasant affair) or much more slowly with (ever growing) free markets. Every little thing that causes the Chinese people to improve their own standard of living will pressure their government to get more of it - the Chinese government likes being in power because that is where the wealth is in that country. Create a generally higher level of wealth and the country will become a better place, because the people there are far bigger than their government.

Horizontal Expansion

[eldavojohn]

Since it's IPO on April 30th 2004, Google seems to be testing the waters of a lot of different markets.

Granted, they all center on information technology, this company is ever expanding along different product lines. We've seen Google blogs, Picasa, Analytics, Video, Desktop, Talk, Earth, Toolbar, Gmail, Translate, Mobile, etc. And (thank god), they've all been presented to us rather benignly but are they all considered successes?

And now we observe GBuy, a service to compete with Paypal. Paypal's history has been rocky but they do have a solid foothold as they are almost married with eBay. Will eBay welcome the new GBuy and favor it equally with Paypal?

Google profits around $17 billion a year--do they really need to become a money transfer service? Ebay reports $4.5 billion a year, will they be sharing some of that with Google? Will a cut of that even matter to Google?

What's interesting is to see if they actually take a cut (a la Paypal) or if they just continue Google ads through the pages on the service to pay for all of the legal work that comes with claims and fraud. They have the resources to do it and this would probably kill sites like Paypal that take a 3% or more charge on each transaction.

Re:Horizontal Expansion

[Alex P Keaton in da]

Not to confuse the issue with facts-
Don't forget that credit card companies charge businesses that take their cards. When you buy gas with your credit card, the credit cards company (mastercard, visa, whatever) charges the gas station to process the payment, sometimes as much as 5 percent. So your statement "What's interesting is to see if they actually take a cut (a la Paypal) or if they just continue Google ads through the pages on the service to pay for all of the legal work that comes with claims and fraud." Ignores the largest expense that PayPal or Potentially GBuy has....

Confused

[HoosierPeschke]

Hi, I'm going to create a service similar to yours in the same industry, but I'm not going to directly compete with you.

If I was PayPal, I wouldn't believe Google either...

Can third party transfer survive?

[dada21]

As the banking cartel finds new ways of transfering money "instantly" I wonder if Paypal (and Google Buy) will be able to last without actually becoming licensed and regulated banks themselves. The banking industry has the most collusion (and conspiracy theories) of any industry you'll ever research, and I don't see them just giving up the control of the currency base. Paypal appeared out of the blue (in a bank's reference time) with their services, and it wouldn't surprise me if the banking cartel creates a new standard for money transfers that puts up huge roadblocks for Paypal in the name of "fighting terrorism and money laundering."

I don't like paper cash, and I definitely don't like digital cash. The banking cartel, on the other hand, worked very hard to separate paper receipts for gold from the actual gold, and then the paper receipts became valuable. Now they've made almost 80% of currency digital already (compare M1 versus M3 money supply figures), and I'm even more hesitant to become part of that system. Paypal has embraced it entirely, but I wonder how quickly they'll be forced out of the business if they don't become part of the system.

In the end, competition is destroyed, and we the consumer will end up with pretty much what we've always had.

Re:Can third party transfer survive?

[dada21]

Rothbard in his (free e-) book What Has Government Done to our Money? proves that paper money was a conspiracy for control, definitely.

Money is VERY easy to understand -- it is merely a store of time. You perform some work for someone, instead of bartering for their services or products, they can give you some of their time that they have earned in the form of something valuable, divisible and easy to recognize. This has historically been gold or silver (or wheat or oxen or dirt). Gold and silver have been the best forms of money as they are near impossible to counterfeit or duplicate.

As society evolved, people wanted to be secure with their savings, so they stored it into banks of security. These banks issued receipts for the gold or silver. Banking was private, they all had their own "dollar" bills that were private -- banks competed by offering good rates for secure savings or they helped you invest your gold/silver by loaning it to others.

You could always redeem your receipts (or the receipts of others) for the physical gold/silver if you wanted. This all changed in around 1913 (and a few times before in US history) when the government said gold wasn't valuable and that paper receipts were. Of course, central banks up until the early 1970's still balanced their accounts with gold, and central banks still store gold in reserves. Crazy how the general public loves paper, but governments and central banks loves gold.

