10 Possible Consequences of Google's GBuy

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

GBuy?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.

Below, 10 possible effects that GBuy might have on Google, search and other companies.

1. Google changes how AdWords are bought. As more and more advertisers use GBuy, Google will collect data on which AdWords are most effective at converting clicks, and which clicks convert to sales. Google would then be able to set AdWords prices based on the average ROI to advertisers for that word.

2. Google personalizes your search results like Amazon. You may start seeing "people who searched for this also search for..." Google may be reluctant to do too much with its core search though. This feature could be a powerful add-on, like Google Desktop search.

3. eBay steps up their advertising campaign and partnership with Yahoo. eBay throws more dollars at its contextual ad system, AdContext, and its keyword-based text ad product, eBay Keywords. (In the Yahoo PayDirect days, Yahoo allowed both PayPal payments and PayDirect payments on its auction site. I wonder if Yahoo and eBay will have anything to do with GBuy.)

4. GBuy fails. The feature fails to fulfill a marketplace need, since PayPal owns the space and does it cheaper. Ad money starts flowing back to the content providers, a la Leo Hindrey's famous prognostication.

5. Google begins offering targeted ads to users based upon users' purchases.

6. GBuy will change how search results are returned by factoring in which online stores convert the most sales.

7. Merchants will devote fewer resources to design and more resources to structuring of data.

8. Google builds a valuable offline database of consumer information.

9. GBuy will alienate site owners who both sell their own products and have AdSense on their site. If the Google ads that appear on those sites are for competing products, and those ads have a GBuy icon, then Google will be competing with its own customers.

10. Nefarious site owners will use all the old tricks to raise their SEO for all the terms that use the most popular GBuy AdWords.

I leave the rest to you, my smarter and more resourceful audience. What other effects do you see coming from Google's GBuy? I'm especially interested in the merchants out there. What payment system do you use now, and will you switch to GBuy?