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Google vs. Amazon, the Battle Continues

By Billy Duberstein – Apr 6, 2018 at 5:32AM

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Name a space, and you'll find these two tech giants competing against each other.

With user privacy concerns taking center stage in the digital advertising world, some may not have noticed yet another threat to the established digital ad order -- Amazon (AMZN 2.00%). After taking both the retailing and cloud computing worlds by storm, it seems Amazon has set its sights on the search market. 

Specifically, several new products and services from the e-tailer seem to be directed at taking business away from Alphabet's (GOOG 0.57%) (GOOGL 0.49%) dominant web properties Google and YouTube. 

But is Google going to stand by and let it happen? Of course not. In fact, several of Google's recent moves impressively strike back against its nemesis to the north. Here are some of the ways Google is now counter-punching against Amazon.

Cartoon of a hand tapping a shopping-cart icon on a mobile phone

Can Google become an e-commerce platform? Image source: Getty Images.

Shopping Actions

The most notable move is Google's new Shopping Actions product. Shopping Actions essentially provides consumers with a direct link to outside retailers, with the ability to put the items in a universal shopping cart across all of Google's platforms, including the Google voice assistant and Google Home speaker. In return, Google will take a small cut of the revenue when a customer makes purchases from these outside retailers.

A company blog post describes how a hypothetical user named "Kai," would benefit from the service:

... shopper Kai can do a search on Google for moisturizing hand soap, see a sponsored listing for up & up brand soap from Target, and add it to a Google Express cart. Later, in the kitchen, Kai can reorder foil through voice, add it to the same cart using Google Home, and purchase all items at once through a Google-hosted checkout flow.

The program appears to be successful. After Google partnered with top retailers Target, Walmart, Costco, Home Depot, and Ulta Beauty (ULTA 1.06%) on early testing, internal data showed a 30% rise in average basket size for these retail partners, and an increase in sales from users in the subsequent four-month period.

Another benefit for retailers is that they can integrate their data-rich rewards and loyalty programs with Shopping Actions. For instance, one of Ulta Beauty's strengths has been its Ultamate Rewards program, which allows Ulta to collect data on and offer customized discounts to its 27.8 million members. For retailers like Ulta, linking a rewards program to Google will preserve the retailer's ability to provide custom recommendations through Google.

Shopping Actions allows Google's platform to essentially become its own online retailer, only without having to invest in all of those pesky things like stores, inventory, or shipping. In other words, it's a wonderful capital-light business. 

Gaming with Maps

Google also recently made an exciting announcement for game developers: They can freely access Google Maps technology to develop location-based games. Location-based gaming combined with augmented reality is likely to remain a big trend, given the phenomenal success of 2016's Pokemon Go.

In fact, the format is currently being extended to the popular franchises Ghostbusters and The Walking Dead, each of which has an upcoming release that incorporates Google Maps technology. Think about it: Now you can easily turn your own city into the backdrop for a ghost invasion or zombie apocalypse.

Graphic showing a circle of laptops linked to a central cloud icon

Can Google Cloud Platform compete with AWS? Image source: Getty Images.

Teemu Huuhtanen, CEO of Next Games (NXXTF 0.00%), which makes The Walking Dead, heaped praise on the Google Maps tool for game makers: "Google Maps is not the only way to get location-based games done, but honestly it's the best ... companies that can support us with tools and technology, we want to be in closer relationship with them."

Google's gaming tools compete somewhat against Amazon's Lumberyard game engine, as each enables increasing usage of its company's cloud services platform. And while Amazon Web Services has a big lead right now over Google Cloud Platform in the enterprise space, Google is a strong cloud choice for many game developers, due to its excellent data, artificial intelligence, and imaging tools.

Thus, the new gaming tool is another feather in the cap for Google's burgeoning cloud business. According to management, Google was the fastest-growing cloud platform last year (albeit off a smaller base than Amazon's), and the company has said that most new hires are in cloud technology and sales.

It's down to two

Big tech gets a lot of headlines, but increasingly, the battles seem to be between Amazon and Alphabet.

While the turf war is on, it's important to understand that many of the spaces these companies are competing in aren't winner-take-all environments -- often, the pies are big enough for several players to have a piece. 

For investors, that means even the "loser" is probably still doing well for itself, so long as its putting up a good fight.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Billy Duberstein owns shares of Alphabet (C shares), Amazon, and Ulta Beauty. His clients may own some  of the companies mentioned.

The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), and Amazon. The Motley Fool has the following options: short May 2018 $175 calls on HD and long January 2020 $110 calls on HD. The Motley Fool recommends COST, HD, and Ulta Beauty. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Alphabet Inc. Stock Quote
Alphabet Inc.
$99.22 (0.49%) $0.48, Inc. Stock Quote, Inc.
$116.05 (2.00%) $2.27
Walmart Stock Quote
$130.13 (0.06%) $0.07
Target Corporation Stock Quote
Target Corporation
$151.07 (-1.01%) $-1.54
Costco Wholesale Corporation Stock Quote
Costco Wholesale Corporation
$473.29 (1.48%) $6.89
Ulta Beauty, Inc. Stock Quote
Ulta Beauty, Inc.
$396.46 (1.06%) $4.17
The Home Depot, Inc. Stock Quote
The Home Depot, Inc.
$272.82 (0.70%) $1.89
Alphabet Inc. Stock Quote
Alphabet Inc.
$99.74 (0.57%) $0.57
Next Games Oyj Stock Quote
Next Games Oyj
$2.20 (0.00%) $0.00

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