Definitely one of the big news stories today is Google’s announcement and release of it’s new product called Google Checkout. Many in the blogosphere (as evidence by the comments here) are dismissing its launch to Google’s apparent lack of focus and inability to address it’s core business.
What should not be overlooked is how strategically important this product will be for Google and how this launch illustrates that they are very focused on their core business: advertising. A great majority of the $6 billion in revenue that Google reaped last year can be directly attributed to their advertising programs. Without this revenue, there is no doubt that Google would be a shell of the company it is today and what it will be in the future. So to maintain their market dominance, they have to secure that revenue stream, which has come under increasing pressure as worries about click fraud have start to deteriorate trust in their current CPC system.
So what does a checkout system have to do with any of this? Quite simply, they have to reinvent advertising, again. The end goal in any advertising effort is to get customers to do something. This could be the consumer pulling their wallets out but may be the customer just making a phone call to the advertiser. The problem with most advertising today is that there is no way to really track why and how that action was initiated and if it ended in an actual purchase.
Earlier this week, Google announced a new ad program based around a cost-per-action model. The theory goes that if you can track a transaction from start (when the user sees the ad), to finish (they make a purchase, or other valuable action) then the advertiser will pay more for each action than they would for a click. Advertisers will pay more per action because they are only paying for what they truly see as valuable and not for clicks which may or may not pan out.
But what is missing in this plan? Google has the advertising infrastructure and audience. They also have a pretty good way to contact the advertiser through an ad using Click-to-Call. And now, they actually have a way to track and record the purchase.
If anything, Google Checkout shows that Google is right on track in securing their business. There is no doubt in my mind that they are doing what they have done many times in the past, redefining the rules of the game.