Whoever tries the most stuff usually wins. This is often the case, isn’t it? It certainly is for the Google Amazon competition.
Ever considered the Google Amazon competition? Google and Amazon didn’t always seem like competitors, did they?
Google is in the business of selling of ads, Amazon in the business of delivering goods. At least that was my opinion.
Google seems much more of a technology company than Amazon. But perhaps our research will amaze you, eh?
Lately, though, those businesses have converged. The first way this is happening is simple: Google is getting into the market for on-demand goods.
It launched a same-day delivery service, Google Shopping Express, in the Bay Area in 2013 and expanded it to customers in Manhattan and West Los Angeles in May.
Recently, Google announced that its service is rolling out to Chicago, Boston, and Washington with a shorter name (Google Express), a more colorful logo, and a newly defined pricing plan.
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“Many people think our main competition is Bing or Yahoo,” Eric Schmidt, Google’s executive chairperson, said this week in Berlin. “But our biggest search competitor is Amazon.”
Schmidt likely intended to persuade a skeptical European audience that Google is not all powerful and faces more competition than some might assume. Even so, he offered the clearest comments yet on how Google views Amazon as a top competitor.
(Google’s ‘Rivalry’ With Amazon? It’s Complicated, http://mashable.com/2014/10/14/google-vs-amazon/)
“People don’t think of Amazon as search, but if you are looking for something to buy, you are more often than not looking for it on Amazon,” Schmidt continued in his speech. “They are obviously more focused on the commerce side of the equation, but, at their roots, they are answering users’ questions and searches, just as we are.”
As two of the largest Internet technology companies, Google and Amazon have inevitably brushed up against each other over the years, but the overlap between them has arguably become more pronounced in recent months.
Background
At the most fundamental level, both Amazon and Google want to be the top online destination for people searching for items to buy.
They want to control as much of the experience around that search, by owning the devices shop with and in some cases controlling the fulfillment process.
Online shopping has been Amazon’s core focus from the start, but the company must invest in new areas to keep up with tech trends and ward off competitors.
Google, on the other hand, has come to recognize shopping as a key user search activity and one that marketers are intensely focused on when placing ads.
“The competition for Google is not only for direct advertising dollars but people going directly to Amazon and bypassing Google’s search network,” says Yory Wurmser, a media and marketing analyst with eMarketer, who notes that this is even more of an issue for Google in a mobile-first world.
“The head-to-head competition is growing.”
Cloud computing
Perhaps the most high-profile area of competition between the two involves cloud computing and data service efforts — particularly the Amazon Web Services arm of Amazon.
In technology, it’s sometimes good to let a pioneer figure out the pitfalls of a new market. Apple’s iPod transformed music listening after countless lesser MP3 players failed to make a real dent.
Google is now trying to do something similar in cloud computing. The company last month announced price cuts that made its cloud services cheaper than Amazon’s, the leader in cloud services for businesses.
At almost the same time, Google orchestrated a flurry of coverage of its cloud services.
But whereas music players were a fragmented industry when the iPod appeared, in cloud computing Google is playing catch-up with a single market leader, Amazon, that has a track record of destroying incumbents in every industry it gets into.
What Google has in its favor, besides a sheer technical expertise, is that it already runs the biggest cloud-computing operation in the world—just that it puts most of it to a different use.
The resulting battle is likely to be epic, and its outcome determines nothing less than who will control the internet.
“The cloud” is a term so nebulous it hardly does justice to the specifics of Google’s and Amazon’s respective strategies.
Generically, the cloud is just a vast mass of computers connected to the internet, on which people or companies can rent processing power or data storage as they need it.
It’s used for everything from hosting websites to storing archives to running massive data-crunching operations.
Unless you work in technology or corporate logistics, you might not have known that Amazon was ahead of Google in the cloud business. Most consumers will have encountered the cloud in the form of services where Google is strong—email (Gmail), document storage (Google Drive), and the like.
But Amazon Web Services has for years been the front-runner in the business of renting computer power to companies. Does that surprise you? It surprised me.
To understand the scale of the war brewing between them, it helps to understand that what Amazon and Google are contesting is who gets to eat a bigger portion of the total corporate information-technology pie.
