The Bank of Google
Lots of media outlets (here the NY Times) picked up on a story that first appeared in the WSJ online Friday about the allegedly impeding launch of a PayPal rival (Google Wallet is the rumored name).
One of the key things this move does, if the story is accurate, is signal the launch of a potentially significant diversification effort by Google. The market will soon demand this to continue to pay such a premium for Google shares.
Roughly 98 percent of Google's revenues now come from advertising. PayPal was responsible for almost 25% of eBay's first-quarter revenue.
There's no guarantee this would succeed and become a big revenue generator for Google (Microsoft's Passport failed). The NY Times article also discusses the possibility of Google gathering information about its users' spending patterns through the new system as a way to fine-tune the ads served to them. This would be a form of behaviorial targeting and I don't see Google doing this; it would all-but-doom the new effort.
Convenience and, especially, trust are key elements that will determine whether Google Wallet will succeed. Google has struggled a bit in the trust department lately, with initiatives such as My Search History, Accelerator, Autolink and others raising privacy concerns. Because of its enormous success, some people are starting to regard Google with the skepticism that Microsoft routinely encounters.
Google already has something of a "wallet" on its IE toolbar in "autofill," which can store a credit card number. That feature is very helpful and convenient in my view.
PayPal gets much of its volume from the eBay marketplace. By analogy that raises the question of who will use this and pay the associated fees? Presumably it will be a seller-fee based model. Most consumers buying things online have credit cards and consumers won't pay Google to store or otherwise use that information.
The hidden aspect of all this may be the small business angle. PayPal is effectively an alternative to a credit card merchant account for small business retailers/sellers. Yahoo! offers PayPal as part of its merchant solutions. The new Google offering could piggyback on my suggestion of a Google SME Web-hosting business in the same way.
Another question to ask is: Will Google be creating a private-party classifieds marketplace (a la eBay or Craigslist)? That would be something of a bombshell announcement (it would probably need to be free). Though no small effort, that would would be the "other shoe" for eBay — and an unhappy day for newspapers.
I've often told journalists asking, "Who's going to be the next Google" that there won't likely be another Google. I still think that's true because the next Google will probably be bought buy Google — or Yahoo!, MSN, AOL, IAC, etc. But the bigger, more diversified and portal-like Google becomes, which is now something of a market imperative, the more it creates an opening for a simple tool that just helps people find information online . . .
. . . Sort of like the way Google used to be.