GBuy – Google Payment System

The WSJ reports that Google is testing a online payment system that will be tied into Google AdWords. (via Battelle)

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.

The ability to accept payments will open up many streams of revenue due to the variety of Google’s web properties. Google will be able to help advertisers sell products through Froogle, Google Maps, Google Earth, Google News, Google Local, and of course Google Search.

Back in June, I predicted that Google would be building a pay per sale model based off of their current AdWords product. Here’s what I wrote:

But I think Google’s initial use of a payment system is to add a pay-per-sale model to their current pay-per-click advertising network. Merchants using AdWords to advertise and Google Wallet to process their sales will be able to track which ads lead directly to sales and at what cost. Merchants will be able to tap into the power of large scale affiliate marketing (ala Commission Junction). Publishers can then choose between which model to promote – AdSense for clicks or AdSense for sales.

Advertisers can also decide whether they want to generate traffic or pay for sales. A pay per sale model typically encourages a publisher to create a high quality and relevant web site – which is great for advertisers. Pay per sale will also alleviate click fraud issues, since there are fewer concerns about whether conversions are legitimate, and whether traffic is of low quality.

This feels like a natural addition to the AdWords product. Although Google is not directly competing with Paypal, I can see why Paypal is concerned.