Google is banking on small and medium sized businesses to take it up on its offer of a credit card. But does it make sense for these business owners to take on a credit card that can only be used to buy AdWords? According to Google executives, the answer is a definitive yes.
Google is hoping to expand its offers of a Google card for its consumers with an online presence and who want to incorporate AdWords into their marketing plans. The model is simple: these smaller companies have traditionally relied on bigger companies they’re buying from to help them with financing and Google hopes it translates. It might have missed the mark with this one, though.
A model has been in the works over the past few months and the Google credit card was offered to a few hundred SMBs in the U.S. The cards are issued through MasterCard, but the only place these particular cards could be used was on the Google site and only for the purchase of ad words. Google reports the vast majority of those participating in the test pilot are happy with the card. Brent Callinicos, VP Treasurer for Google, notes that 74 percent of those in the U.S. pilot now use AdWords Business Credit as their “primary form of AdWords payment.”
Here’s where the problems come in though – as mentioned, it’s a very restrictive card offer and the APR is at 8.99%. For many business owners, using a card with a lower APR is always more attractive, so the interest rate might be problematic for the search engine giant. Not only that, but many of these business owners don’t want too many credit cards showing up on the books and the puzzled looks they get from their accountants. For independent contractors who may not use a tax ID number, but rather, use their own social security numbers, there’s the problem with debt to income or DTI since their own personal credit comes into play.
Despite the two big problems, Google insists it’s ready to move to an international customer base. It plans to launch the offer in the UK later this month. If it appears the card is garnering enough interest, it could become available to all business owners both here in the states and the UK.
On the flip side, however, Google reports a 21% increase in its advertising revenue. The total comes in at just slightly less than $11 billion. Meanwhile, the UK’s totals include an 11% increase from 2010 to 2011. That equates to around $1.2 billion. Those in the know say Google’s ultimate goal is a double approach by increasing sales for American companies while simultaneously introducing the program to those overseas.
There could be another factor, too. Google has increasingly been keeping Amazon in its crosshairs. The online seller has long since offered credit to its many partners via Amazon Capital Services. If Google is hoping to keep up with the super site, it’ll need to rethink the limitations its credit card brings with it. For now, though, that isn’t likely to happen as it’s clear its goal for the short term is to get the card into as many businesses as possible.
Many may recall the frustration with Google+, its efforts of taking some of the social networking power from giant Facebook. Those frustrations come with the invitation-only dynamic that seemed to drag on for months. By the time it was opened without the invitation only requirement, the buzz had already grown stagnant and as a result, its efforts of overtaking Facebook failed. Unfortunately, on its U.K. site, Google is once again gambling with that and saying that not all businesses could apply. “Eligible customers will receive an invitation with a personalized application ID,” it added.
For its UK efforts, Google has partnered with Barclaycard, part of the Barclays group. Here in the states, its partner is with Comenity Capital Bank. MasterCard will issue the cards in both countries. Google promises”an ample credit limit” for AdWords.
If there’s a redemption here, it’s that neither the U.S. or the UK card will have annual fees, Google notes. This isn’t always an benefit in some business credit card offers, but given that everything goes to Google anyway, it has the potential to be a big profit generator – if it can get off the ground. Google has mixed results with its efforts over the years. Some of its product offerings have been nothing short of brilliant while others have some wondering what they were thinking. The jury’s still out on the Google credit card, but like all things in the business sector, that verdict will be coming rather quickly. Ultimately, and as many analysts are already saying, this isn’t going to be the next Google offering and it will hardly be the biggest money maker for the company.
What are you thoughts? Would this be a good addition to your financial arsenal as a small business owner? Let us know if it’s a thumbs up or down for Google.
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