You know Amazon as the dominating force in e-commerce but did you know that in 2018 Amazon garnered up more than USD 4b from advertising revenues?
By my estimate, this would be about 50% of Instagram ad revenues.
In fact, Amazon already occupies the 3rd space in the US from an ad revenue share perspective after Google and Facebook at 4.2%
While the figures do not portray a threat to Google as of now, let’s look at a few key trends and the context, indicating an undercurrent of a new war of sorts between Google and Amazon:
- If you look at Facebook’s growth, it grew in a similar manner with USD4-5B in ad revenues in 2012 to USD 40b in 2017.
2. The trends suggest that more and more people are now beginning their search on Amazon when they intend to buy something, rather than on a search engine. In fact, the no. of people starting their search on Google with purchase intent has been declining over the past years and increasing on Amazon.
3. The third trend points to the fact that Google’s ad revenue market share is already slated to dip from 41% to 37% this year, this is despite the fact the overall advertising pie is increasing.
So from an advertising point of view, Amazon is already a threat to Google largely as also to Facebook and poised to be a very strong third channel for advertisers.
Now let’s look at this competition from a different angle, and that is about how Google is trying to become a threat to Amazon with its Shopping endeavour
Google shopping marketplace is now launched in India and overall it’s strategies are very interesting to observe.
So, we know that about 55% of shoppers will begin their search on Amazon, what is more, interesting is 70% of the shooters will want to cross-check the price on other shopping platforms too before finally buying. Google is trying to tap this opportunity through its aggregation platform where it displays products and prices of products from different marketplaces like Amazon, Flipkart etc.
So it’s a great start to get the attention of shoppers and engaging them even if they start on Amazon and then potentially divert traffic to Amazon’s competition. or fulfil the purchase via Google ’s shopping actions, in which Google gives users access to the universal shopping cart which they can fill with products while searching from any marketplace and then pay via Google pay.
Google is hitting on the convenience USP of Amazon. Users buy from Amazon not because its the cheapest, but because of its easy and intuitive buying process. Google wants to make this process even quicker and easier.
Only about 5% of sellers on Amazon make more than USD 1LAC AS annual profits. The long tail of smaller merchants may not find Amazon as a very attractive option. Google will target these small merchants to allow them better visibility on its platform
So, If you see, the war between the 2 giants is at various levels, from Voice assistants to advertising to search to e-commerce. In fact, it’s a platform or ecosystem dominance war and it would an interesting one to observe how the competition plays up.