While Google Wallet Is Ditching Digital Goods, It’s Likely to Stick with Other Markets

Google Inc.’s decision to kill its application programming interface for digital-goods sales may have more to do with the expense and complexity of the market than with any underlying strategy to retreat from the digital-wallet business overall, experts say.

Google on Thursday announced it will shut down the 2-year-old API on March 2. The feature allows online sellers of games, songs, and the like to accept purchases via Google Wallet.

But Google stressed it is maintaining Google Wallet acceptance for digital products on its Google Play marketplace and for in-app purchases. The latter market has taken on increasing prominence with the emergence this fall of Apple Inc.’s Apple Pay wallet, which like Google Wallet works at the point of sale via near-field communication (NFC) links as well as within apps.

Google’s announcement, posted on a company Web page intended for developers of digital content, gives little indication of the rationale for the decision and leaves developers without a Google alternative. “When we first launched Google Wallet for digital goods, we wanted to make it simple for users and merchants to buy and sell online,” the post leads off. “The industry has matured a lot since then, providing a number of alternative-payment solutions to choose from.”

Google goes on to say it is not replacing the service and that users should “research payment-processing solutions” from other vendors. It also warns developers they should remove the API integration as soon as possible before March 2, since customers will see only so-called 404 errors if they try to use Google Wallet after that date. Notification of customers is entirely up to sellers, the post says.

Likewise, according to the post, sellers who depend on subscription sales will fare no better and will have to find a replacement vendor to service recurring subscriptions.

Despite its apparent rush to vacate the digital-goods market, Google is not likely preparing to abandon other markets for Google Wallet, says Rick Oglesby, senior analyst at Double Diamond Payments Research, Centennial, Colo. While Wallet has struggled since its 2011 debut and has been overshadowed by existing and prospective products from the mobile carriers and major merchants, as well as Apple, it’s likely Google has made a business decision to abandon a losing proposition in a narrow market, he says.

“The digital content market is a smaller overall market, and one that requires globalization so it’s extremely complex,” says Oglesby in an email message. “Google is clearly pulling out of a market where the rewards from and probability of winning are not attractive versus the investment required.” A Google spokesman says the company will not comment beyond the post.

Still, Google’s decision to continue offering Wallet for the burgeoning in-app market is smart, Oglesby notes. “Google is well-positioned to win in the in-app payments market due to its foundation of strength in the Android operating system and Google Play,” he says. “It’s much better served focusing on winning in that market in an Apple Pay-like strategy than it is in continuing to climb uphill in the Web environment where it doesn’t have the foundation of strength that Android and Google Play provide.”

Google is the developer of the widely used Android mobile operating system.