Mobile Will Usurp E-Commerce—And Google Knows It

Google's reported efforts to launch a buy button within mobile search results—and only mobile search results—is the latest sign that traditional e-commerce processes may not survive the transition to mobile devices.

Recent moves by social media sites like Twitter, Facebook and Google demonstrate that the future of mobile commerce could eliminate the need to ever visit a retailer's website. Each entity is working to build in payment functions that let people make purchases or move money without being pushed to a dedicated shopping app or mobile site.

Whether or not these companies have the right solution, it's clear that there is a need to re-imagine the payment process for the mobile age. Mobile commerce today "is onerous. There's a reason that the vast majority of mobile interactions don't convert," said Sucharita Mulpuru, a senior e-commerce analyst with Forrester Research. "A small itty-bitty screen is not sufficient to drive the transaction."

The initial details about Google's mobile buy button were reported late Friday by The Wall Street Journal. According to this report, Google will soon launch a system that displays "buy" icons next to mobile search results, and the entire purchase process would be handled through a Google page rather than handed off to the retailer supplying the product. (Google declined to provide comment when reached by PaymentsSource today).

The process, as described by the Journal, resembles that of the Twitter "buy" button unveiled late last year. That system allowed retailers and nonprofits to post ads or solicit donations through their social media accounts, and then receive funds through a one-click purchase process. Twitter's system relies on technology from Stripe and Gumroad.

Facebook has made several attempts to turn its social media site into a commerce platform, with its latest move being the addition of a P2P capability within its Messenger app. Facebook CEO Mark Zuckerberg said last year that Facebook's payment activities are meant to be supportive of its main advertising business.

Google is similarly expected to build out its payment offerings with its advertisers in mind, said Thad Peterson, senior analyst at Aite Group.

"Will this be an add-on to a retailer placing an ad on Google? That's what it sounds like," Peterson said. "If so, then this is AdSense and AdWords on steroids."

Another consideration is the type of retailer involved. Google's search engine is likely a more significant driver of new business to small shops than it is to giants, as evidenced by the number of independent eBay merchants who suffered when Google changed its algorithms last year, making it harder for consumers to find eBay listings via search.

The addition of a Google Buy icon to mobile search results could level the playing field for smaller merchants listed in Google's search results or sponsored links.

But there may be a tradeoff in customer loyalty, since the purchase under Google's upcoming system would not require a visit to the retailer's website. For any merchant, that is a major strategic question and a big risk, given the belief that mobile may soon be responsible for a huge percentage of all transactions.

"You've got to pick your poison. Do you want to make more money now or do you want to own everything in your customer experience?" Mulpuru asked. By rolling out now, Google is trying to force the decision before retailers have a substantial mobile revenue stream.

Although there will likely be "some upfront fee," Mulpuru said, Google's history gives merchants a reason to be optimistic. Google "tends to price these programs pretty attractively, to get merchants on board," such as absorbing much or all of the interchange and accepting all liability for chargebacks, she said. "Google has typically invested heavily in order to get merchants on board."

Google will be retaining all of the shoppers' payment details, simply passing along the payments (minus any fee) to retailers, according to the Journal. What is unclear is how much other customer data will also flow back to the retailer.

Though Google has much in common with social networks like Twitter and Facebook, its efforts in search-based payments are a bigger threat to Amazon.com. Google may be able to grab a chunk of the sizeable traffic Amazon gets through its mobile app. And Amazon also works hard to provide e-commerce services to the smaller merchants among its more than two million suppliers, so any of those companies that Google wins as clients potentially removes revenue from Amazon.

This is why Mulpuru said that this Google retail play could work far better than the company's earlier efforts to blend payments and search (such as Google Checkout, which was eventually absorbed into Google Wallet). "Google's got more leverage with search and retailers would rather work with Google than Amazon," she said.

Peterson argued Google is also playing to its strengths.

"It's a question of core competency. Google's in the business of selling search," he said. "If they stick close to home, they win."