Wednesday, July 9, 2014

Google s doller 500 million plan to stop Amazon

Google's $500 million investment in Google Shopping Express — a same-day grocery delivery service offered in the US — will be watched closely at Amazon, which runs a similar AmazonFresh delivery service.

This is not just because the two services compete. Google has a habit of putting its search services in front of Amazon's on the web, so that customers have to go through Google to get Amazon. That gives Google a chance to slice off some of Amazon's customers for itself.
So Amazon's plan to do to lettuce what it already did to books just got a little bit more complicated now that Google Shopping Express is on the scene.

Amazon has famously transformed brick-and-mortar retail through "showrooming"— when shoppers browse the shelves of real stores and then check for cheaper prices on Amazon. It took a while for stores to realize they were competing with online sellers this way. Some analysts believe chains like Best Buy have seen revenues contract because of Amazon's showrooming effect.

But unless a shopper is searching Amazon directly, they're likely searching first on Google. And even though Amazon has highly ranked searches in Google, Google crams down those natural search results in favour of its own Amazon-like ads. Amazon pointedly refuses to buy Google's "product listing ads" (PLAs) to boost its visibility in Google, even though eBay and Zappos are huge investors in that media.

This has become a huge business for Google. It's not clear how big yet since we're just seeing the tip of the iceberg: Marin Software, one of the biggest search marketing agencies in the world, says that search marketers will switch one third of their budgets to PLAs by December 2014. Marin places $5 billion annually in search spending, while Google usually claims about 80% of all searches on the web. Using Marin's numbers and some back-of-the-envelope math, Google would be capturing $1.3 billion from PLAs, just from Marin's clients.

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