All the servers that run the whole of the internet, all the software used by companies the world over, and all the other IT services companies hire others to provide, or which they provide internally, will be worth some $1.4 trillion in 2014.
This is according to Gartner Research—some six times Google and Amazon’s combined annual revenue last year.
Not surprisingly, both companies have said at one point or another that this new revenue stream has the potential to be larger than all their current sources of income.
(Amazon and Google are in an epic battle to dominate the .., http://qz.com/196819/how-amazon-beat-google-attempt-to-dominate-the-cloud-before)
But wait, you say; that stuff isn’t all in the cloud. Most IT services are still provided much closer to where they are used, on PCs themselves or in “private clouds” run by companies and their contractors. (For example, IDC reports that only 13% of companies’ data is currently stored in the cloud.)
But if the advocates of cloud computing are right, some day most of that spending will be on software that runs on remote computers controlled by internet giants.
When that time comes, the entire world’s business IT needs will be delivered as a service, like electricity; you won’t much care where it was generated, as long as the supply is reliable.
And Google and Amazon both want to be the utility company that provides it—minus the government regulation that usually attends utilities
Google Amazon … search
For years now, Amazon has been considered the biggest threat to possibly erode Google’s core search-advertising business. Google’s search business makes the most money when people use it to search for products they intend to buy online.
But a lot of those people are increasingly going straight to Amazon to search for products, bypassing Google’s search ads in their purchasing process.
As more shoppers move to mobile, they often use Amazon’s standalone app to buy things, further pressuring Google’s search business.
And new data from Morgan Stanley suggests the number of Amazon’s app users is growing fast. Amazon and Walmart saw more than half of its growth in mobile traffic come from app users. That means the mobile shoppers who used to have Google as a starting point on their smartphones are going straight to Amazon apps instead.
Morgan Stanley research has shown Amazon and Walmart get a surprisingly low amount of mobile traffic from web browsers.
“Only two retailers — Amazon and Walmart drove over 50% of their mobile traffic growth from app users,” Morgan Stanley wrote.
“To us, this is positive for these two players as over time we believe larger app audiences can lead to lower long-term customer acquisition costs, stickier customer bases, and a greater share of consumer wallet.
“Also, given these two players’ size and marketplace structure, this is a potential risk for Google that should be monitored,” it added.
But Morgan Stanley’s note wasn’t all that discouraging for Google. In fact, it noted that Google is in a great position moving forward because the overall mobile-browser traffic is twice the size of the app market while growing 1.2 times faster. Plus, 30% of the top 30 retailers don’t even have a big enough app user base to be measured yet, reflecting the slow adoption rate of apps in the larger retail market.
Still, the fact that two of the world’s largest retailers, with a combined market cap of nearly $500 billion, are driving more than half of their mobile growth through their apps is a telling sign of where mobile commerce is headed — and something Google has got to be worried about.
On-line advertising
Google is king of online ads, but because Amazon is one of Google’s biggest customers, with massive buys on its AdWords platform to market its wares, some say Jeff Bezos & co. are looking to go their way to save cash — and make a bit more for Amazon.
Late in 2014, reports emerged that Amazon was working on an advertising platform that will allow it to sell ads and place them on its site as well as affiliates’.
Given the move towards “programmatic” advertising, where websites of all shapes and sizes prefer to go through the main vendor of ads instead of selling individual accounts, the timing is right.
But can Amazon compete with Google here? That remains to be seen, for sure.
Of course, difficult is never impossible when it comes to technology companies such as these two.
On-line shopping
Not to be outdone, Google has been cooking up some e-commerce initiatives of its own to compete with Amazon on its home turf.
In the last year or so we’ve seen same-day delivery service launched via Google Express, as well as hopes to roll out a “buy now” button on its search results for various products.
Now, none of these efforts are big contributors just yet. But Google Express seems to have been a hit with consumers in test markets like San Francisco and New York, since Google recently added Chicago, Boston, and Washington, D.C., to the list of markets it serves.
And if it’s a logical argument that Amazon should leverage its e-commerce audience to sell ads, then it’s equally logical that Google should leverage is massive search audience to sell products online.
Yes selling products directly instead of simply pointing customers to the right site — frequently Amazon.com itself? That seems an idea with big potential.
