Google's Schmidt cites Amazon as biggest competitor: Reality or deflection?

Summary: Eric Schmidt's take that Amazon is Google's biggest search rival grabbed the headlines, but it's worth parsing his entire speech to see what he's really after.

Google Chairman Eric Schmidt gave a talk in Berlin on Monday about the company's innovation, how it fares in the EU in the market and with regulators and outlined the competitive landscape.

Schmidt's take that Amazon is Google's biggest search rival grabbed the headlines, but it's worth parsing the speech, given at Native Instruments, which makes music production software and hardware, to really get what the search giant's chairman is after.

First, it's worth considering the top of Schmidt's speech, which notes invention and Google's repeated run-ins with European Commission regulators.

Schmidt said:

This issue of providing direct answers to questions is at the heart of complaints being made about Google to the European Commission. Companies like Expedia, Yelp, and TripAdvisor argue that it deprives their websites of valuable traffic and disadvantages their businesses. They'd rather go back to 10 blue links. What's interesting is that the traffic these websites get from Google has increased significantly -- faster in fact than our own traffic -- since we started showing direct answers to questions. That said, the amount of traffic going to other services should not be the main yardstick of success for Google because the goal of a search engine is to deliver relevant results to users as quickly as possible. Put simply, we created search for users, not websites. And that's the motivation behind all our improvements over the last decade.

From there, Schmidt went through a bevy of search rivals in various categories such as news, travel and shopping.

Amazon is a competitor for Google, but also one helluva customer.

Schmidt continued:

Look at Yahoo, Nokia, Microsoft, Blackberry and others who seemed unrivaled just a few years ago, but were disrupted by a new wave of tech companies, Google among them. Many of you are skeptical. I get that. You look at Google, Apple, Facebook, and Amazon and say there's no way competitors can beat them. I'm less certain.

For one thing, these companies are each others' biggest competitors, because in tech competition isn't always like-for-like. Many people think our main competition is Bing or Yahoo. But, really, our biggest search competitor is Amazon. People don't think of Amazon as search, but if you are looking for something to buy, you are more often than not looking for it on Amazon. They are obviously more focused on the commerce side of the equation, but, at their roots, they are answering users' questions and searches, just as we are.

But more important, someone, somewhere in a garage is gunning for us. I know, because not long ago we were in that garage. Change comes from where you least expect it. The telegraph disrupted the postal service. Radio and television shook up the news industry. Airplanes ended the age of ocean liners. The next Google won't do what Google does, just as Google didn't do what AOL did. Inventions are always dynamic and the resulting upheavals should make us confident that the future won't be static. This is the process of innovation.

Do I buy the Amazon as competitor argument? Maybe. Certainly for commerce, Amazon grabs its share of starting searches. Then again Amazon has to pay Google a ton of money for advertising. Google notes Facebook a bit. A cynical view would be that Schmidt is mentioning Amazon because that's the company European regulators are most likely to examine. Perhaps if Amazon gets in some EU regulator hot water Google can beef up its shopping pages and upend the e-commerce giant at least in the third party partner space. Surely, Google has been watching Amazon closely. The search giant's moves into fulfillment equate to a diversionary tactic to prevent Amazon from further splintering Android or the advertising market.

In the end, Amazon may be a Google rival, but Schmidt's likely motive was to prod regulators to look beyond his company.