Google has ramped up commercial search and fulfillment, and Amazon is building a Google-like ecosystem around ads – a project involving an ad-buying platform to rival AdWords, according to The Wall Street Journal. And of course, both are investing heavily in video content and advertising. What is Amazon's Twitch acquisition if not a bite out of YouTube?
Mercent, as a commerce and analytics partner to both companies, has a front-row seat to the rivalry.
The company's software platform is used by more than 500 unique ecommerce brands. Last year it processed just less than $2 billion in retail on behalf of those retailers, and more than half of that revenue came from Amazon Marketplace and Google Shopping Campaigns.
According to Mercent's CEO Eric Best, during the fourth quarter Amazon volume tends to outpace Google's, but at various points over the course of the year, Google took top position as the No. 1 driver of retail sales volume through the Mercent platform.
Best spoke with AdExchanger about Google and Amazon’s ads face-off.
AdExchanger: How do you respectively track Google and Amazon campaigns?
ERIC BEST: We collect orders from the Amazon shopping cart or order pipeline through Amazon Web Service software APIs. In the case of Google, because Shopping Campaigns converts through our customers’ websites, we use a tracking tag to look at last-click attributable revenue from Google Shopping. It’s a different method of measurement, but we rationalize the two different types of tracking to be able to compare revenue dollars apples to apples across the two different platforms.
Google’s rolling its lucrative Product Listing Ads business into Shopping Campaigns at the end of the month. Does Google want to get more into commerce?
Commerce for Google is absolutely strategic to the business. For Google, there are a few priorities they’re trying to balance. On the one hand, they have a level of independence relative to Amazon because they don’t operate a shopping cart today and they’re not operating as a retailer in the sense that it makes Google attractive to a number of retail brands. But new programs like Google Shopping Express, which is building a local delivery network, are clearly designed to address this looming threat for dominance of consumer searches that are coming from Amazon.
How will Google be more “Amazon-like?”
Part of it is ensuring the quality of the consumer transaction post-sale. That includes fulfilling the product quickly, cheaply and correctly.
But Amazon has a very distinct competitive advantage [in mobile] with one-click checkout. I don’t have to worry about navigating to the retailer’s own website and then navigating a nonstandard set of forms and having to go through all the effort to manually check out across these disparate ecommerce storefronts. Amazon has simplified all of that, which is absolutely critical on a smartphone.
How has the rise of mobile affected ad formats?
Google’s Local Inventory Ads is the updated name (formerly Local Product Listing Ads) Google is using to reference these local, mobile ads. The key with local inventory ads is you’ve got strong penetration of the Android operating system on mobile devices. But even on other platforms like iOS, Google still has the ability to know and track a shopper into a physical store. In spite of the massive growth in ecommerce, you still have 85% or more retail transactions still occurring in a physical store. For large retailers, it’s a logical split in terms of where their advertising dollars go and this could be a many-fold increase in Google’s addressable market in retail if they’re able to capitalize on offline purchases.
Amazon’s brewing Sponsored Links and ramping up its ad network. What’s the benefit?
They’ve certainly been participating in text ads for some time. I’m not familiar with the underlying growth of the text ads on Amazon prior (to this), but I’m assuming these were AdSense text ads driven by Google. That seems problematic when you’re competing head to head for dominance of consumer shopping searches on the web to have this dependency built around your key competitor in the commerce market. Amazon has this massive footprint when it comes to purchase behavior data and one of the downsides of ceding some control and insights over text ads to Google is they were providing Google with competitive intelligence they may not want to share long term. So it wasn’t leaving ad dollars in the hands of Google only. It’s more about protecting the crown jewels of Amazon, which are those shopper profiles and purchasing behavior associated with those profiles.
It would seem Amazon wants to crack new publisher/audience opportunities to beef up its retail margins. It has agreed to spend close to $1 billion on a video streaming company.
The last time I checked, Google’s advertising business is greater than $50 billion in addressable market and so it makes logical sense. It’s a massive market. You could argue it’s sort of monopolized by one company at this point and I think Amazon’s finally at the point where they have the scale to provide a legitimate alternative to AdWords and I’m assuming it will be a first or second platform in-market over time if you incorporate Microsoft or Yahoo, at least when it comes to retail advertiser market share.
I think this is an expansion of the footprint of where their ads are served, as well as diversity of the ad formats served. If they’re already doing CPC Amazon product ads, and you can buy promoted products to incrementally increase the visibility of your marketplace listings, it makes logical sense they’d try to expand where those serve and the diversity of those units available to advertisers. Maybe the biggest growth opportunity is ultimately for non-retail advertisers. Amazon has a pretty mature program for commerce merchants, but there’s every other category of advertiser out there that ultimately is going to have some behavioral overlap with Amazon’s shopper base.
What’s Amazon’s challenge?
If there’s a downside risk over time for Amazon, [it’s if] the product detail page where all these conversions kind of occur, is compromised.
The counterpoint to that is Amazon is such a data-driven company and even when I was an employee there in the late '90s, all the header navigation and everything was totally driven by analytics and I’m sure it is even more so today. They’re going to have a very metrics-driven approach to where and how they serve those ads so they do not inadvertently affect conversion rates of their core retail business.
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