- The quest to be shoppers’ No. 1 destination has two tech giants pitted against each other.
- After losing ground to Amazon, Google is doubling down on Shopping to be customers’ first choice.
- Some of its efforts are starting to pay off, but Amazon may have a head start it can’t overcome.
This is the fifth in a 10-part series publishing over the coming days that examines Amazon’s booming advertising business: The people driving it, the ripple effects on other companies, and what’s next.
Google — the owner of the world’s most popular search engine and most-used browser, and the biggest seller of online advertising — isn’t used to being in second place.
But in 2016, a worrying stat reverberated around marketing conference panel sessions and plastered e-commerce company pitch decks: For the first time, a study found, more US consumers said they began their product searches on Amazon rather than on Google.
In reality, Google had been looking in the rearview mirror at a fast-approaching Amazon much earlier than that.
“Successful companies of this generation — Facebook, Google, Amazon — have paranoia and a terror of becoming irrelevant as one of their really important characteristics,” said Sridhar Ramaswamy, Google’s former senior vice president of ads and commerce, who now runs the search startup Neeva.
Complicating matters is the fact that the pair has leaned on each other over the years as their businesses have grown. Amazon spent enormous sums of money to advertise on Google, “and hated spending every cent,” Ramaswamy said. Meanwhile, Google “was terrified an entire product category would disappear to Amazon,” he added.
Google has careened back and forth over different shopping strategies and cycled through a handful of e-commerce leaders over the years as it sought to take on Amazon at its own game.
Under its newest e-commerce leader, Bill Ready, who joined from PayPal in 2020, Google flipped a policy that previously allowed only paying advertisers to appear on its Shopping page. Now, any merchant can display their products there. Analysts said last year that Google appeared to have sped up new product development. And it’s forged partnerships with third-party commerce platforms.
By some measures, those efforts have shown signs of paying off. But on others, Google still lags behind Amazon. And Amazon hasn’t been sitting still either. Searches on Amazon ultimately fuel its ad revenue, and the company continues to add new features to help merchants drive sales on and off its platform. It’s also increasingly been courting new advertisers that don’t sell goods on its site to turbocharge its ad business, which soared to $31 billion last year.
“When I first started out in advertising and engaging with these partners, Facebook knew what you liked, Google knew what you searched, and Amazon knew what you bought. Those things became interconnected but blurred at the same time,” said Jessica Chapplow, the head of e-commerce at Havas Market, a media agency. “Especially for Google, we have seen 2021 and this year really shape up to be more of a year for them in e-commerce and SEO.”
‘Retailers shouldn’t be dependent on a gatekeeper’
Ready, previously PayPal’s chief operating officer, said he joined Google because he saw an opportunity for the “democratization” of the online shopping space.
“What we’re trying to do with Shopping is level the playing field for online retail,” Ready said. “No one wants to live in a world where there’s only one place to buy something. Retailers shouldn’t be dependent on a gatekeeper.”
Ready rattled off a number of key milestones the Shopping team had achieved during his tenure. The switch to free listings helped Google grow its product catalog by 70% between May 2020 and May 2021. He cited other published figures from the company. Last May, there were more than 24 billion listings on what it refers to as its Shopping Graph — similar to the AI-powered Knowledge Graph that it applies to organize its regular organic search results.
Another major shift, Ready said, was the string of partnerships Google announced with other commerce and payments platforms — including Shopify, WooCommerce, and GoDaddy — to allow retailers to use their existing tools with its Shopping service. The number of merchants using the platform grew 80% in the year to May 2021. Google didn’t provide the total number or an updated figure.
Ready said there had already been outside validation of these efforts bearing fruit. A survey carried out by Morgan Stanley in March this year found that 61% of US consumers said they visited Google sites first when researching a product online, up from 57% in November. Elsewhere, Alphabet executives have called out retail as the biggest contributor to its advertising growth in recent quarters — though this has come amid the broader boom in e-commerce following the COVID-19 pandemic.
But it’s unclear whether Google has moved the needle in a meaningful way when compared head-to-head with Amazon.
