Can Google Be a Threat to Paypal?

Google is the number search engine in the world and already makes billions with its Adsense and Adwords marketing programs. Is Google interested in competing with Paypal for the the leadership of the online payment gateway? What explains PayPals early success? PayPal was set up in 1998 as an electronic payment network and from then on business was quite prosperous for PayPal, with revenues increasing quickly. Its early success is mostly due to its three-phase strategy and the linkage of PayPal to Ebay. Firstly, PayPal incorporated its service with Ebay on all international websites. After that, it also introduced its business off-Ebay in fourteen different nations which resulted in a big coverage on the Internet.

Furthermore, PayPal as a first mover had an advantage over credit card companies that it started as a free service. In addition, it provided users a quick setting up of an account and as an extra service, letted its customers decide whether to keep transferred funds in the credit card accounts or just in the PayPal accounts. Moreover, PayPal provided auction sellers a convenient and saver method of payment in comparison to credit card companies. The last strategy of PayPal's early success is that it used an extensive marketing strategy in the beginning which attracted a lot of customers. For instance, it used the ten dollar bonus method for new users. All strategies together encouraged the success of PayPal and allowed it to conquer many challenges such as when Billpoint was set up by Ebay.

Google Base could become a serious threat to PayPal if it is able to market its product in the right way. Although the CEO of Google, Eric Smith, is stating that this change of strategy is not meant to compete with PayPal, it will take market share from PayPal. Google has the same target market, since a lot of eBay users also make use of Google Base. This will result in users choosing for Google payments instead of PayPal payments.

The main advantage that Google has over PayPal is that it is able to offer its users the full package without requiring them to leave Google. First of all, 70% of the e-commerce transactions are done through web search, and since Google is a search engine, it is able to incorporate Google Base in the web search leading the users to its own website. Furthermore, Google is able to incorporate Google Base into its paid search. In the end, this will also give Google the ability to provide marketers information about the effectiveness of their marketing campaign through measuring how many clicks lead to an actual purchase. Other competitive advantages of Google Base are that it processes payments immediately, which is convenient for the small merchants. Next to that, Google stores credit card information on user's accounts which makes the service more convenient for high-volume users.