Can Google Shopping compete with Amazon? (GOOG) (GOOGL) (AMZN)

Amazon(NASDAQ: AMZN) ads are Google’s (Nasdaq: GOOG) (Nasdaq: GOOGL) is our core advertising business, which was evident in our latest quarterly results. Amazon’s ad revenue grew 25%, while Google services revenue grew only 2% year over year.Amazon buy-minded web visitors regularly visit our platform, making our advertising solutions more attractive. As a result, Google, which has spent his 20 years trying to undermine Amazon’s e-commerce platform, has stepped up its efforts in recent years aimed at undermining the appeal of Amazon’s advertising solutions. only.

Google shopping

Google Shopping started in 2002 as an additional Google tab where web surfers can find products to buy. Seeing Amazon’s success in charging sellers a fee for listing products on its website, Google launched its paid listing in 2012. Nearly a decade later, Google Shopping has failed to take off as an attractive shopping destination and has failed to replicate Amazon’s lucrative marketplace.

As a result, during the pandemic in April 2020, Google retired its “paid listings” strategy and switched to free listings. This allows merchants to list their products for free and display them in the Google Shopping tab without having to pay Google a fee for selling through the platform (although paid advertising has not been completely eliminated). Please note, you can pay to have your products listed at the top of the shopping search results page).

The strategy aims to expand the range of products on Google, provide consumers with more choice, and attract more shoppers to the Google Shopping tab than Amazon’s marketplace. Commission-free listings actually saw an “80% increase in Google merchants, ‘mostly’ small businesses.”

Nevertheless, while Google has been successful in attracting more merchants to appear on Google Shopping, it has still failed to meaningfully attract purchase-oriented web visitors compared to Amazon. increase.

Amazon.com has more monthly web visits than Google Shopping. This reflects Google’s growing product listings, but not enough to attract shoppers.

In fact, not only is Google Shopping not getting relatively many web visitors, but those who visit the website spend far less time on the site than Amazon.com. Bounce rate reflects the percentage of visitors who visited only one Her web page before completely leaving the website, with Google Shopping (57.23%) more than Amazon.com (34.30%) is significantly higher. Google is trying to direct Google searchers to her Google Shopping by showing Google Shopping products at the top of the search results page when a surfer searches for products, The marketplace is failing to retain them. In fact, Google Shopping product listings are collections of products with many digital D2C merchants having their own websites, so even if a web visitor finds something they like on Google Shopping, it’s not a spend, but an investment. You may be directed to a particular merchant’s website. Spend more time on Google Shopping.

The bottom line is that Google has so far failed to break the habit of online consumers searching for products on Amazon. JungleScout survey of 1,000 U.S. consumers in Q3 2022 shows shoppers search for products on Amazon (63%) more than search engines like Google, Bing and Yahoo (49%) more likely to.

Over the years, Amazon’s network effects have become increasingly difficult to permeate, with nearly 200 million Prime subscribers worldwide seeking to get as much value from their Prime membership as possible. , looking for products on Amazon.com almost by default instead of elsewhere. In addition to its marketplace, Amazon also offers a variety of services such as Prime Video, Prime Music, and Grocery Services, creating multiple reasons for web surfers to visit Amazon.com and increasing the popularity of the platform (and Prime members). ship) is becoming more established.

Google’s move to free listings inevitably comes at the cost of reduced advertising revenue (and lost sales commissions). The long-term goal is to develop a full-fledged marketplace that benefits from a regular and lucrative stream of her web visitors who are willing to buy. This will increase demand for Google’s advertising solutions on Google Shopping search results pages, ultimately increasing advertising revenue in the long term and effectively competing with Amazon’s advertising solutions.

Bill Ready’s short tenure

With the adoption of Bill Ready in January 2020, the company’s e-commerce efforts began in earnest. According to The New York Times,

in his time [Bill Ready’s] Google CEO Sundar Pichai has warned senior management that the new approach could mean a short-term hit to advertising revenue.He told his team that it was a priority for the company. Therefore, we requested support for the promotion of electronic commerce.

