you know, i think i'm actually changing my mind on this one.
i used to be a skeptic that Google would pick up decent market share against PayPal, just because of the time necessary to build buyer adoption behavior (even with a major brand like Google, could take time as a payment option), and also the time needed to build up fraud prevention staff & expertise.
however, now that i've spent some time thinking about it, i'm pretty sure Google's real goal isn't just getting payment revenue or market share -- i think it's actually a trojan horse to get to CPA-based costing for Adwords.
briefly, the terminology i'm using:
CPM = Cost Per iMpression = advertising based on # views (ie, banners)
CPC = Cost Per Click = advertising based on qualified traffic (ie, click-thrus)
CPA = Cost Per [Trans]Action = advertising based on conversion event or actual sale (ie, purchases)
if that's the lever, combined with the current no-fee incentives & Adword discounts, there could be significant merchant adoption very quickly.
more important than the fees & incentives, if Google starts collecting transaction info using Google Checkout & connects that with the search traffic analytics, they can begin to provide sales-based (CPA) costing for AdWords -- which essentially means "free" advertising for merchants (or more accurately, advertising gets paid out of a share of the actual sale).
this is no small thing to merchants, and could be a huge opportunity to get a behavioral change from merchants -- tying choice of payment option to advertising costs and business profitability is absolutely monumental.
so they might still have a 'long hard slog' to get adoption, but now i'm thinking they have a key selling point to move merchants over to their camp.
eBay, Yahoo, and Amazon better figure out CPA-based advertising fast... before Google figures out payments & ties it into their overall advertising dominance.
strangely, this was really eBay, Yahoo, and Amazon's game to lose. those 3 have controlled huge amounts of transaction data & know the point of transaction, and they could very easily create a CPA-based advertising system that has significant advantages over Google's CPC-based system. but if they wait much longer, they'll lose the CPA game to Google.
we'll see if the eBay-Yahoo merger had any of this stuff factored in, once Yahoo launches their new advertising system later this year. i'll be surprised if they don't offer CPA-based ads by then, but if they don't they're making a huge mistake.
on a related thought, i wouldn't be surprised to see Microsoft make a partnership or even outright acquisition of Amazon, or try again with eBay and/or Yahoo in order to get the point-of-transaction info & payment option that could get them into the CPA game. however, also possible Microsoft is still "fighting the previous battle" on CPC, and might miss the boat entirely on this one.
some previous comments i've made on the CPM -> CPC -> CPA transition beginning to occur: here & here, on John Battelle's blog and on Seeking Alpha, also on Naval's blog. other insightful commentary by Chris Sherman on Search Engine Watch, Tom Taulli on Blogging Stocks:EBAY, Rafe Needleman of CNet, and by Jay Weintraub on DMConfidential.
(full disclosure: i used to work for PayPal, an eBay company, on the Merchant Services team. i also have a number of friends at eBay, Yahoo, Google, & Microsoft, most of whom think i'm an idiot... and they're probably right ;)