Paypal vs Google Checkout vs Yahoo! Stores

Paypal’s transaction fee as listed here
is definitely much higher compared to Google Checkout’s fee listed here.

While PayPal has several years of lead time, the thing that would be working in favor of Google is the advertisement. For Google Checkout enabled sites, the ads will be marked with a cute little shopping cart (which surprisingly is entirely html code and not an image!). Given that identity theft, security and other concerns prevent consumers from ordering from any smaller websites, this is a way for these stores to explicitly tell their audience that they have a big partner working for them! Infact, I bought on Yahoo! Stores a few times because the product offering was cheaper than at other online stores and because I was giving my payment information to Yahoo! and not some smaller company.

First and foremost PayPal needs to reduce it’s transaction fee lower to make sure not to let Google take share away from it. But a 33% reduction (from 3% to 2%) is quite significant and could have a bigger impact to eBay’s revenues.

One reason why Google had to enter into this market is also the fact that they have to expand beyond PPC (Pay Per Click) to PPA (Pay Per Action) and that can be better tracked for transactions performed through Google Checkout.

While Yahoo! provided people to create stores online and offer payment service, Google is using adverting as a vehicle to promote the payment service.