But who knows what the future holds. Right now, each tech giant seems equally capable of winning these three turf wars.
Google Amazon competition … same day delivery
Google is making same-day delivery on Google Express available for three different prices: a flat rate of $4.99 per order, a monthly membership fee of $10, or an annual membership fee of $95.
These numbers are hardly incidental—$95 is a shade cheaper than the $99 fee for a yearlong membership on Amazon Prime and significantly less than the $299 fee for Amazon Prime Fresh, a same-day delivery service for groceries and other “eligible orders” more than $35 on Amazon.
Note that Amazon’s same-day delivery option is also available in 14 cities to Prime members for a flat $5.99 fee.
The two services have some differences. Google’s is exclusively for delivery, while benefits for members of Amazon Prime include unlimited music and video streaming from Amazon’s collections and one free Kindle rental a month.
Google also doesn’t have its massive warehouses like Amazon does, but instead works with local merchants (Barnes & Noble, Fairway, PetSmart, Staples, Walgreens, and Target, to name a few) to gather and deliver goods to customers.
Think about it, though. Google Express might not be about delivery—it might be about protecting Google’s core business.
Google’s investment in its same-day delivery service, with a commitment rumored to be as much as $500 million, is certainly its boldest bet yet on this front.
Google Express and Google Shopping, in general, is Google aligning with retailers to fight against Amazon. It’s a way for Google to be a service provider for retailers.
Perhaps the most obvious example of that was Google partnering with Barnes & Noble to deliver books.
New ventures
Google has stepped up competition with Amazon in online video, home service referrals.
Amazon is rapidly expanding new services and Google is hot on its heels, aiming to compete with the e-commerce giant on home service referrals and online video.
The competition will mean greater convenience for consumers.
Recently Google announced to told video makers that it would offer a premium, subscription-only version of YouTube that would allow viewers to avoid watching advertisements, according to Bloomberg.
The revenue from the subscriptions would be shared between Google and the video creators.
A free-to-viewers version, which would include ads, would still exist, but video creators would be required to agree to new terms of service to post their work to the site; video creators would continue to receive a portion of the revenue from the ads.
An interesting development, don’t you think?
This new paid offering will generate a new source of revenue that will supplement the fast growing advertising revenue.
YouTube is the second-largest source of Web-streaming traffic next to Netflix, according to data from Sandvine network management provider, while video on Amazon Prime ranks at a distant eighth place.
But the new terms of service may make it more difficult for upcoming artists or filmmakers to share their work the way they want to, which may drive them away from YouTube, says Greg Ireland, a research manager in the multi-screen video program at market research firm the International Data Corporation.
Amazon CEO Jeff Bezos has diversified the online shopping platform he launched in 1995 into new services, including an attempt to broaden the audience of its Prime online video platform by debuting the Amazon Fire Phone last year.
The Fire Phone had a lackluster debut, but it showed Bezos’ resolve to compete.
The latest attempt to diversify the company is Amazon Home Services, a platform similar to Angie’s List or Yelp which will allow its vast Internet audience to evaluate and connect with providers of everything from yoga classes to voice lessons and home repair.
Amazon will rank professionals and establish a pool of referrals; the service will be offered in 41 cities, including Los Angeles, San Francisco, New York, Houston, Boston, Chicago and Washington, D.C.
Google may also be ready to leverage search data to allow users to connect more directly with the home service professionals they seek.
This service, which would compete with Amazon Home Services, may be announced during the upcoming Google I/O developer conference on May 28, BuzzFeed reports.
The bottom line
In our opinion, because of scale, the future is Amazon, Google, Microsoft… and not much else.
Whatever the endgame, it could take decades to reach. In the meantime, this is a fight that rewards scale. Size means efficiency; efficiency means lower prices, and smaller providers of cloud services are going to have a hard time competing.
And there’s a third big player: Microsoft. The company launched its cloud service, Azure, in 2008. Though Azure is an also-ran, for now, the company is so deeply entrenched in corporate IT culture that at least some companies are willing to wait for it to bring its cloud services to parity with Amazon’s.
And like both its main rivals, Microsoft has the money to spend on the engineers and infrastructure required to make its cloud truly big.
