What is Alphabet's (GOOG 1.69%) (GOOGL 1.66%) biggest competitor?
You might think it's Facebook, the other ad-driven tech giant, or Apple, its rival in smartphone software. But when it comes to search, Alphabet's biggest market, the company says Amazon (AMZN 1.52%) is its biggest rival. Eric Schmidt, Alphabet's former executive chair of the board, said as much in 2014, noting that the company's highest-value searches are for things to buy. Four years after that remark, Amazon's strength in search has only grown, and with it the threat to Alphabet's biggest cash cow.
Amazon has even managed to leverage that traffic into its own multibillion-dollar advertising business, another sign that the two tech giants remain on a collision course. However, Alphabet has come up with new way to fight back against the e-commerce giant.
Image source: Getty Images.
Strength in numbers
Google has long provided a separate category for product searches under "Shopping," which often appears as a box in general searches, but now the company is taking that strategy to the next level. According to Reuters, Google is partnering with retailers including Target, Costco, Walmart, Home Depot, and Ulta Beauty to take a cut of purchases from such retailers in exchange for listings and linking to retailers' loyalty programs.
Google launched the initiative after it realized that shoppers were sending tens of millions of image searches containing phrases like "Where can I buy this?", "How can I buy it?", or "Where can I find it?" Over the past two years, mobile searches asking where to buy products increased 85%. Often, when consumers search such a phrase, their next stop may be to go to Amazon to buy the product. Google saw an opportunity.
Daniel Alegre, Google's president of retail and shopping, told Reuters: "We have taken a fundamentally different approach from the likes of Amazon because we see ourselves as an enabler of retail. We see ourselves as part of a solution for retailers to be able to drive better transactions ... and get closer to the consumer."
Thus far, the program, called Shopping Actions, appears to be a success -- at least for Google's retail partners, which saw the average size of their customers' shopping baskets increase 30%.
A natural alliance
Amazon's greatest vulnerability may be the diverse range of companies it directly competes with. By flinging itself headlong into industries as diverse as retail, video streaming, cloud computing, and others, Amazon has made enemies out of most major retail and tech companies. So it's natural that those threatened companies would team up, and this is not the first time such retailers have combined forces with Google.
Google launched Google Express in 2013, a same-day delivery service that seemed designed to compete with Amazon Prime. While the service has attracted prominent retail partners like Costco, Target, and Walmart, it has struggled to gain significant market share in delivery and has done little to slow down the growth of Prime. Google's biggest partners also seem to be relying increasingly on their own delivery infrastructure, as Walmart launched its own free two-day shipping with orders over $35, Target acquired Shipt to enable it to provide same-day delivery, and Costco partnered with Instacart to provide same-day delivery and launched its own program for free two-day delivery on non-perishables.
Increasingly, the delivery wars seem to be moving to fresh foods with Amazon's acquisition of Whole Foods and its plan to make two-hour delivery available with a $35 minimum order.
Google is making the right move with Shopping Actions, as the company must monetize its searches as best as possible. But as the experience of Google Express shows, the launch is unlikely to slow down Amazon, especially as the e-commerce giant moves to its cashierless Amazon Go technology, leveraging Whole Foods, and drone delivery.
The incremental sales are surely helpful to the retailers, but if they want to slow down Amazon, they'll have to think bigger than this.
