From Search to Swipe…Google Does Cards

So, I wonder how many payments industry hearts stopped beating yesterday morning when the news hit the wires that Google was issuing a credit card? Turns out that it was not THAT kind of credit card, but rather a small business financing tool that happens to be a plastic card carrying the MasterCard bug and issued by World Financial Capital Bank. This card will be free, carry a low interest rate (8.99%) but can only be used to purchase AdWords. It is being offered to select businesses as part of a beta and will be rolled out to a larger group at a later time.

Google says that it is doing this to help stimulate and smooth (and hopefully increase) small business spending on ad campaigns. Its timing coincides with the approaching back to school and mega-holiday season when most retail sales are made (and ad budgets are spent). At first blush, it seems little more than a clever vendor financing tool and no real big deal (aside from being the first/only vendor financing offer by Google) using a tool that is familiar to a lot of small businesses. Most, including the Google founders in their startup days before they were gazillionaires, use credit cards to finance their business operations. This trend has even intensified given the tightening of small business credit overall. A survey conducted in late April, 2009 found that 59% of small businesses use credit cards to finance their operations, up 10% from December 2008.


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But Google seems awfully interested in revving the AdWords engine these days. Sure, you say, that IS what accounts for 94% of their revenues, but still, they seem quite focused on making sure that as many small businesses as possible are using its platform. At the end of last year, for example, it created a promotion that gave 1 million small businesses a $100 AdWords credit if they spent $100 before a certain time- and it has offered similar promotions in the past. It has incorporated the personal touch into its “onboarding” process – it offers a phone number and real live person to help get campaigns set up for the first time. And, perhaps even more relevant to its more recent Groupon-smashing ambitions, it offers a business the option to link AdWords to Google Places, essentially giving visibility to local business when local search is done. And we know that local is a huge areas of focus for Google. It promotes Google Places anytime anyone does a local search and has a top exec running its local products business unit.

So, is this credit card just a well-timed vendor financing tool? Could be. But I am sort of thinking that it might be a strategy for getting as many small businesses (and their ad spend) on the AdWords platform as possible so that it can juice up its mobile POS ambitions. Subsidizing one part of a platform in order to get the other on board is a classic ignition tactic. Perhaps taking the friction out of AdWords spending is one way to get more merchants on board, which will make it more likely that consumers will become more interested in Google’s local offers, which will make a more compelling case for small businesses to use AdWords.

I’ve also read conflicting reports about whether beta testers will really only be able to use the cards for AdWords – if those restrictions are lifted, perhaps this new card is an interesting way for Google to create a built in base of digital wallet customers with a card that is top of wallet and for preference to be established by providing offers, rebates and other incentives to those business owners to use the card more regularly. Remember, small business owners are consumers, too.

Then again, maybe I am thinking about this too much. What are your thoughts? (Please share below!) Vendor financing tool or just another strategy to build out their payments strategy? Either way, Google, seems intent on spending its cash reserves on things that make its core asset, online advertising, even more valuable.

Karen Webster is the President of Market Platform Dynamics (MPD), a consulting firm that helps companies find, implement and monetize innovation. She serves as an advisor and member of the board for a number of companies operating in the payment, technology and digital media industries. More info here.



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