If Google Checkout succeeds, then Amazon's competitive edge will be diminished

I have an idea on how Google can utilize Google Checkout to provide even greater benefits to its merchants. If Google Checkout gets millions of users, Google could utilize the purchase history data to make personalized product recommendations to users of Google Checkout based on the product catalog of each merchant.

Amazon's big advantage is its ability to utilize millions of customers purchase histories to provide recommendations specific to an individual user. So what happens when Google is able to aggregate purchase history for millions of users across thousands of different merchants? At that point, Google's data is just as rich if not more rich than Amazon's.

Product recommendations could of course be displayed anywhere on the merchants' websites, just as Amazon does. But most immediately obvious and trackable is the ability to up-sell someone after users have added something to their shopping cart. Just as adding an item to your amazon cart causes an up-sell page with product recommendations to appear, the same could occur for merchants using Google Checkout.

This method would be great for Google because the merchants could easily track order size as a result of displaying product recommendations using the Google Checkout engine as compared to their internal personalization engine or whatever other methods they utilize for up-selling. The results would probably show a huge advantage for using Google Checkout's up-sell recommendations.

Smaller merchants in particular would see average order sizes rise because they are most likely to lack the purchase history data or the technical resources to make good recommendations. In turn, merchants would spend more money advertising on Google because the return on investment as measured by average amount per order per visitor from Google would go up.

If successful, Google Checkout could become a great equalizer of commerce to enable smaller shops to compete. A whole new question becomes this: if Google Checkout succeeds, what is the permanent impact on Amazon's business? Will we see more niche merchants flourish and Amazon become less of a destination for all things shopping?

Do you think my idea would be good for Google to implement as part of Google Checkout? Would it make a difference? Please post your comments!

For more information on Google Checkout, be sure to read posts by John Battelle, TechCrunch, Charlene Li,  Steve Rubel, PaidContent and Search Engine Watch.