Predictions are a dime a dozen but for whatever our two cents about prospect for change in the tech sector one thing dead clear to us, Amazon is almost certainly going to break up the Google/Facebook duopoly.
There are a number of reasons for this but most prominent and possibly the number one reason why Amazon advertising business looks almost certain to break up the duopoly is because their ad offering propositions customers with greater intent to buy further down the funnel than both Google and Facebook.
Because Amazon has access to customers further down the funnel, it can charge advertisers (most likely CPG brands who also happen to be among the largest spenders on advertising) which has allowed to grow so fast in a short amount of time and continue to do so for the foreseeable future.
No one knows this more than Google and Facebook who have already given up market share to the Seattle based company. Don’t be surprised to see both companies make changes to their respective platforms or acquisitions that allows them to interact with customers with greater intent to make a purchase. We think both companies (google in particular) will make a major acquisition in the next two years to move their ad offering down the funnel and/or expand their already intimidating reach.
Google has been decisively more aggressive in attempting to stem Amazon’s rise in the digital ad space bolstering its own e-commerce offering google express with meaningful partnerships with Amazon’s rivals but results so far have been unimpressive to say the least. Google and Walmart’s much publicized partnership came to an end early this year which suggest that what looked on paper to be a great deal for both fizzled in the face of a dominant amazon who have early 50% market share of e-commerce.
In truth, we called the potential split between Google and Walmart in the early days of the partnership as while the deal made sense on paper, it looked like both companies were reacting to a power shift they weren’t quite ready for. The years since had supported our position that Google will find it particularly difficult to stop Amazon turning the duopoly into a triumvirate.
However, despite our opinion on the Google Walmart partnership (which is back in full swing with both companies teaming up for voice assisted shopping), Walmart removing its products from Google Express seemed quite sudden which suggests that Walmart share our view that Google, sooner or later, will make a major ecommerce acquisition (Instacart looking the most likely) or even go as far as entering a physical store chain.
However, Google for a sustained length of time, have looked like a company that has stopped betting on itself. While Google has made hefty bets on self-driving cars, AI and voice, it has noticeably avoided making bets to move from search and take their offering further down the funnel and now it looks like it’s been caught on the hop by Amazon’s aggressive push into advertising which has seen CPG companies (the largest advertisers in the world) slowly but surely move their ad spend to Amazon who can offer marketers tools to target buyers rather than just target the intentions of a potential buyer in marketplace.
Even Facebook, who wouldn’t be as affected by Amazon breaking up the duopoly has publicly made their intentions to move down the funnel signalling a serious push in ecommerce and payments. While Facebook has largely cloaked this under the guise of privacy concerns that have plagued the company for the best part of a decade, Facebook clearly see where things are going and know that having the attention of potential customers isn’t enough when they’re competing with Amazon, that has years of purchase history along with the ability to offer marketers tools to target actual buyers at scale.
Expect to see Facebook make a few ecommerce and payments acquisitions as they’re aware just how far behind the curve they are. Google on the other hand however can clearly see that Amazon is coming directly for them but it’s moves so far don’t reflect a company that prepared to address a real threat to their core business.
If Google were serious about checking the real threat Amazon poses, it would either scrap Google Express or make big bets around increasing its visibility to potential consumers already in the Google ecosystem as well as consumers shopping elsewhere, make major bets acquiring last mile delivery startups such as Instacart and Deliv and ecommerce players such as Wish and/or Shopify which would go some way to helping expanding Google Express current offering to big box retailers still using their platform and/or those who left who may comeback after seeing Google’s serious about its push into ecommerce. These moves will also help scale Google Express ecommerce user base get its hands-on purchase history it can use develop tools for marketers to reach their target audience.
Google has been so loath to check Amazon’s growing threat to its core business that it may even have to make a big bet involving acquiring a physical retailer. While a risky and expensive play, it will go a long way to check the Amazon threat while entrenching its relationship with CPG players especially if it buys a physical retailer with a bigger footprint than Amazon owned Whole Foods.
In one fell swoop Google would become almost invaluable to CPG companies on two fronts and offer a real alternative in the physical retail space to Walmart who have squeezed suppliers like P&G for years. While this may disband the anti-Amazon alliance Google has played a part in building, rival retailers would have no choice to deal with Google who would now dominate last mile delivery after buying Instacart, Deliv and investing heavily to scale operations across the US.
Add to this the truly interesting synergies across Google existing offerings particularly voice, self-driving cars, music streaming and video (YouTube), Google Express could be a force multiplier for Google’s wider ecosystem and business as a whole. However, Google aren’t likely to make these moves but Google may have to make big bets whether they like it or not as Amazon’s ad business continues to grow.
With all that said, we may be wrong and Google may well be readying a ramp up of their push in ecommerce to check amazons' threat to their core business which may explain why Walmart removed it products of Google Express to focus on voice activated shopping which solves a major hole in Walmart fight against Amazon. However, Google are well aware
In sum, with Amazon’s push in advertising in the ascendancy, the duopoly in general and Google in particular must move to check the Amazon threat or face a future where its recent quarterly miss go from rare blips to regular occurrences.
