• by Wendy Davis  @wendyndavis, July 3, 2006

Google's new electronic payment system shows the company's ability to boost its search platform while also targeting new markets, according to analysts at Merrill Lynch.

In a report issued late last week, research analysts Justin Post and Han Pham praised Google's new offering--an electronic payment system, "Checkout," that is similar to PayPal. "Wide adoption of Checkout would enable deeper relationships with merchants and greater affinity for use of Google AdWords," states the report. "Google would also gain broad information on users' purchasing activities which could be used to better target query results."

With Google Checkout, users need only enter their data one time with Google, and then they can make online purchases at merchants that accept Checkout without re-entering their information, including credit card numbers. Search marketers who use Google AdWords will receive a discount on Google's processing fee.

Because the procedure is so streamlined, it's viewed as likely to discourage users from placing items in their online shopping carts, but then failing to complete the purchase. "[T]he goal of Google checkout, through ease of transaction processing, is to increase merchant conversion and ROI," stated the Merrill Lynch report.

The report also stated that a higher return on investment will encourage more AdWords users to increase their keyword buys, adding to Google's revenue. "Higher ROI will result in increasing ad spending on Google, which will help offset costs of subsidized payment processing."