Paypal vs Google= Users win

[cr0m0]

Good news for the Internet services users. The more companies competing in the same area, the best prices for the users.

Google

[propertechdotnet]

Google has their hands in everything. If they develop a news site geared towards nerds, it's over.

Yet another online credit card service?

[xxxJonBoyxxx]

"For the last nine months, Google has recruited online retailers to test GBuy, according to one person briefed on the service. GBuy will feature an icon posted alongside the paid-search ads of merchants, which Google hopes will tempt consumers to click on the ads, says this person. GBuy will also let consumers store their credit-card information on Google."

I think Google may have a point. If this is simply yet another small-volume, web-based credit card processing thing, then the quasi-online bank features of eBay still make it a unique service.

I wonder how long until Google's credit card database gets hacked the first time...you know it will be a prime target.

good positioning for google

[DeveloperAdvantage]

Google has done a great job positioning themselves between consumers and basically anything they want to purchase. If you think about what a consumer needs to do when they make a purchase, two key steps are first to find something you want and then secondly to pay for it.

Through their search engine and paid advertising, they basically own Step 1. They act like a gatekeeper, deciding who sees what and really having a tremendous impact on the success of at least some businesses.

As for the second step of paying for an item, they don't yet have a presence, so this is the logical next step. When their system goes forward, I suspect eventually a little slice of every transaction will go into google's pocket.

Eventually people will start talking about paying a "google tax". Businesses will need to recover the expense of advertising and the expense of the transaction. Guess who they will recover it from?

Nothing wrong with healthy competition

[steinnes]

Google is providing good services in most of the areas they've ventured into, PayPal has a rocky history, and most PayPal users have at some point been frustrated by their service. However due to the nature of financial transactions they require a lot of security, and security and service don't always mix well -- at the very least we can say it takes skill to combine the two well. Maybe it's not PayPal's fault that we've been frustrated?

Hopefully Google's foray into this market will bring us some innovations like micropayments, which we've been awaiting for years -- and although we can only speculate on that, we can all be sure their involvement with payment systems will result in better products for us, whether it be from them, or competitors that are forced to enhance their services. I'm excited.

Yet more targeting

[mccalli]

Why waste time guessing which ads your readers clicked on and turned into a sale? Now you can measure it directly, as the ad provider is also the point of sale.

On the other side of the transaction - Google can tell what I've searched for, seen which of those searches actually turned into cash, and push yet more ads at me geared towards exactly what I pay for.

I hate the idea personally. You'd feel like you were in a shop all of the time you're looking for things on the net - a problem I already feel to some extent. I can see why both the placer of and the seller of an advert would love it however.

Cheers,
Ian

A bit out of date

[brunes69]

Most of those stories come before eBay bought Paypal. I use paypal extensively, and also did before the buyout, and I find eBay really cleaned up their act.

As for the Katrina thing, it was perfectly valid and the right thing to do. Somehtingawful was not a registered charity and thus paypal had no way to differentiate what it was doing with the hundreds of scams going on at the time to defraud people. I actually applaud them for their pro-active approach in dealing with it - they *could* have just done nothing and let the fraudsters get away with it.

I digs the paypal

[spottedkangaroo]

I know there are tons of horror stories about paypal, but the silent and vast majority enjoy the service.

Also, you do not need to get a paypal account to pay for an item over paypal using a regular old credit card -- and then only the credit card TOS is relevant to you. So he didn't lose a sale because he has a paypal account, he lost a sale because of your ideology.

And really, boycotts rarely affect anyone but the boycotters.

Your understanding of money is incomplete

[snowwrestler]

Money is VERY easy to understand -- it is merely a store of time.

I had mod points but I'm giving them up to post a reply instead. In short, you are wrong. Money is very easy to understand, but it's not time--it is a placeholder for value. You are exchanged money for your time not because money represents time, but because money represents value, and your time has certain value. How much value your time has is the result of a human negotiation of differing opinions. Currency is simply the formalization of such negotiation.

