[AJ007]

I think what Google wants to do is fully integrate product listings with their search results -- which, they already do in some limited capacity. The best way to do a really good job of it is to have the sale of those items integrated entirely in to Google's "platform." All the other pieces, such as Google Checkout, are already in place and mature.

If Google ships, they know an item was sold and who bought it. They know everything. Their listings can be on a CPA basis rather than CPC for the advertisers (merchants.) The cost for shipping probably could be absorbed by the merchant in much the same way that merchants pay for advertising in the first place.

In the short term, it probably doesn't make much sense. In the long term, Google is probably more interested in cutting out the retail middle man then they are competing with Amazon.