Amazing Facts about the Google vs Amazon Competition

The competition to end it all?

Whoever tries the most stuff usually wins.

Ever considered the Google vs. Amazon competition? Google and Amazon didn’t always seem like competitors, did they? Google is in the business of selling of ads, Amazon in the business of delivering goods. Google seems much more of a technology company than Amazon. But perhaps our research will amaze you, eh?

“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.”

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.

Background

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.”

Cloud computing

Perhaps the most high-profile area of competition between the two involves cloud computing and data service efforts — particularly the Amazon Web Services arm of Amazon.

In technology, it’s sometimes good to let a pioneer figure out the pitfalls of a new market. Apple’s iPod transformed music listening after countless lesser MP3 players failed to make a real dent.

Google is now trying to do something similar in cloud computing. The company last month announced price cuts that made its cloud services cheaper than Amazon’s, the leader in cloud services for businesses. At almost the same time, Google orchestrated a flurry of coverage of its cloud services.

But whereas music players were a fragmented industry when the iPod appeared, in cloud computing Google is playing catch-up with a single market leader, Amazon, that has a track record of destroying incumbents in every industry it gets into.

What Google has in its favor, besides a sheer technical expertise, is that it already runs the biggest cloud-computing operation in the world — just that it puts most of it to a different use. The resulting battle is likely to be epic, and its outcome determines nothing less than who will control the internet.

Unless you work in technology or corporate logistics, you might not have known that Amazon was ahead of Google in the cloud business. Most consumers will have encountered the cloud in the form of services where Google is strong — email (Gmail), document storage (Google Drive), and the like. But Amazon Web Services has for years been the front-runner in the business of renting computer power to companies.

To understand the scale of the war brewing between them, it helps to understand that what Amazon and Google are really contesting is who gets to eat a bigger portion of the total corporate information-technology pie. All the warehouses of servers that run the whole of the internet, all the software used by companies the world over, and all the other IT services companies hire others to provide, or which they provide internally, will be worth some $1.4 trillion in 2014, according to Gartner Research — some six times Google and Amazon’s combined annual revenue last year. Not surprisingly, both companies have said at one point or another that this new revenue stream has the potential to be larger than all their current sources of income.

When that time comes, the entire world’s business IT needs will be delivered as a service, like electricity; you won’t much care where it was generated, as long as the supply is reliable. And Google and Amazon both want to be the utility company that provides it — minus the government regulation that usually attends utilities

Search

For years now, Amazon has been considered the biggest threat to possibly erode Google’s core search-advertising business. Google’s search business makes the most money when people use it to search for products they intend to buy online.

But a lot of those people are increasingly going straight to Amazon to search for products, bypassing Google’s search ads in their purchasing process.

As more shoppers move to mobile, they often use Amazon’s standalone app to buy things, further pressuring Google’s search business.

And new data from Morgan Stanley suggests the number of Amazon’s app users is growing fast. Amazon and Walmart saw more than half of its growth in mobile traffic come from app users. That means the mobile shoppers who used to have Google as a starting point on their smartphones are going straight to Amazon apps instead.

Morgan Stanley research has shown Amazon and Walmart get a surprisingly low amount of mobile traffic from web browsers.

“Only two retailers — Amazon and Walmart drove over 50% of their mobile traffic growth from app users,” Morgan Stanley wrote. “To us, this is positive for these two players as over time we believe larger app audiences can lead to lower long-term customer acquisition costs, stickier customer bases, and a greater share of consumer wallet.

But Morgan Stanley’s note wasn’t all that discouraging for Google. In fact, it noted that Google is in a great position moving forward because the overall mobile-browser traffic is twice the size of the app market, while growing 1.2 times faster. Plus, 30% of the top 30 retailers don’t even have a big enough app user base to be measured yet, reflecting the slow adoption rate of apps in the larger retail market.

Still, the fact that two of the world’s largest retailers, with a combined market cap of nearly $500 billion, are driving more than half of their mobile growth through their own apps is a telling sign of where mobile commerce is headed — and something Google has got to be worried about.

In our opinion, because of scale, the future is Amazon, Google, Microsoft… and not much else

Whatever the endgame, it could take decades to reach. In the meantime, this is a fight that rewards scale. Size means efficiency, efficiency means lower prices, and smaller providers of cloud services are going to have a hard time competing.

And there’s a third big player: Microsoft. The company launched its own cloud service, Azure, in 2008. Though Azure is an also-ran for now, the company is so deeply entrenched in corporate IT culture that at least some companies are willing to wait for it to bring its cloud services to parity with Amazon’s.

And like both its main rivals, Microsoft has the money to spend on the engineers and infrastructure required to make its cloud truly big.

Mike Schoultz is the founder of Digital Spark Marketing, a digital marketing and customer service agency. With 40 years of business experience, he writes about topics that relate to improving the performance of business. Please Bookmark his blog for awesome stories and articles.