Using a market-valued medium to exchange value (example: gold) is NOT a currency, it is simply an advanced form of barter, since the value of the exchange is limited by the market value of the medium.

Economics ultimately comes down to a human perception of value, and as such it is imaginary. Monetary value is imaginary--without human agreement it does not exist. Paper or digital money is an ideal currency for this reason, in that it does a better job of abstracting the human concept of value from the market worth of a limited-supply raw material such as gold.

Put another way, tangible materials like gold are zero-sum, while monetary value is not. If I IPO my hot new company and its stock price soars, the stock prices of other companies do not have to sink in compensation. Whereas if I want to buy a certain amount of gold, someone has to sell it to me.

To come back to your statement that money is literally time, consider the valuation of a start-up company like Google. What "time" is represented by the rapid valuation of that company? Consider the price difference between a BMW and a Hyundai...did the BMW take 3 times as long to make as the Hyundai? Consider salary differences...if money==time, why does a CEO make so much more money than you?

Every one of these questions can be understood by considering money as the placeholder for the negotiation of human opinions of value. As such it of course has implications of control, as in any negotiation one party is likely to be in a stronger position than the other, and therefore better able to bend the negotiations to their will. That's life. If you don't like people being able to control you or tell you what to do, you basically have two options--grow your strength so that YOU can exert the control, or drop out of society and live as a hermit.

Re:Your understanding of money is incomplete

[SeattleGameboy]

Man, that is a lot of BS...

For your information, Hyundai cars are rated consistently better than BMW in reliability (http://money.cnn.com/2004/11/08/pf/autos/cr_auto_ reliability/).

Sure, BMW may save you a lot of time in getting a chick in bed, but not in time spent in shop.

Not every good is valued on equal terms. Some are valued for its utility (save time), some are valued for its rarity (supply is significantly lower than demand), and some are just valued high because they can (say, Versace bags - they certainly don't take 1000X more to produce or last 1000X longer than a normal bag, but that does not stop Versace from pricing them 1000X more than a normal bag).

Perhaps you should come down from your high-CEO horse and stop sprouting your bugus arguments on how you are so "worth it".

Re:Your understanding of money is incomplete

[SeattleGameboy]

A typical executive answer - "my belief is truer than facts".

I am very happy that your expensive mechanic is telling you that BMW costs more to fix. That's nice. And if that was true, than BMW's would not break down more often than lowly Hyundai's. But guess what? THEY DO!!!

No matter how you try to get around the issue ("BMW owners will hold their car to a higher standard than a Hyundai owner generally will" - what a freakin BS!), it still does not change the fact that BMW's break down more often.

Have you even seen the CR survey? It is pretty detailed and non-judgemental. It just asks you if you had to bring your car in for a service, what part broke down (electrical, brakes, powertrain, etc.). How BMW owners would bring their cars for service more often because "they have a higher standard" is beyond me. Especially when Hyunday has longer and more comprehensive warranty which makes it less costly for the owners of Hyundai to bring it in for service than BMW owners (who would pay a LOT more out of their pocket).

People like you just make me laugh. I am sure you are the same guy who paid $500 bucks for a wine that you won't even be able to tell in a blind taste test.

I am happy for you that you have so much money that you can waste it how ever way you want.

But you are going to have to do a lot better than just saying "BMW's are better because I say so".

So lame....

HTTP status code 402

[DarkMan]

Someone is way ahead of you!

Obviously Micropayments

[a2800276]

I would be really suprised if Google's entry into the payment market wouldn't have to do with micropayments. Why dabble with peer-to-peer aka paypal payments? That market is already cornered.

Micropayments, on the other hand are really that big a technical challenge. All previous schemes have failed because of the chicken/egg problem. If they don't have enough users signed up, not content providers will signon and vice versa.

Google already has a gigantic video service which is a great initial content provider. Apart from that, hundreds of website operators will sign on immediately because they've been successful in the past.

As for users signing up, they've only got to get a few % of the millions of gmail users to type in a credit card number, or they could let the billions of "webmasters", who've got google ads on their pages but never make it to the minimum payout, spend their click-money on micropayments.

-tim