- The quest to be the #1 destination for shoppers has two tech giants pitted against each other.
- After losing ground to Amazon, Google is doubling down on Shopping to be the first choice for customers.
- Some of his efforts are starting to pay off, but Amazon may have a head start that he can’t overcome.
This is the fifth in a series of 10 articles to be published over the next few days that examines Amazon’s booming advertising business: the people running it, the ripple effects on other companies, and the following.
Google – the owner of the world’s most popular search engine and most widely used browser, and the biggest seller of online advertising – isn’t used to being in second place.
But in 2016, a disturbing statistic echoed around the marketing conference roundtables and plastered presentations of e-commerce companies: For the first time, according to a study, more American consumers said they started their product searches on Amazon rather than Google.
In reality, Google had looked in the rearview mirror at a rapidly approaching Amazon much earlier than that.
“The successful companies of this generation – Facebook, Google, Amazon – have the paranoia and terror of becoming irrelevant as one of their really important characteristics,” said Sridhar Ramaswamy, former senior vice president of ads and commerce. of Google, which now runs search startup Neeva.
Complicating matters is the fact that the couple have leaned on each other over the years as their businesses have grown. Amazon spent huge amounts of money advertising on Google, “and hated spending every penny,” Ramaswamy said. Meanwhile, Google “was terrified of an entire product category disappearing for Amazon,” he added.
Google has gone back and forth on different shopping strategies and scoured a handful of e-commerce leaders over the years as it seeks to take on Amazon at its own game.
Under its new e-commerce leader, Bill Ready, who joined PayPal in 2020, Google reversed a policy that previously allowed paid advertisers to appear on its Shopping page. From now on, any merchant can display his products there. Analysts said last year that Google appears to have accelerated new product development. And it has forged partnerships with third-party commerce platforms.
By some measures, these efforts have shown signs of success. But on others, Google still lags behind Amazon. And Amazon hasn’t stood still either. Searches on Amazon ultimately fuel its ad revenue, and the company continues to add new features to help merchants drive sales on and off its platform. It’s also increasingly courting new advertisers who don’t sell products on its site to boost its ad business, which soared to $31 billion last year.
“When I started advertising and engaging with these partners, Facebook knew what you liked, Google knew what you were looking for, and Amazon knew what you were buying. These things have become interconnected but blurry at the same time,” said Jessica Chapplow, e-commerce manager at Havas Market, a media agency. “Especially for Google, we’ve seen 2021 and this year is really shaping up to be more of a year for them in e-commerce and SEO. »
“Retailers shouldn’t depend on a gatekeeper”
Ready, a former chief operating officer of PayPal, said he joined Google because he saw an opportunity for the “democratization” of the online shopping space.
“What we’re trying to do with Shopping is level the playing field for online retail,” Ready said. “Nobody wants to live in a world where there’s only one place to buy something. Retailers shouldn’t depend on a gatekeeper. »
Ready achieved a number of key milestones that the Shopping team had achieved during his tenure. The shift to free listings helped Google grow its product catalog by 70% between May 2020 and May 2021. He cited other published figures from the company. Last May, there were more than 24 billion listings on what it calls its Shopping Graph — similar to the AI-powered Knowledge Graph it applies to organize its regular organic search results.
Another major change, Ready said, was Google’s announced series of partnerships with other commerce and payment platforms — including Shopify, WooCommerce and GoDaddy — to allow retailers to use their existing tools with its Shopping department. The number of merchants using the platform increased by 80% in the year ending May 2021. Google did not provide the total number or an updated figure.
Ready said there has already been outside validation of those efforts bearing fruit. A survey by Morgan Stanley in March this year found that 61% of US consumers said they visited Google sites first when researching a product online, up from 57% in November. Elsewhere, Alphabet executives have called retail the biggest contributor to its advertising growth in recent quarters, though this has come against the backdrop of the broader e-commerce boom in the wake of the COVID-19 pandemic.
But it’s unclear whether Google has shaken things up significantly when compared to Amazon.
