Google officially rolled out Google Checkout, its online transaction service this morning and contrary to much speculation, (including my own, here yesterday) it does not appear to be the shark that ate PayPal afterall.  At least, not for now. 

Google Checkout will fuction as a centralized authorization service for customer purchases but it will not be a bank-like  payment service that will compete directly with PayPal, which is owned by eBay.  While it promises a level of transaction security that many online retailers can’t match on their own, details on how Google plans to protect what will surely become a Fort Knox of credit card information are still sketchy. 

When customers click through to a merchant from Google AdWords, a little blue shopping cart icon that represents the Google Checkout option will go with them.  Clicking on the icon will take the customer to the Google Checkout site, where the customer’s billing information and credit card information will already be on file.  All four major credit and payment card services are participating.

In essence, Google is foregoing revenues in transaction fees in order to boost its targeted advertising sales volume by giving online retailers a major incentive to participate.   Among those who have already signed up are Buy.com, Ace Hardware and the Starbucks Store. 

Is Google’s decision to make GCheckout a marketing incentive rather than a transaction business a good one?  In the short term, at least, it looks like a winner.  Google builds ad volume without offending eBay, one of its best customers, and gets a feel for the banking business.  Like all good sharks know, lunch will still be there if you get hungry later.