There’s been a bit alot of rumbling over the last few weeks regarding Amazon’s introduction of Flexible Payment Services to their already burgeoning set of web services. Not a surprise really, but strategically very key for Amazon to close the loop. Having already blazed trails in affiliate marketing as well as more specific service models such as the S3 modules for web services, Amazon has come in on the final piece of the puzzle of the modern commerce landscape they are shaping.

Obviously this is a basic dis-intermediation threat to banks (again) and merchant service providers, as well as a way to reduce costs on Amazon’s own transaction/interchange expenses. Banks can take heart in that rather than pursuing the Paypal model, Bezos and team have elected to go through the existing credit card networks for larger payments. Google Checkout uses a similar model but Amazon has put a bit more into the model. Look carefully and you uncover an Amazon branded stored value account as the crucial center of the FPS value proposition. Om Malik points out that the FPS strategy is a Trojan Horse designed to take share from Paypal. I would build on that by saying that FPS can start enable the holy grail of payments, the dirty little M-word: micropayments.

The pricing model that Amazon has prescribed for their service is a very interesting first indicator of the differentiation that Amazon FPS can provide to online merchants who are selling non-traditional goods. By differentiating ACH, association and stored value transactions into different pricing buckets, FPS provides access to all the major forms of payments as well as their own ultra-flexible account. The Amazon account is controlled by a truly groundbreaking set of rules that can actually enable new types of selling models. Merchant can charge periodically for usage, split payments to and from different endpoint accounts as well as aggregate micropayments without merchants having to “hold” onto transactions. These are just a few of the types of selling models that can be enabled that may have been cost-prohibitive before using the incumbents system.

The wildcards here are 1) Amazon is by far the most developer friendly in the “Big” web. 2) Amazon has 62 million active consumers with Amazon credentials (with credit cards on file) that can be leveraged by merchants using FPS.

To think, it all started as bookstore.

Just think, instead of paying for four Internet connections in your home (phone, cable, wi-fi, mobile), you could actually have the one that makes the most sense at the time. Google’s proposed bid to make this happen with the upcoming 700 MHz spectrum auction is making waves. The kind of waves that severely rocks the boats of telecom incumbents. It’s clear when they use meaningless, bourgeoisie responses such as “corporate welfare” to describe the FCC’s interest in utilizing Google’s free, neutral and consumer-centric rules that the protected hegemonies that so unceremoniously charged me $1.00 per minute to call home from London last month are about to start breaking.

The facts are pretty indicative that Google is serious:

1) They have the cash and have committed to meeting the minimum $4.6 Billion reserve for the auction.

2) They have been buying dark fiber since the 2005 bust. This fiber is key for the economics of running a mobile telecom service. The signal received by one tower needs to be transported by land-based fiber lines to the destination tower.

3) Mobile apps are all the rage at the GOOG. Every one of their consumer facing successes have been ported to mobile including maps, gmail, blogger, picasa and now YouTube as well.

4) Google has a deal with LG for an integrated Google button (and apps) on “millions” of phones.

Google’s openness requirements for the spectrum, favor a company with diversified revenue streams rather than a retail model that relies on access fees only. This is the source of much twitching and bitching from the telcos. What is interesting is that it is absolutely evident that should AT&T or Verizon win this auction, consumer won’t see a single kilobit of wireless data for some time. Their business models have not been evolving because of a non-competitive environment in the US. The consumer, as a result, has been suffering. Take a look at the mobile web on a normal everyday Verizon phone. The “home deck” will take you back to the 1990s. Why would anyone use such a service when rich, interactive, developed environments invite you on the real Internet. Yet the mobile phone is the device most people carry with them all the time.

I would expect that non-incumbent handset manufacturers would get on the Google bandwagon right quick if they win the spectrum. With little legacy carrier volume to protect, why not roll out the pipeline of devices that cannot be used in the US. Apple will probably make a good partner, after all Eric Schmidt is on their board. And what’s AT&T going to do, drop the iPhone? The second tier of US carriers could see the light and through their hat in the ring. I personally vote for Sprint, since they have shown the ability to deprioritize legacy voice revenue defense in favor of WiMax, a better last mile technology, but an open standard. Throw EBay and the trifecta of commerce, cash and communications (auctions, Paypal and Skype) into the mix and who knows where it can go.

I am wary of Google’s growing dominance and reach in various spaces (I recently saw a proposal for small business services from them). However in this case I am more wary and tired of the telco’s abusive consumer policies and the spoonfed pace of innovation in US wireless. Google and Co. would improve the consumer’s experience and drive new value on an already ubiquitous platform. More power to them.

The Google+YouTube deal is a huge deal for the web. Good commentary here, here and here.

Two logic flows on this deal could be:

1. Google Video totally sucks regardless of all the investment and people the folks at Sunnyview have put into it. Given the importance of video and the growing ease of delivering it via the web, Google would have had to acquire a player just as Yahoo acquired Jumpcut. If you have to open your wallet, why not buy the vertical.
2. Video specific searches and web start pages will proliferate. Already I know enough folks who skip all the Googles and Yahoos when they are looking for an image or photograph. They go straight to Flickr, and get what they want without all the web optimized, thumbnaily business that the full web crawlers deliver. Given videos ability to carve out a niche (portable media players, cameras, art), you could see a scenario where the video focused vertical player is siphoning off Google’s search traffic and pulling what will undoubtedly be tagged by the rejuvenated online advertising industry as the most valuable CPMs.

Congrats to the YouTube boys, $1.6 billion is a better exit than I thought they would get. I have said before that Google’s integration of video into their advertising channel could be the start of something big. With the acquisition of all that Diet Coke-Mentos content from YouTube we’ll see what pops.

Yesterday Apple announced that Eric Schmidt, CEO of Google, was elected to their board of directors. The argument for lining up the immense resources and expertise of these two companies is bulletproof. Apple has reached a point where their device strategy needs to service sophistication to fully leverage the customer franchise they have built. Google and it’s expansive service offering has come to the political boundary of hardware to ensure top of desktop position for its products.

One of the often cited shortfalls of AOL circa 1998 was the lack of a well developed hardware or device strategy. AOLMail had become beyond ubiquitous and was even accepted as a business email suffix. An AOL Blackberry or Sidekick would have been a much better platform to build from than what they have today.

With Microsoft’s impending desktop deadbolt Vista and their Zunepod on the way (how come nobody talks about XBOX360?), the timing of this union is a good one.

The form is also good: it is not some non-specific MOU between companies or a hastily planned JV. With a board seat, they will have time to sort out a working model for current products and a venturing model for future development.

So now that the blogerati have settled down on Google Checkout’s launch frenzy, let me take a moment to comment on how they are going to finagle the banks out of being the de facto merchant processors of the web. Banks today don’t do the long tail. Even the ones that purport to be “affinity” focuses such as the former-MBNA portfolios are false advertising on the customization front. Our friends at Google on the other hand do the long tail very well. Adsense is the perfect long tail network and their democratic advertising through ad words drives 50% to 100% of the traffic to their small and medium business clients. Now throw in Google Checkout and you have a closed loop from segment identification to closing the sale. Fine nothing new here right? Well if Google Checkout is works well and Ad Words continues to do its thing, Google will likely never charge any of their advertisers for the transaction.

It is wins all around: business owners who advertise get free credit/debit processing on their site via a trusted consumer name like Google. Google gets transaction data to sophisticate its advertising model. Consumers get smart and legitimate way to buy things from sites that are not called Amazon.com. Now let’s watch them collapse Froogle (holy branding snafu) into the Google Base strategy and you have a complete and open business platform minus banks.