Will Google or Amazon win the race for online retail domination?
Editor's note: The following is a guest post from Andreas Reiffen, CEO of Crealytics.
Measured in advertising dollars, Google's pay-per-click search advertising model is still the unmitigated leader in monetizing purchase intent. Google's market share in overall search is somewhere near 85% in the U.S. and 91% in Europe — enough to warrant regulatory oversight for antitrust violations. No other ad platform comes close to it in being as equipped to capture all the consumer signals that allow the company to know where, when and how shoppers are searching for a product and target them at that moment. Except for one.
Enter Amazon. Amazon's advertising business is still nascent, though it's now a multi-billion dollar program and the company is already seasoned in the art of harnessing and monetizing purchase intent data. So far, Amazon has primarily leveraged this data to personalize offers and target promotions. That's beginning to change, however, as Amazon rolls out Amazon Sponsored Products, expanding the ways brands can pay to personalize the shopping experience, target product placements and boost the visibility of their offers.
Weighing the advantages
Because it operates much further down the purchase funnel, where shoppers are making inquiries at the end of their buyer journeys, Amazon has access to more first-party customer purchase data than Google does. The signal, in other words, is stronger than Google's.
But Google has more signals: Amazon searches are commerce-based, so it's not like someone in the market for, say, auto insurance is going to hit up Amazon the way they would research it on Google. But as Amazon's so-called "everything store" expands into more and more areas, the breadth of its purchase intent data grows, too.
Already, the majority of new product searches are initiated on Amazon. That means it has become the de facto search engine for a range of products, putting Amazon squarely in Google's territory.
The story so far
Why is this race at full throttle now? Look no further than the fact that today's perpetually connected consumers can research options and make decisions — and purchases — within moments. The marketing funnel, as we've known it, is collapsing, resolving in favor of the units that tie most directly to commerce. These giants are leaning into the opportunity to address the new consumerism through improved mechanics that fulfill the desire for convenience, while monetizing the path — albeit a shortened one — in new ways.
Let's look at the race over time from a competitive vantage point:
- By origin, Google was an instantly popular, user-friendly search engine, and Amazon was an increasingly beloved book retailer known for its thoughtful integration of logistics and customer service.
- Google realized how easy it was to find products (eventually well beyond books) on Amazon and how difficult it was through Google's own text ads. So, even though it might not necessarily acknowledge that Shopping is a comparison shopping engine (CSE), the search giant introduced Shopping, which effectively, in fact, became a CSE, allowing platforms to add search boxes to their own homepages to help people find what they need on their sites.
- At the same time, Amazon saw Google ranking products within Shopping through advertisers CPC bids, so they introduced the Amazon Sponsored Products with the very same CPC model.
- It was clear that consumers prioritized convenience and liked buying from Amazon, so Google announced the "buy" button for mobile, known as "purchases" on Google.
- Flash forward, and the adoption of Amazon Prime was massive, so Google introduced Shopping Express as the equivalent. Things are really heating up now!
- Purchases on Google didn't get enough traction and was brought into Shopping Express as Shopping Actions. Google has evolved into a marketplace where people can buy stuff with a single checkout across different retailers.
- Google saw that Amazon had identified Sponsored Products as new, alternative monetization strategy, so it introduced an equivalent for other retailers to fight Amazon: Google PPA (Promoted Product Ads).
Within all of this we can see the possibilities for new ways of capturing purchase intent and all the power the giants are mobilizing in the service of finding new and productive ways to monetize that intent.
The next act
So what's the play for Google? It appears it's already set it in motion. Its Product Listing Ads (PLA) have been on a meteoric rise since their inception in 2012. This ad format, which delivers an image of a product with its price when a user searches a product, now puts Google in the discovery phase of the buyer journey. In other words, it allows a Google product search to act like an Amazon search. Amazon is taking note, another nod to the race in play. From our vantage point, we've seen Amazon significantly increase its investment in Google PLAs over the last year, specifically in key categories that it feels are core to its business growth. [Editor's note: Reports this week suggest Amazon has exited Google Shopping as a bidder.]
The revenue split is becoming more comparable at both companies. Google was once purely CPC and now will be marketplace commission plus CPC, while Amazon was composed of retail and marketplace and is now adding a CPC model.
Amazon will not become an advertising company. The giants collide in a place where they look and feel very much the same, with the exception of outright logistics. We have Amazon buying freight planes, operating warehouses and so on, to own logistics end-to-end. Meanwhile, Google is relying on partners that are unable to compete against Amazon's logistics. As the market becomes more and more efficient, differences in efficiency due to logistics put Amazon in a favorable position against Google.
In the context of a race between giants, perhaps this mounting collision or similarity on various facets is a massive validation of consumer inclination and desire for convenience. But, whatever "evolution" we imagine from a consumer standpoint, the output of the race also has tremendous implications for the retail marketplace and the media economy itself — potentially the likes of which we have never seen.