Is Google Concerned About Amazon Eating Their Lunch?

Dec 26th

Leveling The Playing Field

When monopolies state that they want to "level the playing field" it should be cause for concern.

Groupon is a great example of how this works. After they turned down Google's buyout offer, Google responded by...

The same deal is slowly progressing in the cell phone market: “we are using compatibility as a club to make them do things we want."

Leveling Shopping Search

Ahead of the Penguin update Google claimed that they wanted to "level the playing field." Now that Google shopping has converted into a pay-to-play format & Amazon.com has opted out of participation, Google once again claims that they want to "level the playing field":

“We are trying to provide a level playing field for retailers,” [Google’s VP of Shopping Sameer Samat] said, adding that there are some companies that have managed to do both tech and retail well. “How’s the rest of the retail world going to hit that bar?”

This quote is particularly disingenuous. For years you could win in search with a niche site by being more focused, having higher quality content & more in-depth reviews. But now even some fairly large sites are getting flushed down the ranking toilet while the biggest sites that syndicate their data displace them (see this graph for an example, as Pricegrabber is the primary source for Yahoo! Shopping).

Some may make the argument that a business is illegitimate if it is excessively focused on search and has few other distribution channels, but if building those other channels causes your own site to get filtered out as duplicate content, all you are doing is trading one risky relationship for another. When it comes time to re-negotiate the partnerships in a couple years look for the partner to take a pound of flesh on that deal.

How Google Drives Businesses to Amazon, eBay & Other Platforms

Google has spent much of the past couple years scrubbing smaller ecommerce sites off the web via the Panda & Penguin updates. Now if small online merchants want an opportunity to engage in Google's search ecosystem they have a couple options:

  • Ignore it: flat out ignore search until they build a huge brand (it's worth noting that branding is a higher level function & deep brand investment is too cost intensive for many small niche businesses)
  • Join The Circus: jump through an endless series of hoops, minimizing their product pages & re-configuring their shopping cart
  • PPC: operate at or slightly above the level of a non-functional thin phishing website & pay Google by the click via their new paid inclusion program
  • Ride on a 3rd Party Platform: sell on one of the larger platforms that Google is biasing their algorithms toward & hope that the platform doesn't cut you out of the loop.

Ignoring search isn't a lasting option, some of the PPC costs won't back out for smaller businesses that lack a broad catalog to do repeat sales against to lift lifetime customer value, SEO is getting prohibitively expensive & uncertain. Of these options, a good number of small online merchants are now choosing #4.

Operating an ecommerce store is hard. You have to deal with...

  • sourcing & managing inventory
  • managing employees
  • technical / software issues
  • content creation
  • marketing
  • credit card fraud
  • customer service
  • shipping

Some services help to minimize the pain in many of these areas, but just like people do showrooming offline many also do it online. And one of the biggest incremental costs added to ecommerce over the past couple years has been SEO.

Google's Barrier to Entry Destroys the Diversity of Online Businesses

How are the smaller merchants to compete with larger ones? Well, for starters, there are some obvious points of influence in the market that Google could address...

  • time spent worrying about Penguin or Panda is time that is not spent on differentiating your offering or building new products & services
  • time spent modifying the source code of your shopping cart to minimize pagecount & consolidate products (and various other "learn PHP on the side" work) is not spent on creating more in-depth editorial
  • time switching carts to one that has the newly needed features (for GoogleBot and ONLY GoogleBot) & aligning your redirects is not spent on outreach and media relations
  • time spent disavowing links that a competitor built into your site is not spent on building new partnerships & other distribution channels outside of search

Ecosystem instability taxes small businesses more than larger ones as they...

The presumption that size = quality is false. A fact which Google only recognizes when it hits their own bottom line.

Anybody Could Have Saw This Coming

About a half-year ago we had a blog post about 'Branding & The Cycle' which stated:

algorithmically brand emphasis will peak in the next year or two as Google comes to appreciate that they have excessively consolidated some markets and made it too hard for themselves to break into those markets. (Recall how Google came up with their QDF algorithm only *after* Google Finance wasn't able to rank). At that point in time Google will push their own verticals more aggressively & launch some aggressive public relations campaigns about helping small businesses succeed online.

