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If there's any doubt that Google is compiling what could potentially be the world's most lucrative database, it should have been dispelled last night. Already the leading search engine, Google has signaled its intention to become a key e-commerce destination, too. Google has launched a beta of a shopping catalog service it calls Froogle. At this early stage, Froogle finds product information from retailers by name and price range.

The really interesting bit is that merchants can submit their catalogs electronically, so it’s only a matter of time before Google becomes a master or meta-catalog for retailers. XML-based web services allow retailers to dispatch their own catalogs in a standard format, minimizing the amount of labor required by the merchant and Google. And earlier this year Google exposed its search APIs to web services developers. So you can see where this is heading: Google is developing the capability to become a near real-time database that can be queried by all kinds of clients, not just web browsers.

But for now, the goals are fairly basic.

"Froogle is a better way to search for products," spokesperson Eileen Rodriguez told us. "There will be no pay for placement , but it will offer merchants a way to increase their customer base, and to increase traffic."

This first implementation allows users to narrow searches by price. Google told us that comparison shopping might be added, but this would depend on feedback. It would almost certainly depend on the quantity of catalog information from retailers too, says Google.

(The link for feeds is here.)

"Our long term aim is to have as many products as we can," said Rodriquez.

Google's meta-shopping catalog would have a similar leveling effect that its news feed has created, with equal prominence given to smaller news outlets who add value, rather than spend millions on conventional marketing and promotion.

"We will feature retailers large and small," said Rodriquez.

In Google We Trust

Real-time price information will bring one of the wet dreams of Bubble Economy theorists [snicker] - a perfect market in which geographical and temporal distortions are magicked-away. In this world the consumers have perfect information on which to make their decisions.

Except they don't, and this brings us to the first piece of Google news we ran this week. Business is a social contract more than it is an economic transaction, and simply having pure price information isn't enough.

I'll defer to George Soros here, for his view of rational choices by informed individuals creating a perfect market:

"The result is a theoretical construction of great elegance that resembles natural science but does not resemble reality... it relates to an ideal world... it has little relevance to the real world," he once wrote. "Market prices are always wrong."

Just as creationists prefer a neat theory to messy reality, you can rarely part a free-market economist from his pie charts for long enough that he'll acknowledge this. But transactions are expressions of social relationships: and this understanding is the biggest cultural difference between US, and the more holistic European and Asian models of capitalism.

The missing ingredient here is trust, and you want to know something about the reputation of the merchant before placing an order. And lo and behold - look what Google introduced this week: a reputation experiment.

Join all the dots, and it's clear that Google is doing some fairly impressive forward thinking here.

But what's in a name?

"Froogle is pun on Frugal," explains the FAQ. "'Google' is itself a play on the surname of the two brothers who founded the company: Sergei and Larry Dougall." [*]

[*] Of course, we made that up. ®

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