Category Archives: PayPal

GoogleCheckout price increase

It was always on the cards that Google was going to raise the prices of their payment processing service, GoogleCheckout. Up till now I had effectively used GoogleCheckout for free, as they offset their 1.5% + £0.15 processing fee against my Adwords spending. But they are dropping the Adwords offsetting and introducing a new tiered pricing structure.

As I put most of my payments through PayPal I will probably be on the highest price tier of 3.4% + £0.20 per transaction. This means that a £19.95 sale will cost me £0.88 (4.4%) through GoogleCheckout as opposed to the £0.68 (3.4%) I pay through PayPal. I wouldn’t mind the higher fees if I got a better service than PayPal. Unfortunately GoogleCheckout still has all the flaws I commented on back in April 2007, namely:

Google still don’t accept payments in more than one currency (e.g. as a UK resident I can only accept payments in £). Expecting anyone outside the UK to pay in £ is a very bad idea.
Delays between customer purchase and payment clearance result in angry and/or confused emails from customers wondering why their licence key hasn’t arrived. This has improved since the early days of GoogleCheckout, but it is still an issue.
Google’s option to anonymise the customer email address is a royal pain in the backside for the vendor. It causes me of lots of wasted time and unecessary emails.
The customer *has* to sign up for a GoogleCheckout account (unlike PayPal).
There is a £7 chargeback fee (PayPal don’t charge a chargeback fee).
Customers prefer PayPal.

About the only advantage of GoogleCheckout is the GoogleCheckout badge that appears alongside your Google Adwords ad. In their email to me explaining the price rise Google claim:

Advertisers who use Checkout have the opportunity to display the Checkout badge on their ads, which has proven to be an effective way to differentiate ads and attract user interest. Checkout users click on ads 10% more when the ad displays the Checkout badge and convert 40% more than shoppers who have not used Checkout in the past.

My own measurements showed a worthwhile effect from the GoogleCheckout badge, but I am not convinced it is worth the additional problems and expense of GoogleCheckout just to get the badge.

I already push PayPal more than GoogleCheckout (e.g. you have to click a link from my US dollar payment page to see a GoogleCheckout button). The price increases will probably result in GoogleCheckout being pushed further into the background for use just as an alternative for those that don’t like PayPal. I don’t know if Google will punish me by removing my Adwords badge.

Note, in order to continue to use GoogleCheckout from 5 May 2009 onwards, you must login to your account and accept the new Terms of Service between 18 March and 4 May.

PayPal vs GoogleCheckout revisited

I wrote back into December 2007 that 70% of my customers prefer PayPal over GoogleCheckout, given the choice. I re-checked the figures today to see if GoogleCheckout was gaining traction with my customers. It isn’t.

% of UK customers[1] choosing PayPal vs GoogleCheckout by month

I’m glad. Despite PayPal’s recent flakiness (since improved) and higher transaction fees[2], I still prefer them as a payment processor due to Google’s confidential email option (which a pain in the butt for support), lack of multi-currency support, chargeback fees and slow processing of many orders. It is useful to have an alternative to PayPal though.

[1] GoogleCheckout only lets me accept payment in pounds sterling, so I only offer it to UK customers.

[2] For a £19.95 transaction PayPal charges me £0.68 and GoogleCheckout charges me £0.45. But Google currently refunds transaction fees for 10x my adwords spend, meaning I don’t pay any transaction fees at all to Google in a typical month.

PayPal reliability problems

paypal PayPal appear to be having major reliability issues over the last few weeks. When someone buys my software through PayPal I should get a PayPal notification email and PayPal should send an IPN to e-junkie. The IPN to e-junkie causes a temporary licence key to be emailed to the customer immediately and the full details of the transaction to be emailed to me (I then send a permanent licence key at my leisure). But sometimes the IPN is sent 30+ minutes after purchase. The leads to very unhappy customers. They have paid for their licence and they want the key. Now. Other times the PayPal notification email never arrives. This is less of a problem, but it doesn’t inspire confidence.

It is not just me having these problems. I have seen complaints on quite a few blogs and forums. The problems seem to be particularly acute for subscription payments. This is causing huge problems for some companies. It is rather worrying that:

a) PayPal broke something so fundamental as subscription payments. Don’t they have proper testing before they roll out changes?

b) It still wasn’t fixed 12 days later.

c) PayPal seem completely unresponsive to requests for information from developers when problems occur.

I have also noticed the PayPal sometimes includes the referral data I read from cookies in customer notification emails. There is no reason why customers should see custom data I pass through to PayPal for tracking purposes. I’m not trying to hide the fact I use cookies. But I don’t want to shove it in their face either. Whether they include this custom data in notifications emails seems quite random. Sometimes they do, sometimes they don’t.

Reliability is my top requirements for a payment processor. PayPal can’t really afford to drop the ball on something as basic as this with GoogleCheckout and Amazon payments breathing down their necks. If I was running PayPal head would be rolling. I hope they sort all these issues out soon. A bit more transparency wouldn’t hurt either.

