Google Launches Credit Cards for Small Businesses(mashable.com)
mashable.com
Google Launches Credit Cards for Small Businesses
http://mashable.com/2012/10/08/google-credit-cards/
17 comments
I co-founded a company a decade ago that spent most of its marketing budget on AdWords, on the order of $120K a month. We were constantly running into issues with the credit card company triggering their fraud algos and killing our campaigns, despite having these charges regularly coming from the same company (Google).
At some point if you're Google you get tired of letting the banks skim 3 percent ($3.6K a month!) off the top of these high-volume transactions and prevent your customers from spending. Google knew we were certainly good for the money by the time we'd been doing it for a few months. This kind of cash squeeze is why all sorts of companies get into financing, like GMAC for auto financing and Dell for computer financing.
At some point if you're Google you get tired of letting the banks skim 3 percent ($3.6K a month!) off the top of these high-volume transactions and prevent your customers from spending. Google knew we were certainly good for the money by the time we'd been doing it for a few months. This kind of cash squeeze is why all sorts of companies get into financing, like GMAC for auto financing and Dell for computer financing.
Think of it as trade credit. The rationale for much of trade credit is that the supplier knows a great deal about the firm, so they are able to make a well-informed lending decision [0]
In contrast, banks may not know much about firms (or only know obsolete information), so the usual information asymmetry [1] issues arise
[0] http://rfs.oxfordjournals.org/content/10/3/661.short [1] http://en.wikipedia.org/wiki/Information_asymmetry
In contrast, banks may not know much about firms (or only know obsolete information), so the usual information asymmetry [1] issues arise
[0] http://rfs.oxfordjournals.org/content/10/3/661.short [1] http://en.wikipedia.org/wiki/Information_asymmetry
I've heard of Google offering trade credit for large advertisers, this seems to be a more mainstream way to accomplish the same thing while allowing them to charge 12% APR.
Seems like a fairly intelligent idea, but I can only see people with poor credit using this card long-term. Anyone with good enough credit to qualify for any good points card would be stupid to not use that instead.
Seems like a fairly intelligent idea, but I can only see people with poor credit using this card long-term. Anyone with good enough credit to qualify for any good points card would be stupid to not use that instead.
For some businesses this is probably fine, but at the same time Google has a long history of being ok with a business one day and the next day deciding that business is no longer acceptable under Google's policies and shutting down accounts. How long til Google does the same thing to credit card accounts? Also, at what point is this business profitable enough that Google mandates this as a payment mechanism?
this. who do I call when I have issue with Google overcharges or whatever? last time we had these issue we were told, quote "we (google) are an internet company and as such we don't have customer service".
Amazon started a similar service very recently:
http://www.forbes.com/sites/greatspeculations/2012/10/05/ama...
Instead of a credit card it's a loan (which makes more sense to me), but basically the same idea.
Instead of a credit card it's a loan (which makes more sense to me), but basically the same idea.
Sounds like 2 genius ways for Google to extract more revenue from their core service.
One, they'll start seeing increased sales from companies who can now spend money on Adwords they don't currently have in the bank. This revenue is almost 100% new since the capital was not available before. Although, it's possible some companies were just using other credit cards to finance their ad buys.
Two, Google would start collecting interest. This doesn't sounds cheap if you consider the risk of default and actually collecting on those default. But they could probably sell those loans to collection agencies and still make a profit.
One, they'll start seeing increased sales from companies who can now spend money on Adwords they don't currently have in the bank. This revenue is almost 100% new since the capital was not available before. Although, it's possible some companies were just using other credit cards to finance their ad buys.
Two, Google would start collecting interest. This doesn't sounds cheap if you consider the risk of default and actually collecting on those default. But they could probably sell those loans to collection agencies and still make a profit.
This looks like a co-brand card and so Google will not necessarily collect the interest revenue. All the risks and revenue are typically borne by the bank (there may be complex provisions so we will not know the exact deal structure for sure) and sometimes there will be profit sharing. Google will mainly save on the interchange (transaction fees) and may have a say on some of underwriting policies.
Cross-referencing display ads seen with credit card purchases made could help 'close the loop' on ad campaigns for which conversions are currently harder to measure.
So perhaps this is a first toe-in-the-water offering, that could grow into a mass-market credit-card program.
So perhaps this is a first toe-in-the-water offering, that could grow into a mass-market credit-card program.
"Don't you worry, we got everything you need here in the Company Store! So, get back to work!"
I thought it was standard to use a cash back credit card for this sort of thing.
The real scam was to use cash back or frequent flyer cards to buy money from the US mint. Apparently they were required to sell $1 coins online to get them into cerculation. So people were buying thousands of dollars worth of them (free shipping!) and depositing them right into their bank.
Supposedly you can't do it anymore but I don't remember how they prevented it while still trying to get the $1 coins into circulation.
Supposedly you can't do it anymore but I don't remember how they prevented it while still trying to get the $1 coins into circulation.
If you wanted to pay for AdWords on credit, why wouldn't you be doing so already? I assume most businesses are already using a credit or charge card. And getting benefits like cash back or points for doing so.
If you're already doing that, why would you want to switch to a Google card? They offer no apparent benefits aside from a possible higher credit limit. If someone can't get a decent line of credit, would they really spend so much more on AdWords if given a Google card that they'll be more profitable?
If a business can't get credit at all, why would the banks Google partners with extend them some?