A separate online survey of around 1,000 US internet users, commissioned by Insider and conducted by customer experience firm Sitecore, found that around two-thirds (69%) of respondents said Amazon was the first website they visited when shopping online. This was an increase from around half (54%) of respondents when Sitecore asked the same question in a 2021 survey. In the 2022 survey, 13% said they visited based on search engine results, up from 24% in last year’s survey.
Elsewhere, Insider Intelligence, which shares a parent company with Insider, estimated that Amazon will increase its share of the U.S. search ad market from 20.1% in 2021 to 22.6% this year. Google’s share is expected to rise from 57.2% to 56.1% over the same period. And average conversion rates for Amazon ads are more than double those of Google ads, WebFX says.
Advertisers love Google Shopping automation but want more data
For some merchants, including those who don’t sign up with Amazon as a matter of principle, Google offers the most logical alternative to showcasing their products to a large audience of shoppers. Plus, it adds more commerce-friendly features outside of search, such as live shopping on YouTube — which also has a higher ad load than Amazon Freevee (formerly IMDb TV).
From 2020 to 2021, clothing brand Buck Mason went from zero spend on Google Shopping to “big budget,” said Jim Davis, its chief account officer. For the first four months of 2022, Buck Mason had “almost doubled” what he had spent in the same four months of the previous year.
Davis said Google officials have increasingly pushed how automated and smart its algorithms are, especially with products such as Smart Shopping campaigns, which use a retailer’s product catalog to serve ads. on search, YouTube, Gmail and its display network.
“They basically made it so you don’t even have to have a good agency to make money from Google Shopping anymore,” Davis said. “It’s pretty stupid at this point. »
But Davis and other advertising experts said the pursuit of simplicity sometimes comes at the expense of the needs of more sophisticated e-commerce advertisers. They want more bells and whistles to allow them to increase a shopper’s average basket size or optimize their targeting around their highest margin products, for example.
“There’s a certain black box element to some of Google’s products,” said Daniel Wilkinson, global head of paid media at digital agency Jellyfish. “It’s good to let the machine make all the decisions because it can do it at a much higher frequency and much more often to get the best possible results, but at the moment I don’t have enough visibility on all signals and where to spend my time improving which signals perform best. »
Others said Google sales reps aren’t as connected to branch e-commerce managers as Amazon’s.
“I don’t have Google reps calling me and saying, ‘I really want to talk to you about our buyer data and cut your budget that you spend on programmatic for Diageo on The Trade Desk at DV360,’ the Google’s demand-side platform, said John Donahue, partner at digital agency Up and to the Right. “It is a crying shame. That phone call should have been made. »
One of Google’s traditional strengths has been its ability to strike deals with senior executives — often up to CEO level — at major brands. These relationships could benefit Google as they play a bigger role in the recent rush of retailers and direct-to-consumer companies. build their own advertising businesses. Mark Johnson, Sitecore’s president of commerce, said this was the top question he’s received from retail customers: “How can I compete with Amazon? »
“There’s a mantra in the marketplace where brands suddenly realize they’re demand aggregators and can become merchants,” Johnson said. “Google will be their main source of promotion” of these efforts, he added.
The competition between Amazon and Google just intensified with ‘Buy with Prime’
Google has positioned its Shopping offering as a way for shoppers to shop anywhere, rather than through a single platform. But Amazon’s latest move could skew that position. The e-commerce giant said in April that later this year it would allow certain merchants to place a “Buy with Prime” button on their own websites and use its payment and fulfillment services to deliver products. to consumers.
Advertising experts said they expect competition between Amazon and Google for commerce dollars to remain intense – and that Google may need to invest more in all aspects of fulfillment if it wants to. go forward.
“Unless Google is really ready to get into end-to-end commerce, including logistics, it’s really hard right now to see how it can bridge that gap with Amazon,” said Kiesse Lamour, head of Global Media at WPP’s Wunderman Thompson Commerce agency.
For his part, Ready said he doesn’t see Amazon and Google competing in a zero-sum game for the same buyers and advertisers.
“There is a massive rising tide that is lifting many ships,” he said. “I think the question is, ‘How do we make sure there’s equal access to this rising tide?’ »
Zac Wang contributed reporting.