Hear this? No? It’s faint, just behind the horizon. But it’s coming. This is the sound of disruption.
An amazing story is slowly unfolding in the world of business, proving once more that often the most thrilling stories hide in spreadsheets and zigzaggy lines. It appears that Google is about to win the Internet.
How is it doing it? Let’s first step back and look at the state of the Digital Empire in the year 2014.
Up until now, there has been a watchful truce between the three most prominent Website behemoths of our time, Amazon, Facebook and Google, as each of them is expanding their business further and further, reaching from the zeros and ones of the Web into our physical lives themselves. While Facebook and Google are filling their treasure chests with advertising dollars, Amazon earns its money as an online retailer, arguably the online retailer. It’s often dubbed the Walmart of the Internet.
Contrary to the other two companies, Amazon isn’t as good at making a profit, though. Recently it announced a loss of several hundred million dollars for the second quarter and projected a twice as large negative for the third. This, however, is calculated into Jeff Bezos’ operation. His “make it cheap, make it accessible, and grow as fast as you can” approach to online retail has been a smashing success, which shows in ever increasing sales. Nourished by a limitless supply of Wall Street cash, Amazon has destroyed and/or seriously endangered many traditional brick-and-mortar retailers, most prominent among them the book sellers and publishers. As Amazon grew and grew and grew, it spread into other sectors of the retail environment, always closing in on its objective of being the “Everything Store”. Now, Amazon warehouses are dotting the United States and its iconic packages flow through the streets like blood through veins. About fifteen years since it was founded, Amazon seems as unconquerable as it is insatiable.
But how true is the former?
Right now, Amazon is busy making bad headlines for itself. Whether it’s fighting bloody battles with authors, publishers and, recently, Disney, raising once again concerns about its profitability, or fighting off accusations of inhumane working conditions in its logistics centers, there seems to be a whole lot of negativity pouring on the brand. But the most dangerous threat Amazon could face came silently. It started in 2013 and is now well under way of becoming a serious attack on the very core of Amazon’s business model.
And it comes from … Google!
We’re used to google everything nowadays. Be it locations, routes, lyrics, recipes or the most arcane facts, the first thing we do to find out about them is go on Google. With one exception: product search. Searching for stuff to buy, millions of people preferred the search field on Amazon’s website or went directly from Google to the product site on Amazon. Apparently (and typically), someone at Google headquarters one day asked: “Why must this be so?” and a project was started that is now known as Google Shopping Express.
GSE is basically a collaboration of Google with local retail, where Google delivers goods and groceries from these small and big shops to the people who ordered them via the search engine. It does this with cars. And the deliveries are same day, a service that Amazon has been struggling to implement, since it’s highly expensive.
The brilliance of the Google experiment lies in two facts. One: It relies on it’s search engine, a powerful tool not at Amazon’s command. Two: It doesn’t require billion-dollar investments in warehouses and other infrastructure, since all Google does is use its geographical knowledge to hook up local buyers with local sellers and then send a car (in the future possibly automated) to make the delivery. First test runnings on the East and West Coast have proven a success, suggesting that Google’s initial mere 500 million dollar investment might be only the beginning. The company has the money – and unlike Amazon doesn’t have to borrow it.
This could be an existential challenge to Amazon. The only thing easier than searching for a product on Amazon is searching for it on Google, which for is for many people the first web site they go to. So, if you for example type in “plumber” and have to decide between clicking on a link to Amazon or one-click-ordering it on Google and having it delivered a few hours later, which would you choose? As always, the crucial question is: Which is the more comfortable way? It very much seems like Google has the edge there.
The greatest thing about all this, though, is how Google works with traditional retailers instead of simply squeezing them like Amazon. Google doesn’t want to do what Amazon does, but it can help stores do it and make quite a bit of money on the side. Sounds like the perfect business idea to me.
Barnes and Noble has recognized the program’s potential and signed up for it. Amazon better scramble or it will soon be as obsolete as it claims bookstores are. How do you like disruption now, Seattle?
While you can be critical and even wary of Google in many ways, in this case, my sympathies lie with them. Because I genuinely believe that they do believe in more than just making money. Which is not the case with Amazon.com.