Last month, Google (NASDAQ:GOOG)(NASDAQ:GOOGL) Chairman Eric Schmidt made an interesting characterization: He said Google considers Amazon.com (NASDAQ:AMZN) its biggest search competitor, despite the fact that Amazon is not in the business of Internet search.
The underlying reason is that when people are looking to purchase something, they bypass Google entirely and just head straight to Amazon. Why input a query into Google and click on a sponsored search ad when Amazon probably has the lowest price anyway?
Over the years, Amazon and Google have found themselves competing in an increasing number of arenas, including but not limited to cloud computing services, mobile devices, Internet browsers, and music streaming services. Well, Amazon may be looking to jump in to two more markets Google currently enjoys.
This competition is about to heat up even more.
Earlier this year, The Wall Street Journal reported that Amazon was building an ad-supported video streaming service, which would naturally compete with YouTube. Amazon has been building up its catalog of original content, which would be delivered through the service alongside licensed content.
Well, the New York Post is now following up with a fresh report claiming that Amazon is now putting the finishing touches on the purported video-streaming site. Unlike many of Amazon's other offerings launched in recent years, the video-streaming site is not expected to be bundled in with Amazon Prime. Prime already has Prime Instant Video, after all. But Amazon will still reportedly have some type of mechanism to encourage viewers to sign up for Prime.
However, one key difference is that there's no mention of whether or not Amazon would allow user-generated content, which is the defining feature of YouTube. If Amazon focuses more on original and licensed content, the service would be more similar to Netflix.
But the fact that Amazon is ramping up its advertising efforts still poses a threat to Google, since an ad delivered by Amazon that encourages users to purchase an item on Amazon could be a powerful combination. Amazon would be uniquely positioned to know if a user follows through with a purchase, too, and that data could give it a differentiated value proposition to advertisers -- who could potentially shift ad spending away from Google.
Meanwhile, travel industry intelligence site Skift reports that Amazon is about to launch a new site geared toward travel booking dubbed Amazon Travel. The service is expected to go live around the new year and will initially offer a handful of hotels in a limited number of markets like New York, Los Angeles, and Seattle. Amazon would earn a 15% cut for its troubles, but hotels could potentially negotiate lower commissions.
Amazon would boost visitor engagement with travel-related content and editorial reviews. The service would appeal to smaller independent and boutique hotels that lack the scale and marketing budgets of larger chains. Hotels would be the only category at first, but if Amazon moves forward, it seems inevitable Amazon Travel would expand to other categories like flights and car rentals.
The travel industry is a huge profit center for Google, but Google's recent attempts to directly integrate content and listings in its quest to become a one-stop information shop are creating tensions with the industry. Amazon's foray may sound minuscule in comparison to Google's at first, but there is absolutely potential for Amazon to become a meaningful player in the travel booking industry in the long run. No wonder Schmidt is so concerned.
Evan Niu, CFA, owns shares of Netflix. The Motley Fool recommends Amazon.com, Google (A shares), Google (C shares), and Netflix. The Motley Fool owns shares of Amazon.com, Google (A shares), Google (C shares), and Netflix. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.