Google AdWords Business Credit Card in the U.K.: Making a case for vertical-led payments strategies

Navigator Edition: October 2012
By: Amanda Giacchetto and Alex Kays

Google-Adwords-Business-Credit-Card_12Oct30_v1Google’s launch of the AdWords Business Card in the U.K. sheds light on a supplier-driven distribution strategy for commercial card products.  Focusing on a specific industry vertical is not an uncommon approach among networks and issuers in the B2B payments space; and Google’s collaboration with MasterCard and Barclaycard is a ripe example.

The sale of advertising words (“AdWords”) is Google’s biggest single source of revenue, totalling more than $36 billion (£23 billion) in 2011, and Google plans to further fuel this revenue stream by financing its customers through the Google AdWords Business Card.  In essence, Google is arming businesses with the means to invest in longer-running, more effective advertising campaigns that may have not otherwise been within budget.

At this time, the AdWords Business Card is available to businesses in the U.K. via invitation-only and cannot be used for spend outside of advertising with Google.  The card boasts no annual fees and “ample” credit limits, while financing at an 11.9% APR, an attractive rate in comparison to similar small business plastics.  A successful pilot with 1,400 American companies will soon bring a full launch to the U.S. as well.  A blog post from Google notes that the pilot has yielded such a response that 74% of participants now use AdWords business credit as their primary form of AdWords payment.  For the U.S. launch, the white-label partner will be Comenity Capital Bank, and the card will carry rates as low as 8.99%.

First Annapolis has identified key baseline factors exhibited by the Google AdWords Business Card that contribute to what may very well be a highly successful vertical distribution strategy:

  1. Meaningful B2B spend.  Digital advertising is, by nature, a B2B industry vertical; businesses are procuring a service from a supplier base.  Digital advertising in the U.K. is growing, despite the economic downturn.  Between 2010 and 2011, spend in digital advertising more than doubled at a 152% clip.  The B2B spend opportunity in this space is real and relevant.
  2. Sizeable buyer base.  First Annapolis estimates over 600,000 B2C merchants exist in the U.K., 80% of which are small or medium enterprises.  Over 100,000 SMEs sell online in some capacity and thus will be predisposed to digital advertising; fertile ground for the Google AdWords Business Card.
  3. Supplier power.  Google, in this closed-loop framework, is the sole-supplier.  The supplier thus pushes buyers to make card their primary form of payment.   For MasterCard and Barclaycard, Google serves a single supplier acceptance hub with the reach potential of an entire buyer base.
  4. Macroeconomic advantages.  Amidst an economic downturn, businesses are finding it difficult to get credit from their banks, especially for spending on advertising budgets.  Google is capitalizing on this market reality.

Without oversimplifying the keys to a successful vertical-led distribution strategy, the Google AdWords Business Card seems to tick the boxes to capture the “low hanging fruit” of card-eligible buyers.  Securing an opportunity within a defined industry vertical to push a preferred payment method via a lead supplier within this vertical is indeed what is happening in the case of Google’s closed-loop business card.

Issuers may view this case from several angles.  One option presented here is the concept of white-labelling a business card for a key supplier, and in turn encasing a discrete (but sizeable) cardholder base.  This eliminates the need to pursue a “chicken and the egg” strategy where building a supplier acceptance network helps sell the card to the business buyer base.  Among other interesting verticals (e.g., construction, freight, student loans), one vertical that seems ripe for a test case is health care.  Henry Schein, one of the largest providers of health care products and services, already has a MasterCard-branded credit product via First National Bank of Omaha that works everywhere, but another issuer might be willing to determine if a provider focused on small practices could succeed with a PLCC.

A second viewpoint is to take the fundamentals of Google’s “extreme” case and apply these to a broader vertical strategy. Taking the health care example, this vertical has few specialist suppliers serving a broad base of customers ranging from hospitals and clinics, to doctors’ offices and sole practitioners.  As such, commercial payments providers could pursue a strategy of approaching a handful of key suppliers to promote preferred payment methods to the masses with value propositions focused on improving the companies’ bottom lines.

Supplier-driven distribution strategies are a frontier that will inevitably be explored with increased concentration, and as issuers are increasingly focused on developing strategies to penetrate payment ecosystems within vertical markets, it is only fitting that the two sides combine to introduce new commercial products.

For more information, please contact Amanda Giacchetto, Consultant specializing in Commercial Payments from our Amsterdam office,, or Alex Kays, Senior Analyst specializing in Commercial Payments,

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