Google's 'Rivalry' With Amazon? It's Complicated

Image: Elizabeth Pierson, Mashable

'Many people think our main competition is Bing or Yahoo,' Eric Schmidt, Google's executive chairman, said this week in Berlin. 'But, really, our biggest search competitor is Amazon.'

Schmidt likely intended to persuade a skeptical European audience that Google is not all powerful and faces more competition than some might assume. Even so, he offered the clearest comments yet on how Google views Amazon as a top competitor.

'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,' Schmidt continued in his speech. '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.'

One day after Schmidt's remarks, Google announced a major expansion of its same-day shopping delivery service, as if to underscore just how seriously the company takes the threat of Amazon.

As two of the largest Internet technology companies, Google and Amazon have inevitably brushed up against each other over the years, but the overlap between them has arguably become more pronounced in recent months.

Amazon followed Google's lead in selling smartphones and recently poached a creator of Google Glass to work on a mysterious project. The ecommerce giant raised eyebrows for acquiring Twitch, a game streaming service that Google was reportedly eyeing, in August. And Amazon recently started using its treasure trove of data to target ads on third-party websites, moving closer to Google's bread and butter.

Meanwhile, Google has worked to make its search engine more shopping-friendly by adding product listings and consumer reviews. It has doubled down on same-day product shipments and even invested in drone deliveries, as Amazon has.

At the most fundamental level, both Amazon and Google want to be the top online destination for people searching for items to buy. They want to control as much of the experience around that search, by owning the devices shop with and in some cases controlling the fulfillment process. Online shopping has been Amazon's core focus from the start, but the company must invest in new areas to keep up with tech trends and ward off competitors. Google, on the other hand, has come to recognize shopping as a key user search activity and one that marketers are intensely focused on when placing ads.

'The competition for Google is not only for direct advertising dollars, but for people going directly to Amazon and bypassing Google's search network,' says Yory Wurmser, a media and marketing analyst with eMarketer, who notes that this is even more of an issue for Google in a mobile-first world. 'The head-to-head competition is growing.'

Google's investment in its same-day delivery service, with a commitment rumored to be as much as $500 million, is certainly its boldest bet yet on this front. 'Google Express and Google Shopping in general is Google aligning with retailers to fight against Amazon. It's a way for Google to be a service provider for retailers,' Wurmser says. Perhaps the most obvious example of that was Google partnering with Barnes & Noble to deliver books.

Inside Google, Amazon is on the short list of tech competitors discussed by employees.

'People in Google were absolutely aware and talking about Amazon,' says Mark Ebel, who worked on the business development team at Google last year after it acquired the previous company he worked at, Channel Intelligence, to improve the Google shopping experience and better compete with Amazon. The conversation, he says, 'was about what does the Google ecosystem look like in three- to five years and who are the major players.'

While the two companies are actively competing in certain areas, they also depend on each other to some extent.

Amazon reportedly spends more than any other company on Google's U.S. search ads. Amazon also uses Google's Android operating system for some of its hardware, though it offers a separate app store.

'As a competitor they certainly keep us on our toes, but as a partner they advertise on Google for a variety of their products and we work collectively to grow the pie and build the industry as opposed to fight over smaller portions,' said Jonathan Rosenberg, a former Google product manager, in one recent interview.

James McQuivey, an analyst with Forrester Research, compares the budding rivalry between Amazon and Google to the relationship that Google and Apple have: they compete against each other for smartphone and tablet market share, but many of the top apps on iOS are from Google and Google generates significant revenue through ads delivered on Apple products.

McQuivey believes that Google has the advantage in a fight against Amazon, simply based on it having a much broader reach globally and tremendous financial resources, but both companies have work to do.

'Google's approach gets it wider distribution faster, but it will take time and money to go deep,' he says. 'Amazon is going deeper into physical lives, but it will take a tremendous amount of time and money to scale more broadly than that.'

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