Since that point in time Amazon has made so many great moves to combat Google:

All of that is on top of creating the Kindle Fire, gaining content streaming deals & their existing strong positions in books and e-commerce.

It is unsurprising to see Google mentioning the need to "level the playing field." They realize that Amazon benefits from many of the same network effects that Google does & now that Amazon is leveraging their position atop e-commerce to get into the online ads game, Google feels the need to mix things up.

If Google was worried about book searches happening on Amazon, how much more worried might they be about a distributed ad network built on Amazon's data?

Said IgnitionOne CEO Will Margiloff: “I’ve always believed that the best data is conversion data. Who has more conversion data in e-commerce than Amazon?”

“The truth is that they have a singular amount of data that nobody else can touch,” said Jonathan Adams, iCrossing’s U.S. media lead. “Search behavior is not the same as conversion data. These guys have been watching you buy things for … years.”
...
Amazon also has an opportunity to shift up the funnel, to go after demand-generation ad budgets (i.e. branding dollars) by using its audience data to package targeting segments. It's easy to imagine these segments as hybrids of Google’s intent-based audience pools and Facebook’s interest-based ones.

Google is in a sticky spot with product search. As they aim to increase monetization by displacing the organic result set they also lose what differentiates them from other online shopping options. If they just list big box then users will learn to pick their favorite and cut Google out of the loop. Many shoppers have been trained to start at Amazon.com even before Google began polluting their results with paid inclusion:

Research firm Forrester reported that 30 percent of U.S. online shoppers in the third quarter began researching their purchase on Amazon.com, compared with 13 percent who started on a search engine such as Google - a reversal from two years earlier when search engines were more popular starting points.

Who will Google partner with in their attempt to disrupt Amazon? Smaller businesses, larger corporations, or a mix of both? Can they succeed? Thoughts?

Published: December 26, 2012

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Comments

December 27, 2012 - 2:02pm

Would be nice if Amazon started their own search engine. They not only have conversion data but also a decent amount of search data (Alexa.com). I believe that Amazon could compete with Google over search...don't you?

Of course it wouldn't be an easy project for Amazon but doable with the resources and data they have.

By the way, I appreciate that you have mentioned the following.."time spent disavowing links that a competitor built into your site is not spent on building new partnerships & other distribution channels outside of search"

Most SEOs (Rand Fishkin for example) try to look the other way and agree with pretty much everything that Google keeps injecting into their brains instead of admitting the truth.

Check this out...In March my backlink count was 17k in GWT. Now (after months of chasing spammy sites and removing whatever I could) it shows around 6.9k. I have disavowed probably another 2k links recently and that still wasn't good enough. Funny thing is that 2 months ago I have noticed another influx of shady looking links to my blog from some foreign sites. It almost seems like someone really doesn't want me to recover.

I am about to create a list of all sites linking to me including the good ones and dump it into the disavow tool :) no joke! There is no end to this. It probably won't help but at least I'll know that I have covered everything and move on.

December 27, 2012 - 7:48pm

...the "disavow all" approach & Google shot them down on that.

A friend shared this great quote with me:

Business is arbitrage. Any exchange not based in fraud is legitimate regardless of volume or medium. The mediums choose to delegitimize smaller players as a way to consolidate power.

December 28, 2012 - 12:16pm

Doesn't Google have a ton of conversion data via Analytics?

December 28, 2012 - 1:24pm

It isn't tied to user accounts within those sites, it doesn't track user response to email promotions & generally isn't tied to the profit margins of the sales.

There is certainly loads of value in knowing what people are searching for, what sites they generally read & what videos they watch ... these can all be good vectors for knowing what sorts of things they might purchase, but it isn't quite as good as knowing precisely what they purchased.

January 16, 2013 - 9:51am

Aaron thanks for the great post, it reminds me of the good wife season 4 episode 3.

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