Here’s what I think Google is building – A pay-per-sale advertising model.
CEO Eric Schmidt has already spoken out and specifically said that Google is not building a PayPal killer, “We do not intend to offer a person-to-person, stored-value payments system…The payment services we are working on are a natural evolution of Google’s existing online products and advertising programs which today connect millions of consumers and advertisers.”
They are working on a service that will extend their current programs and lay the groundwork for something more. Charlene Li believes Google is building a centralized micro payment system – which makes sense. Google would then grow into an open market facilitator. That’s a realistic possibility in the future.
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.
What do you think?