A separate online survey of about 1,000 US web users, commissioned by Insider and conducted by the customer-experience company Sitecore, found that about two-thirds (69%) of those polled said Amazon was the first website they visited when shopping online. That was up from about half (54%) of respondents when Sitecore asked the same question in a 2021 survey. In the 2022 poll, 13% said they visited based on search-engine results, down from 24% in last year’s survey.
Elsewhere, Insider Intelligence, which shares a parent with Insider, estimated that Amazon would grow its share of the US search ad market from 20.1% in 2021 to 22.6% this year. Google’s share is predicted to drop from 57.2% to 56.1% in the same period. And the average conversion rates for Amazon ads are more than double that of Google ads, WebFX said.
Advertisers like Google Shopping’s automation but want more data
For some merchants, including those who don’t list on Amazon out of principle, Google offers the most logical alternative to get their products in front of a large audience of shoppers. Plus, it’s adding more commerce-friendly features outside of search, such as livestream shopping on YouTube — which also offers a higher ad load than Amazon Freevee (formerly IMDb TV).
From 2020 to 2021, the clothing brand Buck Mason went from spending zero on Google Shopping to “a sizable budget,” said Jim Davis, its chief customer officer. For the first four months of 2022, Buck Mason had “nearly doubled” what it spent in the same four months of the prior year.
Davis said Google reps have increasingly pushed how automated and intelligent its algorithms are, particularly with products such as Smart Shopping campaigns, which use a retailer’s product catalog to push ads across search, YouTube, Gmail, and its display network.
“They basically made it so you don’t even have to have a good agency anymore to make money from Google Shopping,” Davis said. “It’s pretty stupid-proof at this point.”
But Davis and other ad experts said the drive for simplicity sometimes came at the expense of the needs of more sophisticated e-commerce advertisers. They want more bells and whistles to enable them to increase a shopper’s average basket size or to optimize their targeting around their highest-margin products, for example.
“There’s a certain element of black-box-ness about some of Google’s products,” said Daniel Wilkinson, the global head of paid media at the digital agency Jellyfish. “It’s fine to let the machine make all the decisions because they can do it at a much higher frequency and much more often to get the best possible results, but at the moment I don’t have enough visibility into all the signals and where to spend my time improving which signals get the best-possible performance.”
Others said Google’s sales reps weren’t as plugged in with heads of e-commerce at agencies as Amazon’s were.
“I don’t have Google reps calling me saying, ‘I really want to talk to you about our shopper data and slim your budget you spend on programmatic for Diageo on The Trade Desk to DV360,'” Google’s demand-side platform, said John Donahue, a partner at the digital agency Up and to the Right. “That’s a crying shame. That phone call should have been placed.”
One of Google’s traditional strengths has been its ability to strike deals with C-suite executives — often up to the CEO level — at major brands. Those relationships could benefit Google as it serves a bigger role in helping the recent rush of retailers and direct-to-consumer companies building their own ad businesses. Mark Johnson, Sitecore’s president of commerce, said this was the top question he received from retail clients: “How do I compete against Amazon?”
“There’s a mantra going on in the market where brands all of a sudden realize they are demand aggregators and can become merchants,” Johnson said. “Google will be their main source of promoting” those efforts, he added.
Competition between Amazon and Google just escalated with ‘Buy With Prime’
Google has positioned its Shopping offering as a way that lets shoppers buy anywhere — rather than through one platform. But Amazon’s latest move could skewer that positioning. The e-commerce giant said in April that later this year it would allow some merchants to place a “Buy With Prime” button on their own websites and use its payment and fulfillment services to deliver products to consumers.
Ad experts said they expected competition between Amazon and Google for commerce dollars to remain intense — and that Google might need to invest further in all aspects of fulfillment if it’s to pull ahead.
“Unless Google is really ready to get into end-to-end commerce, including logistics, it really is difficult right now to see how it can close that gap with Amazon,” said Kiesse Lamour, the global head of media at WPP’s Wunderman Thompson Commerce agency.
For his part, Ready said he didn’t see Amazon and Google competing in a zero-sum game for the same shoppers and advertisers.
“There’s a massive rising tide that is lifting many ships,” he said. “I think the question is, ‘How do we make sure that there’s equal access to that rising tide?'”
Zac Wang contributed reporting.