Mr. Markets

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.

If Farecast serves millions of people, it is designed to fail

Farecast could absolutely change the way people think about buying airline tickets online. It is only available in Seattle and Boston right now, but once it rolls out to all cities, you will be able to see historical pricing for routes at any given time of the year. This is great because airlines are quite predictable in the pricing moves they make. Observe the pricing graph, and you can easily tell if it is a good time to buy a given ticket, or best to wait a few days.

The problem here is that Farecast is designed to be a victim of its success. That is, if everyone uses Farecast, then the airlines have a serious problem because their pricing schemes will no longer work. The result? Airlines will change how they price, which will cause Farecast to become a whole lot less good at predicting prices.

What can Farecast do to avoid this? If they have meaningful patents, they can prevent competitors like Flyspy from making the same information available to everyone. If that is the case, then Farecast could sell subscriptions. By limiting it to people most willing to pay, the impact of Farecast on revenues would likely not be great enough to force the airlines to change their pricing policies.

However, as Mike Arrington points out, it may be in the best interests of consumers that websites like Farecast exist. Why? Because if airlines are pushed, they may come up with a simpler pricing structure.

Funniest of all is that Southwest is not on Farecast, often has the best rates, has the simplest pricing of all and has been profitable for years while other airlines have declared bankruptcy multiple times.

Go figure.

Thanks to Brian Smith at Search Engine Watch for the link to this post. Read his article for more information on the "New Players in Travel Search."