In an all-out effort to keep shoppers dialed into the Google (NASDAQ: GOOG ) ecosystem, the company has reportedly been readying a same-day shipping service aimed at directly competing against Amazon's (NASDAQ: AMZN ) Prime shipping service. Dubbed "Google Express Checkout," the service is expected to cost $10 to $15 less than the $79 annual fee Amazon charges for its Prime service, but will offer same-day deliveries from the likes of Target, Wal-Mart, Walgreens, and even Safeway. On the surface, the motivation appears that Google wants a bigger piece of the e-commerce pie, but deeper down this is likely part of a larger effort to collect more data about its users.
Although Android enjoys a 70.1% worldwide market share, it controls the minority of the industry's profits. The abundance of sub-$250 Android-powered smartphones has attracted a more frugal class of smartphone users compared to Apple iEnthusiasts. As a result, Google has been working on ways to extract more value out of its Android user base, which naturally means improving the effectiveness of its mobile advertising platform. A same-day delivery service would allow Google to collect a combination of online and offline data about user shopping behavior. Over time, this valuable data should allow Google to increase the relevancy of its mobile ads, which ultimately should translate into increased mobile ad spending.
From search giant to e-commerce king?
Google is in a potentially unique position to capitalize on e-commerce growth, since shopping-related searches often start on a search engine. However, Google has to deal the challenge of breaking the association among users that online shopping typically ends away from Google's domain. If successful, Google has a seemingly large pool of users that it can prospect for new data.
At this time, it isn't known if this same-day delivery service will be the first nationwide rollout among major competitors. eBay (NASDAQ: EBAY ) has been trialing a same-day delivery network in New York and San Francisco, which relies on excess delivery capacity within those cities. eBay CEO John Donahoe has coined it "the Uber of deliver networks," which presents eBay with a massive retail opportunity.
What will Amazon do?
To combat the same-day delivery threat, Amazon plans on growing its warehouse network to reduce its two-day shipping time down to one day for most areas. In larger urban areas, the company believes it will be possible to offer same-day delivery. However, CEO Jeff Bezos has gone on record saying he doesn't see how a nationwide same-day delivery service would be economical. Should Google or eBay show success with their same-day delivery platforms, you better believe Amazon will find a way to make it happen.
As one of the most dominant Internet companies ever, Google has made a habit of driving strong returns for its shareholders. However, like many other web companies, it's also struggling to adapt to an increasingly mobile world. Despite gaining an enviable lead with its Android operating system, the market isn't sold. That's why it's more important than ever to understand each piece of Google's sprawling empire. In The Motley Fool's new premium research report on Google, we break down the risks and potential rewards for Google investors. Simply click here now to unlock your copy of this invaluable resource.