Why does Google want to automate the advertiser click cycle and make it as fast as it possibly can?
The first reason is obvious: Google makes money on click conversions. The more clicks done quickly, the more money for Google, and the happier the advertiser.
The second reason is that by automating the click cycle, Google will be vastly improving the efficacy of its search results, and how searches correlate with AdWords. Unlike destination sites that measure success by how much time is spent on a page, Google measures success by how quickly a user navigates off Google. The company is constantly testing out data centers to see which center returns the best results that get users off Google quicker.
There are other reasons: Google will begin compiling transactional data. That data alone, even without trending analysis, is worth billions. Google will also become the first company to own not only the method of advertising, but also the data on what advertising works best. Perhaps most importantly, GBuy, when combined with Google's new Cost Per Action feature, has the potential to significantly reduce click fraud.
But there's the rub. Will merchants actually use GBuy?
Of course, you say, why would they not? You could use Google for everything! AdWords, Page Creator, Analytics, GBuy … it's a virtuous circle of Googledom. And yes, even a curmudgeon like me is attracted to the idea of one Google to rule them all.
But let's not forget this has been tried before. It was called Yahoo PayDirect. Yahoo started the service as a competitor to PayPal. Unlike Google, Yahoo had a product incentive for this service. That is, Yahoo had a then-robust classifieds and auctions business that it wanted to tie PayDirect into. The math was simple: User browses Yahoo products, user buys with Yahoo system, Yahoo gets profit. PayDirect was free (most of the time), but it didn't work. Yahoo folded PayDirect in 2004, mostly because PayPal simply owned the market.
Of course, Google has several competitive advantages that Yahoo did not have. But what Google doesn't have — and this is important — is product to sell.
The main reason PayPal succeeded was because eBay was developing at the same time. There was no other easy way to pay an auctioneer, so users turned to PayPal. The two companies became so closely intertwined that eBay decided to buy PayPal and integrate it directly. Purchasing PayPal made perfect sense. As a merchant, why would eBay want give another vendor control of its clients?
This is the challenge that Google faces with GBuy. If you talk to a lot of retailers, I think you'll hear them saying the same thing: “Why would I give Google control of my customer?” Google's not selling anything. And traditionally, the merchant takes payment for an item because it's the merchant — not Google — that has to fulfill the order.
Of course, there is a new breed of merchant online that just aggregates content and has no interest in owning customers at all. Think Shopzilla. For sites like those, perhaps GBuy is the golden ticket.
But back to the traditional merchants. Online merchants already track purchases made via Google AdWords. They've already bought software to track orders, or they've integrated a code into their inventory systems that correlates a sale with an AdSense referral. There's an entire marketplace of shopping cart software that's already integrated PayPal.
So the question inevitably becomes: If I'm a merchant, and I've already gone through the trouble of integrating PayPal, and PayPal is cheaper and it's trusted, why would I switch to GBuy?
One possible answer to that question is that GBuy is free for AdWords customers. Yes, that's a great incentive. But don't expect GBuy to eclipse PayPal with that feature alone. Companies with large marketing budgets will be advertising over multiple sites, not just with Google AdWords. Does it make sense to switch to GBuy for a 1-2 percent gain? Perhaps.
At any rate, the market will decide. I'm still cautiously optimistic about GBuy. If merchants can be incentivized by the potential to reduce click fraud, and if they're not leery of giving too much control to Google, perhaps they'll switch…