Google's online payment service, Google Checkout, looks more and more like a deadly rival to eBay's Paypal... so we learned, after chatting with Patrick Chanezon, a Google API evangelist, at yesterday's Salesforce.com/Google event.

Google Checkout and AdWords: a virtuous circle

Google Checkout and AdWords are creating a virtuous circle. If you're a merchant and uses both Checkout and AdWords to buy keywords, there's a little shopping cart logo that appears under your Google Ad. What we realised is that people click more on these ads, increasing your click-through rate than the ones without the Checkout shopping cart. And, as you know, when your CPR (cost per read) is high, you pay less for your ads. Bottom line, you pay less for your ad campaign and more people come to your site.

Today, Checkout is free for merchants. But starting from next year, Google will charge processing fees valued at 2% commission plus 20 cents per transaction in the US. However, another "virtuous circle" comes to play.

"We will give merchants a credit valued at 10 times their spending in AdWords to pay for the Checkout processing fees. For example, if you spend $100,000 per month in buying AdWords, we will give you $1 million dollars in processing credits."

Basically, Google Checkout will remain free for merchants using enough AdWords... which you would if you want to attract more ustomers to your site... sounds like a Win-Win to me. No wonder that after one year, Google claims to have 100 of the 500 largest online merchants like Buy.com or diamonds' vendor Blue Nile.

Checkout simpler than PayPal

- Checkout is using the user's credit card. So we didn't have to build a payment platform per-se like PayPal did. And it shows in our API, which is much simpler albeit still complex than PayPal's 16 APIs;

- Google Checkout is built on the same platform than for AdWords' on which we have processed billions of dollars of transactions. So we were already used to managing fraud and risks;
- Moreover, we will give developers bonuses to use the Checkout API in projects contracted and paid by merchants. That way they will earn money both from the merchant and us!