Inside Google's Big Plan to Race Amazon to Your Door
J Thoendell stashed this in Tech
Google is the undisputed king of search in all but one lucrative and vital category: Product searches.
Over the past decade, Amazon has transformed itself from a seller of books online to the place Americans turn to when they want to search and buy just about anything — from diapers to flat-screen TVs. In some cities, Amazon has started delivering fresh groceries. With each product search that starts on Amazon instead of Google, the search giant’s main business of selling ads alongside search results weakens.
Though Google over the years had experimented with letting consumers buy goods with the help of services such as Google Wallet and Google Checkout, it accelerated this strategy in 2013 with Shopping Express. The service lets shoppers buy things from local retail stores through Google, which then delivers them to consumers from the physical retail store on the same or next day.
A source familiar with the company’s plans says senior Google execs have set aside as much as $500 million to expand the service nationwide. Google declined to comment on the size of the investment but made no secret of its ambition.
“You can very much expect that we are putting a lot of money into this and we’re excited and willing to sustain that investment over time as this gets going,” said Tom Fallows, head of Google Shopping Express.
Investment so far has gone toward the marketing of the service in each new city and the buildup of a fleet of delivery vehicles, as well as toward paying for a network of couriers and workers to pack up the goods in stores and deliver packages to shoppers’ doorsteps.
The service gives Google a crack at the $600 billion grocery market. Also at stake is a large piece of the $3.5 billion in so-called direct-response digital ads that research firm eMarketer expects consumer package goods companies and electronics brands to spend in the U.S. in 2014. This category of ads, which includes search ads, is meant to influence online shoppers to perform specific tasks, such as signing up for email newsletters or making an online purchase.
“Google can’t give up on product search and this is another pathway to closing the loop for advertisers,” said Keith Anderson, a vice president at the consulting firm RetailNet Group. “They failed on the payments side in stores, but if they can use expedited delivery as a way to get it then they’ll keep on being willing to spend.”
This is a big bet:
“We are trying to democratize the world of same-day delivery.” ~Tom Fallows, head of Google Shopping Express
“Why wouldn’t Google just eliminate the merchant from the middle?” said Faisal Masud, e-commerce chief at Staples.
Fallows, for his part, was adamant that Google will not pursue this strategy.
“Very firmly no,” he said. “Google is a platform and partnership business. We can’t say that strongly enough.”
That Google is willing to put at least $500 million into this effort shows that Webvan was too early AND undercapitalized.
The big question I have is: Can Uber enter this market?