Bill Ready is leaving Google after just two and a half years in the role to become CEO of Pinterest (PINS) in June 2022. He played a key role in envisioning and devising the long-term strategy for the eventual conversion to Google Shopping. Successfully he became an e-commerce platform, virtually rivaling Amazon. His sudden departure disappointed investors just as Google was ramping up its e-commerce ambitions.

Additionally, Pinterest’s recent third quarter results show that its e-commerce initiatives have been successful in boosting ad revenue, while Google’s ad revenue growth has slowed significantly in the same quarter. became. It’s unclear to what extent Bill Ready played a role in Pinterest’s recent success, but considering he only joined the company at the end of his second quarter of 2022, the recent turn of events is , suggesting a significant loss of talent at Google, cheering investors. Bill Ready pursued his Pinterest opportunity not only to fulfill his executive ambitions, but on Pinterest he may have potentially seen better e-commerce potential than Google. for believing that

Time will tell if Ready’s successor, Nick Fox, will be able to successfully execute Google’s new e-commerce vision, but the short-term cost of advertising revenue from free listings won’t be enough for meaningful e-commerce activity. Given the lack of growth, it significantly increases advertising revenue through Google Shopping and hinders Amazon’s penetration of the advertising market.

YouTube shopping

Google has struggled to find success through its Google Shopping initiative, but it’s not the only way it’s pushing its e-commerce ambitions. YouTube is leveraging the YouTube influencer’s popularity and trust among content consumers to push its livestream shopping efforts to attract more purchase-oriented her web visitors.Additionally, YouTube is[探索]new under section[ショッピング]It also expands tabs. This tab offers a collection of products from YouTube influencers and digital merchants who want to sell through their creators of popular content on the platform.

The aforementioned JungleScout survey found that 32% of online shoppers will search for products on YouTube in Q3 2022. This is up from 27% in Q3 2021 (based on 1,100 US consumers).

According to similarweb, YouTube has the second highest number of web visitors (after google.com).

Extending our web statistical analysis to include YouTube, we found video streaming platforms to be “stickier” and more attractive than Google Shopping or Amazon.com. This is because bounce rates are significantly lower and visit times are longer, giving you more opportunities to move forward. advertising solution.

So while Alphabet is struggling to compete with Amazon through Google Shopping, Amazon investors shouldn’t underestimate YouTube’s enhanced e-commerce potential. Shopping features on YouTube may offer advertisers opportunities for product differentiation compared to Amazon.com, especially through influencer endorsements. On Amazon.com, side-by-side competitive product comparisons are inevitable, even for merchants using Amazon’s “Sponsored Products” and “Sponsored Brands” advertising solutions.

In fact, despite YouTube’s recent advertising woes, management declared continued growth in YouTube Premium subscribers in its third quarter 2022 earnings call. Additionally, the stickiness of YouTube Premium, which offers subscribers ad-free access to both music and videos, could provide a gateway that encourages users to participate in both YouTube Shopping and Google Shopping. Similar to how Amazon Prime offers bundles of services to make its platform more entrenched and discourage consumers from looking elsewhere, Alphabet offers shopping perks such as exclusive discounts and deals on YouTube/Google Shopping. Leverage your YouTube Premium subscriber base by bundling with Drive engagement on your shopping pages and provide an opportunity to evolve your advertising solutions. That said, Alphabet needs to make significant strides in its e-commerce solutions, especially fulfillment, to effectively challenge Amazon in its own game.

Overview

The coming downturn in economic conditions is likely to undermine the performance of both tech giants in the short term, triggering ‘Hold’ ratings, but Google’s failure to effectively compete with Amazon through Google Shopping. The company has a long way to go before it can fully compete with Amazon on the e-commerce front, but YouTube’s shopping and marketing solutions It could be a notable challenger to Amazon’s future advertising growth.

Amazon has successfully created a competitive moat through self-reinforcing network effects that have proven difficult for competitors to penetrate. However, an excerpt from Wiley’s “Why Moats Matter” is noteworthy. “Companies evolve, moats grow, mature, and eventually die. In other words, economic moats have a life cycle.” But nothing lasts forever. New innovative solutions from existing competitors like Google and emerging competitors in the e-commerce space have the potential to transform industry dynamics and create new industry leaders. Even Disruptors can be confused.