Brand recognition: PayPal beats Google

I offer both PayPal and GoogleCheckout as payment option on my pounds sterling payment page (GoogleCheckout only allows me to price in pounds sterling, unfortunately). As GoogleCheckout is effectively free to me at present[1] I put the GoogleCheckout button on the left in the hope of getting more payments through Google. But 70.5% of purchasers clicked on the PayPal button.

I have since then become a bit disgruntled with GoogleCheckout for their slow processing times, chargeback fees, lack of multi-currency support and use of anonymised email addresses[2]. So I swapped the button order in the hope of increasing the number of purchasers using PayPal. 69.3% of purchasers now click on the PayPal button.

From this I conclude that GoogleCheckout still has a long way to go to beat PayPal in brand recognition, positioning on the left may not be more prominent (although 1.2% may be statistical noise) and button order is less important than I thought. Or perhaps the PayPal icon is just more compelling. I wonder if GoogleCheckout have tested their icon against the PayPal icon?

[1] Google currently process £10 of payments free for each £1 I spend on Adwords.

[2] The user can opt to have their email anonymised at time of purchase. The vendor then recieves an email address like Miss-abc123xyz@checkout.l.google.com. Google forwards email from this address to the purchaser, until they choose not to receive further emails. In theory this protects the purchaser from vendor spam, but in reality it makes support more difficult. For example, the purchaser can’t retrieve their key from your online key retrieval system unless they remember to use the anonymised address (they never do).

Cost effective software registration with ejunkie

ejunkie Most small software vendors don’t want all the hassle of taking payments direct from customers, so they use a third party registration service. Registration services provide payment processing plus additional services, including handling of:

licence key emails
coupon codes
affiliate payments
taxes
invoice sales

But these services don’t come cheap. According to this calculator some registration services charge as much as 15% commission on every £20/$40 sale. 15%! I find that quite staggering. 10% is more typical, but personally I don’t intend to give 10+% of my hard earned income to anyone, except my wife and the government. To add insult to injury some of these services also try to upsell questionable ‘offers’ to your customers. For example KAGI upsell a licence look-up service for which the software vendor gets a, frankly insulting, $1. I understand from reading the macsb forum that the upsell will be added automatically to the shopping carts of all software vendors selling downloads and will be checked by default. You then have to opt out if you don’t want it. Personally I think every software vendor should offer licence retrieval for free. And don’t even get me started on Digital River/SWREG and their Reservation Rewards ‘offer’.

PayPal and GoogleCheckout are much cheaper, with rates of approximately 3.4%[1] and 2.25%[2] respectively on a £20/$40 sale. But PayPal and GoogleCheckout are just payment processors and don’t provide all the additional services most software vendors need. They provide extensive APIs so you can ‘roll your own’ service, but this sounds like a lot of work reinventing the same old wheels.

Alternatively you can use a third party to provide additional services on top of PayPal and/or GoogleCheckout. I use ejunkie which provides most of the services you would expect from a fully-fledged registration service from just $5 per month[3]. The savings can be considerable, for example (all figures approximate):

number of $40 licences sold per year	yearly costs
number of $40 licences sold per year	10% commission registration service	PayPal +e-junkie[4]	GoogleCheckout +e-junkie[5]
1,000	$4,000	$1,420	$1,060
5,000	$20,000	$6,820	$5,060
10,000	$40,000	$13,660	$10,060

If you can offset your GoogleCheckout processing fees against your Google adwords spend your monthly costs could be as little as just the $5 ejunkie fee.

On the whole I have been very happy with the service I have received from e-junkie, once I got it all working. It has been very reliable and the support has been very responsive. ejunkie does seem to be more geared to selling downloads (e.g. e-books and MP3s) than licence keys and the documentation is thin in places. Consequently I had a few issues trying to bend it to my particular requirements. I will try to find time to cover these issues in another article.

You can find out more about ejunkie and try their 1 week free trial here.

Other possible third party integration solutions are PayLoadz and Linklok. For those of you who prefer a more traditional registration services, I have heard some good reports about Plimus and Avangate on various forums. Neither of these companies has been bought out by SWREG owner Digital River (yet). I haven’t used any of these services myself.

It remains to be seen whether pressure from PayPal and Google forces registration companies to reduce their fees, add more services or just puts them out of business.

Thanks to Patrick for first alerting me to ejunkie.

Full disclosure: The above ejunkie links are affiliates links. If you follow these links and sign up with ejunkie I will get a commission. It is not a lot, but I won’t need many people to sign up to cover my ejunkie fees completely.

[1] PayPal rates vary according to volume. Currency conversions cost an extra 2.5%.

[2] Google have sweetened the deal by offsetting processing fees against adwords fees until the end of 2007. This means the rate is effectively 0% if you have a moderate spend on Google adwords each month.

[3] The monthly fee depends on number of products. $5 per month covers 10 products and 50MB of storage.

[4] Based on 3.4% PayPal fee + $5 per month ejunkie fee.

[5] Based on 2.25% GoogleCheckout fee + $5 per month ejunkie fee.